All because of remote work: New York is at risk of losing millions of income
'16.07.2020'
Vita Popova
Last year, corporate income tax brought the city more than $ 2 billion in revenue. This year, New York risks losing this money. This is because, against the backdrop of a pandemic, business is shifting its activities beyond the Big Apple. This publication writes Fox Business.
New York City may lose millions in revenue from an unincorporated business tax (UBT) as companies continue to move beyond the metropolis.
UBT is a 4 percent tax levied on taxable income allocated to the city. Individuals and unincorporated organizations that are operating or are currently in the process of liquidation are subject to this tax. Financial and legal firms, as well as other sole proprietorships, may also be subject to taxation.
Phil Drudy, Managing Director and Head of Tax Practice at New York Tax Department, CBIZ MHM, explained how this works. If, for example, a law firm with 30% of its business in New York earned $ 1000, it would pay $ 300 of UBT tax.
But now many law firms and financial services companies have moved out of the city to places like the Hamptons, Westchester, Connecticut and even Florida. This means that if no percent of the business is conducted within New York City, the included UBT income is $ 0. “This could be a very big blow to the New York industry,” Drudy said. “I think that in the future, many businesses will rethink whether they need to be in the city so much.”
Enterprises that are not organized as a corporation (in all sectors of the economy, including real estate management and construction) are subject to a 4 percent collection. One of the main drivers of city business tax, according to officials, is Wall Street.
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New York received more than $ 2 billion in tax last year. Prior to the coronavirus outbreak, the city inspectorate expected tax revenues to increase by 5,9% annually. It is estimated that in fiscal 2020, revenues were more than $ 2 billion, and in 2021 - $ 2,3 billion.
However, in May, UBT revenue estimates were revised down to 0,1% per year. In 2020, the city expects to receive about $ 1,68 billion from UBT and $ 1,65 billion in 2021.
If companies eventually move to remote work, this could lead to a long-term decline in revenue, Drudy says.
To date, the city has faced a $ 9 billion income deficit due to the outbreak of the virus. In May, New York financial controller Scott Stringer said the suspension of economic activity had an “unprecedented” effect on business taxes, including UBT. He predicted that in the fourth quarter, tax losses for businesses would be 25% compared with estimates made before the COVID-19 pandemic.
