Domicile Revisited: The Snowbird Case That Didn’t Fly

By Brian Gordon, CPA

“This article originally appeared in the November 2013 TaxStringer and is reprinted with permission from the New York State Society of Certified Public Accountants.”

"Domicile" is the New York state tax issue that never seems to go away. Although this year did not see as much activity as in past years, there was one case with wide implications for the many New Yorkers who wish to spend the winter months in Florida or other warm places. A couple with a long tradition of spending significant time in Florida, who thought they moved from New York City to Boca Raton, learned a painful lesson about the Empire State's strict residency rules, and the need to have careful documentation when arguing a case before the Division of Tax Appeals.

The case in question was in The Matter of Donald and Rose Lieberman, DTA No. 824101, decided by Administrative Law Judge Joseph W. Pinto Jr. and involving the years 2004 and 2005. The issues in the case involved domicile and statutory residence, as well as assessed penalties.

The Lieberman case goes to the heart of New York's domicile laws and rules, and some background on these can highlight the significance of this particular ruling. Domicile is a complex issue that involves intention and sentiment. In general, it is the place that individuals intend to be their permanent home. There is a range of sentiment, feeling and permanent association established with the home. A domicile once established continues until the individual in question moves to a new location with the bona fide intention of making a fixed and permanent home there. The burden to prove a change in domicile is on the person claiming the change. In this case, the Liebermans claimed that they changed their domicile from New York City to Florida in February 2004; therefore they have the burden to prove by clear and convincing evidence that a change was made.
"Statutory residence" is more easily defined. If you have unfettered use of a permanent place of abode in New York (a residence), and you are present in New York for more than 183 days (any part of a day equals a day) then you are a resident for tax purposes.
New York state audit guidelines direct the auditors to examine five primary factors to determine which home or location is the primary home – the domicile. These factors try to mirror the issues generally considered by judges in their evaluation of cases. There are also other factors; however, most cases are decided based on the primary factors.

The primary factors are:

• Home: Comparison of the homes
• Time: Comparison of time spent at each residence
• Business: Comparison of business activity in each location
• Near and Dear: At which location are valuable possessions or personal keepsakes?
• Family: At which location are close family ties?

Permeating all of the factors, although not listed as a separate factor, is the issue of lifestyle. A term often used by judges is “habit of life.” This issue proved crucial in this case as well as another case from last year, Matter of Cook, previously described in an earlier Tax Stringer article.
How did the Liebermans fare when their situation was matched against the primary factors?

Home Factor
In the first year of audit – 2004 – Mr. Lieberman was 78 and Mrs. Lieberman was 80. They owned their home in Queens, N.Y. since 1971. Petitioners began traveling to Florida in the early 1980s to escape the cold. They purchased a house in Boca Raton, Fla., in January 1990. The Liebermans became members of a social club as a requirement of ownership of their home. In the early 2000s the Liebermans sold this home and purchased another home in Boca Raton. There was no club membership requirement with this home.
In analyzing the home factor, what is missing in this case is the petitioners' detailed description of the homes. We have no choice but to conclude that one home was not more significant than another. To make a convincing claim of domicile change—that is, to show there was a real move from New York to Florida—the petitioners should explain their emotional attachment to this new home and community. There was no mention of social activity other than a club which they were required to join as part of ownership of a home they bought years ago, before moving to a different home. There was no mention of social activity or hobbies with the new home. What took place during 2004 for them to claim a change in domicile? There was no change mentioned in the case.

Time Factor
The Liebermans claimed that they spent approximately 5 months each year in New York; however, this was not proven. For the sake of this discussion we'll assume that the time spent was approximately equal in New York and Florida. This is not convincing for a change of domicile.

Near and Dear Items
Nothing mentioned.

Family Ties
During the audit period, Mr. Lieberman had three children, a son and two daughters. The son lived in Florida during the years in issue and the daughters in Connecticut. Mrs. Lieberman had one child who lived in Arizona. Did the Liebermans move to Florida to be near their son? They didn’t mention that.

