2016 NYC-202 Instructions

1 Instructions for Form NYC-202 . NEW YORK CITY DEPARTMENT OF FINANCE. Unincorporated Business Tax Return 2015. TM. Department of Finance For Individuals and Single-Member LLCs Hi g h l i g h t s of Recent Tax Law Changes for Unincorporated Businesses The biotechnology tax credit providing a tax credit to certain emerging technology companies for cer- tain costs and expenses incurred was extended through 2018. See section 11-503(o) of the Administrative . Code, as amended by Local Law 111 of 2015. Royalty payments -- For tax years beginning on or after January 1, 2013, the Unincorporated Business Tax has been amended to change the treatment of royalty payments to related members. Under prior . law, taxpayers who made royalty payments to related entities were required to add back the amount of the payments to taxable income if those payments were deducted when calculating federal taxable income and if the royalty recipient, under certain conditions, could exclude the royalty income.

2 Ad. Code section 11-506(e), as amended, eliminates the income exclusion previously allowed to certain royalty recipients and increases to four the number of exceptions to the add-back requirement. Part E. of Chapter 59 of the Laws of 2013, 9. For more information, see Royalty Payments to Related Members, below. Tax year 2011 was the last taxable year in which eligible taxpayers who made the one-time election to continue using books and records allocation for tax year 2005 were permitted to use that method of . allocation. For tax years beginning on or after January 1, 2012, all taxpayers must allocate unincor- porated business taxable income using formula allocation. See sections 11-508(b) and (c) of the Administrative Code. Chapter 201 of the Laws of 2009 provides for a 10 year phase-in of single factor allocation beginning in 2009.

3 For taxable years beginning in 2015, for taxpayers using the three factor formula, the busi- . ness allocation percentage will be composed of 10% of the New York City property percentage, 10%. of the New York City wages percentage and 80% of the New York City gross income percentage. Starting with taxable years beginning in 2011, the election to double-weight the gross income per- centage for manufacturers is no longer available. Note: The phase-in of single factor allocation is now . more advantageous than double-weighting. For purposes of the New York City Unincorporated Business Tax, General Corporation Tax, Banking Corporation Tax and Business Corporation Tax, the City has decoupled from the Federal bonus . depreciation allowed under the Economic Stimulus Act of 2008 and other Federal legislation, except with respect to the depreciation deductions allowed with respect to qualified New York liberty zone property and qualified property placed in service in the Resurgence Zone (generally the area in the borough of Manhattan south of Houston Street and north of Canal Street.)

4 For City tax purposes, depreciation deductions for all other qualified property must be calculated as if the property was placed in service prior to September 11, 2001. See Form NYC-399Z and Finance Memorandum 15- 1, Application of the IRC 280F to Sports Utility Vehicles for more information. IMPORTANT INFORMATION CONCERNING FORM NYC-200V AND PAYMENT OF TAX DUE. Payments may be made on the NYC Department of Finance website at , or via check or money order. If paying with check or money order, do not include these payments with your New York City return. Checks and money orders must be accompanied by payment voucher form NYC-200V and sent to the address on the voucher. Form NYC-200V must be postmarked by the return due date to avoid late payment penalties and interest. See form NYC-200V for more information. Instructions for Form NYC-202 - 2015 Page 2.

5 GEN ER A L IN FOR MATI ON not apply to: dealer as defined in Admin. Code 11- 501 (l) will not be deemed engaged in an a) any entity subject to the tax imposed unincorporated business solely by reason WHO MUST FILE by Title 11, Chapter 6 (General of the conduct of the following activities For tax years beginning in 2009 or later, any indi- Corporation Tax) of the NYC. for the taxpayer's own account: the pur- vidual or unincorporated entity that carries on or Administrative Code. For taxable chasing, holding or selling of property liquidates a trade, business, profession or occupa- years beginning in 1996 and there- (defined below), engaging in transactions tion wholly or partly within New York City and after, unincorporated associations in positions in property, the acquisition, has a total gross income from all business regard- and publicly traded partnerships holding or disposition, other than in the less of where carried on of more than $95,000 taxable as corporations for federal ordinary course of business, of interests (prior to any deduction for cost of goods sold or income tax purposes under IRC.

