The Business Council supports this legislation, which would increase the credit allowed under the New York City personal income tax for liabilities under the Unincorporated Business Tax (UBT).
This bill will provide small businesses owned by residents of New York City with business income generated within New York City of $150,000 or less relief from the double taxation of income the UBT imposes. New York City's sole proprietors have their income already taxed as personal income, and sole proprietors forfeit an additional 4% of their business incomes to the UBT. Eligible firms with incomes of $100,000 or less will gain full exemption from the tax under this bill. It is estimated that over 80% of the beneficiaries of this legislation are sole proprietors. The bill also lessens filing requirements on small firms doing business in New York City.
As with other aspects of the tax code, the UBT was implemented in the 1960s as a means to derive revenue from businesses structured to sidestep corporate taxes. While the nature of business operations has changed significantly since the 1960s, this aspect of the tax code has not kept pace with those changing times. Significantly more New Yorkers – in and outside New York City - are sole proprietors and this proposed change in tax law is overdue.
While the Business Council would support broader reforms that extended these exemptions to sole proprietors and small businesses which operate in New York City but whose owners do not necessarily reside in New York City, we agree that this legislation is an important first step in long overdue reform.
Therefore, The Business Council supports this bill as it provides both administrative and fiscal relief for sole proprietors and small businesses owned by New York City residents and deriving their income in New York City.