Business Ties
Mr. Lieberman invested in and managed residential real estate in New York for many years. In 2004, 2005 and 2006 he downsized his real estate business, but he continued to operate and manage the business with the help of an employee in New York who was in constant contact with him by telephone while he was in Florida. Mr. Lieberman also spoke with his tenants by telephone. When he returned to New York, he would check on his investment properties maintaining personal contact with his tenants. Mr. Lieberman expressed his desire to remember “who I am and what I am.” He believed he accomplished this by continuing to negotiate leases, handling renewals and creating new tenancies, all of which were “done through” him, providing him personal contact with his clients, enjoyment and something to do.

Only on this issue of "business ties" do we find out who Mr. Lieberman is, per his own quote “who I am and what I am.” This is what domicile is all about. It is the first time we see any feelings of sentiment, and permanent association; it is with his New York real estate business. This is his habit of life. There was no business activity in Florida. If you were to describe Mr. Lieberman, you might describe him as a New York real estate manager who winters in Florida – a snowbird. That does not add up to a clear and convincing change of domicile from New York to Florida.

According to Judge Pinto: “What is glaringly missing, other than the purchase of houses in Boca Raton, was any evidence of an intent to change their domicile to Florida. There was no mention of a daily routine in Florida, much less a social life. There was not a range of sentiment, feeling and permanent association established with Florida.”  Since the petitioners did not have adequate documentation for their time spent in Florida or New York, they were also found to qualify as New York statutory residents. Petitioners were also found to be subject to negligence penalties.

Each domicile case has its own nuances. There are no two cases with identical facts. It is necessary to understand the nuances and the relevance of each bit of information, and to be thoroughly prepared before addressing a New York residency audit.

---

Brian Gordon, CPA, is a state and local tax consultant in private practice. Previously he was with the NYSDTF for more than 30 years, most recently as a District Audit Manager in Manhattan and Brooklyn where he was involved in many residency audits. He is a member of the NYSSCPA New York, Multistate & Local Taxation Committee and writes and speaks on various tax issues. He can be reached at 516-510-6041 or bgord520@gmail.com. He posts a monthly blog at http://gordonstate.blogspot.com.

NYS Partnership Alocation Methods

There is some misunderstanding among tax professionals regarding the proper way to allocate income to New York State from partnerships and other unincorporated businesses. It is clear that

New York State residents must report 100% of their share of income from partnerships on their

New York Resident Income Tax Return. There is no allocation allowed for residents. The allocation

methods apply to nonresidents only.

To consider allocation, we have to determine if the business has nexus in New York. Business is

carried on in New York if activities are conducted with a fair measure of permanency and continuity.
Since there is no specific number of transactions that create nexus, tax professionals should be
conservative in their approach to this issue. For the purpose of comparison, New York State Sales Tax Bulletin ST-175 says that you have nexus for sales tax purposes if you make sales of taxable products to customers within New York State, and regularly (at least 12 times a year) deliver the products in your own vehicles.

Any amount of personal service income would create New York source income, and therefore nexus.

The website, Law.com defines personal services in part as:

 

In contract law, the talents of a person which are unusual, special or unique and cannot be performed

exactly the same by another. The value of personal services is greater than general labor, so woodcarving is personal service and carpentry is not.  Entertainers would fall into this category. General service income (i.e. carpentry) may not create nexus if it is an isolated transaction.

After one has determined that a business has nexus in New York, and business is carried on partly

within and partly without New York State, one must consider allocation methods.

The rules for partnership allocation are not the same as the rules for corporations.

Most general corporations are now required to use only the Gross Income (Receipts) Factor as

 

 

 

 

 

 

 

NYS SALES TAX - What's your opinion?

