Governor Kathy Hochul on August 31, 2022, signed into law a bill (S.B. 9454) that, among other things, accomplishes two important tax changes for New York City (NYC): (1) adopting an economic nexus threshold of $1 million and (2) retroactively allowing the NYC pass-through entity tax (PTET) election to be made for tax years beginning on or after January 1, 2022, as long as the New York State (NYS) PTET election is first properly made on or before September 15, 2022.
S.B. 9454 also excludes, retroactively to 2021, income received from the NYS’s COVID-19 Pandemic Small Business Recovery Grant Program and NYC’s Small Business Resilience Grant Program from calculation of an entity’s unincorporated business tax, general corporation tax and banking corporation tax.

Factor presence nexus adopted

Effective for tax year 2022, this bill aligns the NYS and NYC tax codes so their customer-based nexus thresholds for corporations match.  Corporations that do not have a physical nexus with NYC may now be subject to tax under the newly enacted factor-presence nexus provisions.
NYC will have a factor-presence nexus threshold of $1 million of NYC receipts for purposes of the Business Corporation Tax (BCT) for tax years beginning on or after January 1, 2022. Specifically, the legislation states that corporations “deriving receipts from activity within the city” are subject to the tax.  As such, corporations with $1 million or more of receipts from NYC customers are now subject to the BCT.
Additionally, a corporation that derives at least $10,000 in receipts from NYC will be subject to the BCT if it is part of a unitary group that collectively meets the $1 million economic nexus threshold (total for corporations with at least $10,000 in NYC receipts).
This new factor-presence nexus standard is only applicable to corporations subject to the BCT filing, but it does not extend to partnerships subject to the NYC Unincorporated Business Tax (UBT) or S corporations subject to the NYC General Corporation Tax (GCT).

PTET election available retroactive to January 1, 2022

The NYC PTET was enacted earlier this year and was to be effective January 1, 2023. However, this bill allows eligible PTEs to make the NYC PTET election retroactive to January 1, 2022.  For the 2022 tax year only, the bill allows the NYC PTET election to be made by March 15, 2023, “in a manner prescribed by the commissioner.”
At present, there is no guidance as to the mechanics of making the NYC PTET election. The only guidance released thus far is a reference on NYS’s Department of Taxation and Finance website stating that “any entity that wants to opt in to the New York City pass-through entity tax must first opt in to the New York State pass-through entity tax by Sept. 15, 2022.” It goes on to state that “additional guidance on the New York City pass-through entity tax election process will be available soon.”


  • NYS adopted similar factor-presence nexus provisions in 2014.  However, before S.B. 9454 was enacted, physical presence was still required to establish nexus for corporations subject to the BCT in NYC.  As a result, out-of-state corporations could have had scenarios where they were subject to NYS tax but not NYC tax, even if all of its receipts were sourced to NYC.  This bill eliminates that difference, so corporations will need to re-evaluate whether they have nexus and tax filing/reporting obligations in NYC going forward (including corporate partners with an ownership interest in a partnership doing business in NYC).
  • Even though this bill allows PTEs to make the 2022 NYC PTET election by March 15, 2023, the electing PTE must first have made the NYS election for 2022, which is due by September 15, 2022.  Another requirement for a valid 2022 NYS PTET election is that an electing PTE is required to make an estimated payment with its election.  As such, PTEs contemplating making the NYC PTET election for 2022 will need to quickly assess whether they will make the NYS PTET election by the September 15 deadline.

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