Magazine article The CPA Journal

New York Reduces the Franchise Tax for Small Businesses

Magazine article The CPA Journal

New York Reduces the Franchise Tax for Small Businesses

Article excerpt

The 2005/2006 New York State Budget Act reduced the entire net income (ENI)-based general corporation franchise tax (Article 9-A) for small business taxpayers from 6.85% to 6.5%. This reduction of the small business tax rate is the latest in a series of reductions that have lowered the tax rate from 9%, the rate for years beginning before July 1, 1999.

In addition to the reduction in the small business tax rate, the Act also widened the definition of a small business taxpayer. Effective for tax years beginning on or after January 1, 2006, a small business taxpayer is defined as one whose ENI does not exceed $390,000.

The new 6.5% rate applies to all taxpayers whose ENI does not exceed $290,000. For taxpayers whose ENI is between $290,000 and $390,000, the 6.5% small business rate phases out until it reaches the regular franchise tax rate of 7.5%.

The ENI-based franchise tax should be computed as follows:

* If the ENI does not exceed $290,000, the tax rate is 6. …

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