By Brian Gordon, CPA

I have summarized below, contrasting New York State Advisory Opinions on the question of imposition of Sales Tax on scaffolding and temporary walkways used on construction sites.  The most recent opinion was issued this year, and appears to be a departure from previous opinions.  It states that the lump sum of the charges for rental and temporary walkway services would not be taxable.

Advisory Opinion     TSB-A-13(11)S

Petitioner asks whether it must collect sales and use tax on the installation, rental, and dismantling of temporary pedestrian walkways for use with capital improvements when the price charged is a lump sum for all services and the rental.

New York State concluded that the lump sum of the rental and the service of installing scaffolding, safety netting, hoisting equipment, and temporary pedestrian walkways are subject to sales tax when the installation is not a “temporary facility” at a construction site that is a necessary prerequisite to the construction of a capital improvement to real property. 

Please note that although the question concerned temporary walkways, the response included the installation of scaffolding and other equipment, presumably since they are all commonly addressed together, and are issues on sales tax audits.

The advisory opinion unit continues by focusing on the issue of whether the facilities are temporary.  This is consistent with NYS Regulation 541.8(a).  They say that if the temporary pedestrian walkway is a “temporary facility” at a construction site that is a necessary prerequisite to the construction of a capital improvement to real property, the lump sum of the rental and services would not be taxable.  This is a new position.

If the rental of the temporary pedestrian walkway is separately charged however, that charge would be subject to sales tax as a rental of tangible personal property.

In the advisory unit’s analysis, they state:

“Petitioner’s lump sum charge is primarily for the provision of the service of installing and dismantling temporary pedestrian walkways for its customers.” 

 

This is the key to the opinion.  Since this issue is viewed as primarily a service of installing and dismantling temporary walkways, the advisory unit rationally opined that it is not subject to sales tax, unless there is a separate charge for rental.

Contrast with advisory opinions TSB-A-02(30)S and TSB-A-09(9)S

TSB-A-02(30)S

In response to almost the identical question as above, the advisory unit’s conclusion was different:

“Accordingly, because the agreement between Petitioner and the subcontractor is for the rental of tangible personal property used by Petitioner to provide temporary pedestrian walkways, the subcontractor is required to collect the tax on the total receipts from such equipment rentals. Where the subcontractor charges for installation or installation and subsequent removal of the rented pedestrian walkways, whether or not separately stated, the entire charge is subject to tax” (emphasis added). 

TSB-A-09(9)S

Question: Is the rental of the specified construction equipment ever considered a component of a capital improvement project, and therefore not a taxable sale?

Answer:

“Section 541.8(a) of the Sales and Use Tax Regulations provides an exclusion from tax for charges for “the installation of materials and the labor” to provide “temporary facilities at construction sites,” including temporary pedestrian walkways, where the temporary facility is a necessary prerequisite to the construction of a capital improvement to real property...

The provisions of Sales Tax Reg. § 541.8(a) apply to contracts for the performance of a service of the installation of temporary facilities at a construction site, and do not apply to contracts for the rental of tangible personal property” (emphasis added).

Question: Under what circumstances is a charge for disassembling scaffolding or temporary pedestrian walkways taxable?

Answer:

“Disassembly is not one of the enumerated services subject to tax under Tax Law section 1105(c). However, when disassembly is done as part of a rental of scaffolding or a temporary pedestrian walkway, it is an integral part of that rental, and therefore a separate charge for disassembly is taxable” (emphasis added).

In this opinion, the advisory unit obviously considered this issue specifically one of equipment rental, and therefore concluded: “…that the rental and all related services are all an integral part of the rental, and is therefore taxable whether separately stated or not” (emphasis added).

They further explain that in deciding whether a contract qualifies as a rental of tangible personal property, as distinguished from a contract to provide a service using the property, the determinative factor is whether the vendor maintains dominion and control of the property.

