March 07, 2017
New Filing Requirements for New York State and New York City Mandatory First Installments
For tax years beginning after December 30, 2015, New York State ("NYS") and New York City ("NYC") require certain corporations (including C Corporations) to use the "second preceding year's tax" to determine if a mandatory first installment ("MFI") is needed and to determine the amount of such MFI. NYS and NYC issued guidance in this area [see NYS TSB-M-16(10)C and NYC Finance Memorandum 16-7].
Both NYS and NYC require the payment of an MFI when a C Corporation's second preceding year's tax exceeds $1,000 (after applying tax credits). While NYS and NYC conformed to the recently amended federal corporate tax return due date (i.e., April 15 for calendar year filers), MFIs for C Corporations remain due on March 15 (for calendar year filers) and must be reported on the following forms:
- For NYS, Form CT-300.
- For NYC, Form NYC-300.
Note that these provisions do not apply to S Corporations.
Corporations that do not have a "second preceding tax year" do not need to make an MFI payment. However, these corporations must still declare estimated tax, due on the 15th day of months six, nine, and twelve of the taxable year, by completing Form CT-400 and NYC-400.
For NYS, the MFI is calculated as described below:
- If the franchise, excise, or gross receipts tax (after tax credits) on the corporation's second preceding year's tax return exceeds $1,000, but does not exceed $100,000, the MFI is equal to 25% of that tax.
- If the franchise, excise, or gross receipts tax (after tax credits) on the corporation's second preceding year's tax return exceeds $100,000, the MFI is equal to 40% of that tax.
- The MFI for life insurance companies (taxable under Article 33) is 40% of the tax if the second preceding year tax exceeds $1,000.
Example: Corporation A is a calendar year taxpayer. For calendar year 2015, Corporation A reported $250,000 in NYS Franchise Tax. Corporation A must pay $100,000 (i.e., 40% of $250,000) with its Form CT-300 for 2017.
Note that if the corporation is subject to the MTA surcharge, then the same computation method applies in calculating the MFI for the surcharge.
For NYC, the MFI is calculated as described below:
- If the NYC General Corporation Tax or Business Corporation Tax exceeds $1,000, the C Corporation must pay 25% of the estimated tax as MFI.
- NYC does not have the 40% provision applicable to MFI or the provisions relating to life insurance companies.
Example: Corporation A is a calendar year taxpayer. For calendar year 2015, Corporation A reported $2,000 in Business Corporation Tax. Corporation A must pay $500 (or 25% of $2,000) with its Form NYC-300 for 2017.
Please contact your dedicated Marcum State and Local tax professional to address any questions regarding this case or any other tax matter.
On March 4, the New York State Department of Taxation and Finance issued an updated Frequently Asked Questions document dealing with Form CT-300. Per this document, prior year overpayments may be applied to MFI's for 2017 (instead of having to remit additional money out-of-pocket), which could lead to favorable cash-flow ramifications for a taxpayer. Click here to read the FAQs.