New York State Franchise Tax Sweeping Changes in 2015

On March 31, 2014, New York Governor Andrew Cuomo signed the most extensive New York state corporation franchise tax reforms in almost four generations. The overall result was to eliminate some of the older elements of the franchise tax and implement rules that are more in line with other major states. Some of the more significant changes are listed below. Unless otherwise stated, these changes will go into effect for the 2015 tax year.

Most Significant Changes

• The most significant changes in New York’s rather complex corporate franchise tax include:
• Elimination of the Banking Corporation Tax (Article 32). Banks will now file under Article 9-A which is the Corporate Franchise Tax
• Reduction in entire net income rate to 6.5% starting in 2016 (0% if you are a qualified NY manufacturer and 5.9% for qualified emerging technology companies)
• A phase out of the 0.15% alternative tax on business capital starting in the 2016 tax year
• Repealing the alternative tax on minimum taxable income (AMT)
• Increasing the alternative fixed minimum tax to $200,000 for taxpayers with NY gross receipts over $1 billion.
• Adopting bright line statutory nexus thresholds for both franchise tax and MTA surcharge Combined water’s edge reporting reform
• Apportionment formula changes to sourcing rules for sales
• Eliminating additional tax on subsidiary capital and most exclusions for income from subsidiaries
• Changing NOL (net operating loss) computations from pre-apportionment to postapportionment

What’s Really Behind This?

New York has consistently ranked highly among the worst states to do business. A recent survey of CEOs by ChiefExecutive.net listed New York, California and Illinois as the worst states to do business. See survey results here. Corporations have been relocating to other states and this is affecting the state’s unemployment rates and revenue streams. Tax reform may be one way the state is seeking to address these issues. Stay tuned for further analysis of some of the tax changes listed above and how these changes may affect your business. 

How Can We Help?

Allyn’s tax team is staffed with seasoned tax professionals experienced in all aspects of multi-state and local tax compliance and consulting for large US and global corporations. We use that experience to your advantage. Contact us and we can provide a customized cost-effective solution to meet your company’s needs. For further information on Allyn Tax services, please contact: tax@allynintl.com.

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