The issue of dominion and control is a question of fact that cannot be determined in the context of an Advisory Opinion.  If the equipment provider is not responsible for the maintenance, insurance, or upkeep of the equipment once it has been installed and approved by the appropriate governmental agencies, it would appear that it is a rental rather than a service.

The new opinion TSB-A-13(11)S discussed above, did not address dominion and control.  The issue of installation, rental, and dismantling was determined to be primarily a service, and as long as the installation is a temporary structure, a necessary prerequisite to a capital improvement, and billed as a lump sum, the service is not subject to NYS sales tax.

NYS Residency and the Professional Athlete

by Brian Gordon, CPA

“This article originally appeared in the July 2013 TaxStringer and is reprinted with permission from the New York State Society of Certified Public Accountants.”

Residency for state tax purposes has proven to be a very difficult concept to comprehend. This is quite understandable given all the factors state taxing authorities use to determine domicile, as well as related court decisions. While the issue is complicated enough for any taxpayer, it becomes especially confusing when residency rules are applied to the life of a professional athlete. What kinds of issues will tax professionals have to handle with clients employed by a team in a professional sports league?
New York state determines residency in one of two ways:

• Domicile: People are residents of New York if they are domiciled there. In a legal sense, "domicile" simply means a person’s primary residence.

It's not a clearly defined issue: Domicile is an issue of intent. People can choose where they want to live, but they must choose and actually live there. (It is well settled that “[t]o effect a change in domicile, there must be an actual change in residence, coupled with an intention to abandon the former domicile and to acquire another” according to Matter of Ingle, Tax Appeals Tribunal, December 1, 2011, quoting Aetna Natl. Bank v. Kramer, 142 AD 444 [1911]). They must have the feeling that the new place is their “home”—a place that they will return to when they are absent. The burden is upon any person asserting a change of domicile to show that the necessary intention existed. There is no bright line test as in statutory resident (below). It requires an analysis of several factors to determine if the requisite intent was actually exhibited.

• Statutory Resident: According to the law, someone would be a resident if he or she maintains a permanent place of abode (residence) in New York state, and is present in the state for more than 183 days. The same rule applies for New York City resident tax.

Someone could be a resident of two states for tax purposes, by being domiciled in one state, and a statutory resident in another. Good planning could help to avoid that troublesome situation.
Many states have the same or similar laws as New York. Because athletes travel so much, and they are not often in one location for the majority of the year, the primary issue generally is domicile—where they claim is their fixed and permanent home.
The typical audit question would be: Is the athlete domiciled at the primary location of the team that employs him or her (home field), or at an off-season residence in a different state or country?
To determine domicile, the New York audit guidelines require examination of five primary factors. There are also secondary and other factors which may or may not play an important role in domicile determination. This list is not in order of importance because the importance varies depending on the individual circumstances, as becomes clear in more detailed examination of the rules, below.

• Home: Comparison of residences and how they are used—lifestyle.
• Business: Location of business involvement or employment.
• Time Spent: Amount of days spent at each state of residence.
• Items Near and Dear:  Location of cherished possessions.
• Family Ties: Relationship to close family members.

"Lifestyle," although not listed in the guidelines as a separate factor, permeates all of the factors. Domicile cases that have been heard in court have analyzed it in detail. Lifestyle can mean how people spend their time. What do you like to do, and with whom? What are your hobbies? At which of your residences to you carry out most of these activities?
The business factor is also important for athletes. Most people live near where they work. This can also be true for a professional athlete; however athletes have a different work pattern and lifestyle than most employees.
The athlete has the following work pattern and lifestyle:

• The season—when they play for a good part of the year. During the season, they play half, or more, of their time at their team’s “home” city/state (home games), and the other portion visiting the cities of their opponents (away games). Many athletes will have a residence (or permanent place of abode) near their home team location.
• Playoffs. If an athlete's team qualifies for the playoff tournament, the season is extended until the team is either eliminated or wins the championship. This again consists of home and away games.
• A pre-season—where the team trains to get ready for the new season. This can be located in a state different from the “home” state.
• An off-season—where athletes have no work responsibility for a few months. Many athletes will also have a residence in a state or country that is far from their home team location for the off-season. This off-season location may be where they grew up, or it may be a location that they chose as an adult.

