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Proposed Changes to NYC Commercial Rent Tax

Good news for many NYC businesses

December 5, 2017
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Proposed Changes to NYC Commercial Rent Tax


BAD NEWS

Historically, New York City ("NYC") has had a commercial rent tax (“CRT”) imposed on tenants who occupy commercial space in Manhattan, below 96th Street and above Murray Street, who pay $250,000 or more in annual “NYC CRT Rent.”* The effective tax rate is 3.9%.

GOOD NEWS

On November 30, 2017 the NYC Council passed Intro 799-B (which Mayor de Blasio stated he will sign in the coming weeks), which provides, effective July 1, 2018, the following:

  • Tenants who have NYC CRT rent under $500,000 and “total income”** of less than $5m will no longer have a CRT liability.
  • Tenants that do not fit into the above should see a reduction in their NYC CRT liability if NYC CRT rent is less than $550,000 and total income is less than $10,000,000.

The bill does not affect tenants who have either (1) total income of over $10,000,000 or (2) NYC CRT rent base of over $550,000.

The bill is estimated to reduce the NYC CRT liability for 2,700 small businesses, including 1,800 that will no longer pay the tax at all. The average annual tax relief for small business is anticipated to be between $11,300 and $13,000.

The commercial rent tax has been a heavy burden, and often an overlooked burden, for many NYC businesses.  This reform should provide much-welcomed relief for a number of small businesses operating in Manhattan.

If you have questions regarding this reform, please contact your account advisor, or reach out to David Seiden or Eugene Ruvere.


*”NYC CRT Rent” is the amount paid for the use of premises and includes payments that must be made by the tenant for the landlord for real estate taxes, water rents or charges, sewer rents or any other expenses, including insurance. NYC CRT Rent does not include expenses for improving, repairing, or maintaining the premises.

 **“Total income” means the amount reported on the tenant’s prior-year federal income tax; gross receipts minus cost of goods plus dividends, interest, gross rents, gross royalties, capital gain net income, net gain or loss from the sale of business property, net farm profit or loss, ordinary income or loss from other partnerships, estates or trusts or other income or loss.