6 In unincorporated entities also eligible services performed) must file an Unincorporated 7701 (a) (3) and 7704 are subject for this exemption, and any other activity Business Tax Return. See Finance Memorandum to the General Corporation Tax and not constituting an unincorporated busi- 99-1 for information regarding the treatment of not the Unincorporated Business ness subject to the Unincorporated single member limited liability companies owned Tax. However, unincorporated Business Tax. by individuals that are disregarded for federal entities that were subject to the income tax purposes. Unincorporated Business Tax for Property Defined. Property for this pur- tax years beginning in 1995 that pose includes real and personal property, If an individual or an unincorporated entity carries elected to continue to be subject to including property qualifying as invest- on two or more unincorporated businesses, in the Unincorporated Business Tax ment capital (see Instructions for whole or in part within the City, all such busi- for years after 1995 on a timely Schedule D of this form) and other stocks nesses shall be treated as one unincorporated filed Unincorporated Business and securities, notional principal con- business for purposes of this tax.

7 The gross Tax return for the tax year begin- tracts, derivative financial instruments income and deductions from all such businesses ning in 1996 continue to be sub- and other positions in property but must be combined and reported on one return. ject to the Unincorporated excluding property and positions in prop- Business Tax. erty held by a dealer, and excluding debt However, an individual member of a partner- instruments acquired in the ordinary ship who carries on his own separate and inde- b) any entity subject to the tax imposed course of a trade or business and certain pendent unincorporated business is not required by Title 11, Chapter 11 (Utility Tax). other property. See Admin. Code 11- or permitted to include his distributive share of of the NYC Administrative Code 502 (c) (1) (A). partnership income in computing his separate (except that vendors of utility serv- unincorporated business taxable income.

8 Ices are subject to the Notwithstanding anything to the contrary, Unincorporated Business Tax on the receipt of $25,000 or less of gross WHICH FORMS TO FILE that percentage of their entire net receipts during the taxable year (deter- Individuals must file on Form NYC-202 or income allocable to the City which mined without regard to any deductions). NYC-202S. Single-member LLCs must file on their non-utility receipts bear to from an unincorporated business will not Form NYC-202 . Partnerships (including any their total receipts); disqualify the taxpayer for this exemption. incorporated entity other than a single-member c) any entity carrying on an insurance 6) A person that is an owner, lessee or fiduci- LLC treated as a partnership for federal income business as a member of the New ary will not be deemed to be engaged in an tax purposes) or other unincorporated organiza- York Insurance Exchange (autho- unincorporated business solely by reason tions must file Form NYC-204 or Form 204EZ.

9 Rized in Section 6201 of the of the holding, leasing or managing of real Estates and Trusts must use Form NYC-202 EIN. Insurance Law); property. For taxable years beginning on or after July 1, 1994, if an individual or d) Real Estate Mortgage Investment WHO IS SUBJECT TO THE TAX unincorporated entity is carrying on an Conduits (REMICs). Holders of 1) The Unincorporated Business Tax is unincorporated business in whole or in interests in a REMIC remain tax- imposed on any individual or unincorpo- part in the City, and is also holding, leas- able on such interests or on the rated entity (including a partnership, ing or managing real property as an owner, income from such interests. fiduciary or corporation in liquidation lessee or fiduciary, the holding, leasing or and including any incorporated entity e) certain wireless telecommunications managing of the property will not be con- treated as a partnership for federal service providers - Effective for tax sidered an unincorporated business to the income tax purposes) engaged in any periods beginning on and after extent that the real property is held for the trade, business, profession, or occupation August 1, 2002, entities that receive purposes of producing rental income or wholly or partly carried on within New eighty percent or more of their gross gain on the disposition of the real proper- York City.

10 Receipts from charges for providing ty, provided, however, this partial mobile telecommunications services exemption for rental real estate is not 2) Income received from the practice of law, to customers will be taxed as if they available to a dealer holding real prop- medicine, dentistry, architecture, or any were regulated utilities for purposes erty primarily for sale to customers in other profession is subject to the of the New York City Utility Tax and the ordinary course of the dealer's Unincorporated Business Tax. Unincorporated Business Tax. Thus, trade or business. The operation by any 3) S Corporations are not subject to the such entities will be subject to only taxpayer, otherwise eligible for the partial Unincorporated Business Tax. S Corporations the New York City Utility Tax and exemption, of a garage or other business at are subject to the General Corporation Tax.