There are no guarantees in life, but a teacher who takes a new job in a new location probably changed domicile. A professional athlete’s life is generally not as stable as that of a teacher. Athletes rarely get to choose which team they play for, or how long they play for that team. An average career is less than five years, according to various studies. A player may be on two or three different teams during that time. Taking a new job in a new city (going to a new team) would just be the beginning of a domicile analysis. All other factors would have to be analyzed to determine if an athlete intended to make this new location a fixed and permanent home.
There was a case in New Jersey, Matter of Samuelsson, where the athlete, a hockey player, prevailed in his claim of a change of domicile from New Jersey to Florida, when he changed teams from Philadelphia to Tampa Bay (Tax Court of New Jersey Kjell And Vicki Samuelsson, Docket No. 003615-2004).
There was also a case in New York, Matter of Meminger, in which a basketball player was found not to have changed domicile when he changed teams from New York to Atlanta (New York State Tax Commission - File No. 24810).
New York and New Jersey have the same basic residency laws. It all depends on the individual facts. Most of the court cases on athletes’ residency are very old, as the more recent audits have been resolved without going to court.
Let’s look at another factor: time spent at each location. This is also generally a very important factor because you usually spend most of your time at your primary residence. Although this seems like common sense, it is not necessarily the case for professional athletes.
Because of the length of a professional sports season, players may spend more time in their team’s home state than in any other location; however, their lifestyle may indicate more of a fixed and permanent association with their off-season home. On the other hand, it may not. Each person’s situation is different.
Home: Are homes owned or rented? What is the size and value? Which one does the athlete intend to be a permanent home? How does an athlete use a home? Is it furnished and decorated as a permanent home, or more of a temporary residence?
Family: Who are the athletes' close family members? Are they married? Do they have children? Where do they primarily reside? Where do their children go to school?
Near and dear items: Where do the athletes keep their prized possessions— for example, Super Bowl rings or Olympic medals? These may be monetarily valuable items, or items with only sentimental value.
All of these factors will help to determine where the domicile is—the place that an athlete's actions point to as the intended permanent home.
This does not mean that athletes must stay at a location for 30 years or any other defined period of time. The requirement is only that at the time that they move there, or at any other future time, they decide that this is the place that they intend to make their primary home. It becomes the focus of their life with regard to family, friends, leisure activities—lifestyle—and that the residents intend that home to be a permanent home, "with the range of sentiment, feeling and permanent association with it." (As described in Matter of Bodfish v. Gallman.)
Allocation of Income: Another state tax issue for athletes to be concerned with is allocation of income. After a residence in a state is chosen or determined, the athlete must pay tax to all other states in which they perform—that is by playing in a regular season game, playoff game, pre-season game, practice, or any other team meeting or team responsibility. The same applies to other team members, such as managers, coaches and trainers.
For all of these issues mentioned—domicile, statutory residence and income allocation—knowing the amount of time spent in each state or country is important. In the event of a state tax audit, tax auditors will request detailed records of an athlete's whereabouts each day of the year. It’s a burdensome task for an athlete to prove, particularly in the off-season, because there's no team schedule to rely on. It is also valuable during the season if games are missed due to injury, because the team schedule may not be applicable to you during the injury.
Athletes and their tax advisors must give very careful consideration to the above-mentioned factors to determine which state they are a resident of for state tax purposes, and which states they must report income to as a nonresident. As with any other tax issue, for best results it is best to be prepared for an audit before it happens.
Meanwhile, the way athletes are taxed remains subject to debate, as noted in a pair of "Tax Compass" articles in the April Tax Stringer.
_______________________________________________________________________________________________________
For a free phone consultation on this or any other tax issue or concern please call
Brian Gordon, CPA at (516) 510-6041 or email at bgord520@gmail.com.

