The New York Franchise Tax

The New York franchise tax, known as the Franchise Tax, on Business Corporations under Article 9 A of the Tax Law is applicable to corporations that conduct business in New York State. Here’s a breakdown

Who is required to make payments

Businesses must pay the New York franchise tax if they conduct activities regardless of whether they’re officially registered to operate in New York. This tax is applicable to both C corporations and S corporations.

  • Local corporations – businesses that have been incorporated in New York State.
  • Foreign corporations – businesses incorporated outside of New York that meet one or more of these conditions:
    • Conduct business operations in New York
    • Utilize capital in New York
    • Lease property in New York
    • Maintain an office in New York
    • Generate revenue from activities carried out in New York

There is also a tax known as the New York City Business Corporation Tax that will impact certain corporations. Contact us for more information.

What’s the New York franchise tax amount

The franchise tax is calculated based on a company’s income. Corporations need to complete and submit Form CT 3, which serves as the New York corporate tax return in order to determine and fulfill their New York franchise tax obligations. Typically the tax amount owed is approximately 6.5% of the income generated by the business within New York State.

However, there exists a **business income tax credit** that can notably reduce the amount owed. Currently set at 6.85% of income this credit essentially offsets most of the tax liability for numerous businesses.

Tax Calculation Bases

In general companies operating in New York face a tax rate of **6.5%** if their federal taxable income is $290,000 or less. Some New York manufacturers may be eligible for a 6.5% rate regardless of their income.

The franchise tax is calculated based on whichever of the following amounts is highest:

Business income base –  4.875% of income apportioned to New York (for tax years starting in 2018).
Capital base – 0.04% of the capital base (up, to a maximum of $5 million).
*Fixed amount, in dollars Based on receipts from New York (ranging from $19 to $3,375 for tax years starting from 2018).

Points to keep in mind

Requirements, for filing
If you don’t owe any taxes because of the credit you might still have to submit a return depending on your business type and income level.

Tax year
The franchise tax pertains to a corporations tax year, which doesn’t necessarily have to match up with the calendar year.

Recent updates
There have been some modifications, to the franchise tax in times. We can help you stay abreast of the current changes and how they may affect your liability.

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