Mayor de Blasio this week tackled the city’s corporate tax structure.
Photo Courtesy of Demetrius Freeman/Mayoral Photography Office
Mayor Bill de Blasio this week proposed a major reform of the city’s corporate tax structure, modernizing what he called an “outdated system,” providing tax relief to small businesses and local manufacturers, and streamlining tax codes.
The revenue-neutral reforms will be retroactive to Jan. 1, 2015.
Certain corporate tax provisions have not been reformed in decades, de Blasio said, and reflect an outdated financial regulatory structure. By conforming the city’s corporate tax system with that of the state, de Blasio said his administration’s reforms will ensure that firms will not need to maintain separate records for tax purposes, and create the consistency in computation of taxes that is critical to facilitating joint audits and preventing major administrative burdens for both taxpayers and the city. The mayor indicated that these reforms will “protect and support” the expansion of the city’s tax base.
“These are common sense reforms that will modernize and streamline a corporate tax code that hasn’t seen real changes since the 1940s—serving taxpayers, businesses, and the city alike,” de Blasio noted. “By targeting relief to local small businesses and manufacturers, this will keep jobs here and expand economic opportunity. Together with a broadened tax base and the elimination of burdensome administration, this will mean a simpler, fairer system for all.”
De Blasio’s corporate tax reform pledges to:conform city tax code to state provisions in the most important areas of tax computation, including updating the city’s corporate income tax and minimum tax codes to mirror the state codes; target relief toward small businesses and local manufacturers; retain the alternative tax base on capital, which will help stabilize revenues in years of low profits for large corporations; merge the bank tax into the corporate franchise tax for large corporations; adopt a new method for computing net income that broadens the tax base by treating most income as business income; adopt a new method for determining how corporations attribute net income, based on where a firm’s markets are located, rather than the location of the business operations. This will eliminate a tax penalty for increasing operations and employment, and incentivize businesses to locate their employees—and thus create jobs—in the city, because increasing staff in the five boroughs won’t increase taxes; adopt unitary combined reporting rules, so that economically related business entities that are commonly owned are required to file as one taxpayer. This will prevent the shifting of income and expenses among related entities to inappropriately reduce taxes; and broaden the tax base by eliminating certain special deductions and exemptions.
“This is an important modernization of the city’s tax system that recognizes how banks and corporations have changed over the past two decades,” said City Councilwoman Julissa Ferreras (D-East Elmhurst), chairwoman of the Finance Committee. “It has been done in a responsible, revenue-neutral way. I welcome the lower rates for small business and manufacturing. I look forward to working with the administration to continue to improve NYC’s tax code to better support all businesses.”
By Forum Staff