---

Brian Gordon, CPA, is a state and local tax consultant in private practice. Previously, he was with the NYSDTF for more than 30 years, most recently as a District Audit Manager in Manhattan and Brooklyn, where he was involved in many residency audits of professional athletes. He is a member of the NYSSCPA New York, Multistate & Local Taxation Committee and writes and speaks on various tax issues. He can be reached at 516-510-6041 or bgord520@gmail.com. He also posts a monthly blog at http://gordonstate.blogspot.com.

NYS Nonresident Wage Allocation: No De Minimis Rule

by Brian Gordon, CPA
“This article originally appeared in the May 2013 TaxStringer and is reprinted with permission from the New York State Society of Certified Public Accountants.”

 

You're a nonresident of New York state who works just one day in the state in a given year. Are you still subject to income tax in New York? Yes. Even one day makes you liable for taxes: There is no de minimis rule for nonresident income tax. New York State Department of Taxation and Finance Technical Memorandum TSB-M-12(5)I, issued July 5, 2012, explains the tax department’s policy.
 

Actually, there is a de minimis rule—but it's for employer withholding, not for the employees paying taxes. Consider  nonresident employees  assigned to a primary work location outside of New York.  If they work 14 days or less in New York, the employer is not required to withhold New York tax for that employee. In that case however, the employees are still required to file a New York nonresident income tax return and allocate the appropriate portion of their wages to New York based on the days worked within and outside of New York, and pay any tax due. The employees are also responsible for estimated taxes if warranted.

There are exceptions to the de minimis rule, however. The 14-day rule for withholding does not apply to compensation paid to nonresident traveling salespersons or other employees when the compensation depends entirely on the volume of business they transact. In these cases, the employee’s income is not earned evenly across the number of days worked like a salaried employee; the amount earned in New York in a few days, based on business transacted, may be a significant number—not de minimis.

Compensation paid in one year that is related to services performed in a prior year also does not qualify for the 14-day rule. Examples of this would be deferred compensation and compensation from nonstatutory stock options. Because this income was earned in prior years, the employer would be required to withhold New York taxes based on the days worked in and out of New York in the years the income was earned. For deferred compensation, generally you would use the last three full years worked plus the most recent partial year, as a basis for the allocation. For nonstatutory stock options, the allocation period is option grant date to vest date. This was the result of a rule change in 2006.
Other situations where the 14-day de minimis rule does not apply involves employees that can earn a very high income for one day of work. Withholding, and of course income tax, is required for the following types of taxpayers, even if they work only one day in the state:

Public Speakers
This includes those who earn income from public speaking and personal appearances. It is not limited to income earned from services in the form of a speech, presentation or personal appearance.

Professional Athletes
It should be noted that the allocation method for professional athletes’ wages has changed over the years. At one time, athletes’ wages were allocated based simply on the number of games in a regular season schedule, plus playoffs (this means games that count, not practice or exhibitions) played in New York, divided by the total number of games. Now, earnings are allocated by work days, or what New York calls “duty days.”Duty days include all days that the athlete is required to be at work, including pre-season games, practice and workouts.

Interestingly enough, the New York Giants football team is based in New Jersey. In most years, they do not play any games in New York (unless they play against the Buffalo Bills, in Buffalo, which last happened in 2007); however, they have held their training camp in New York. The salaries of the nonresident players, coaches and others with the team are therefore subject to NYS withholding and income tax based on the number of duty days practicing in New York. (More on this issue can be found in the Tax Compass section of the April 2013 Tax Stringer.)

Entertainers
This includes, but is not limited to, actors, singers, musicians, dancers, circus performers, writers, directors, producers, set designers, and any person appearing on television, radio, the stage, a night club performance or hotel show. In short, anyone who received compensation related to a live, recorded or filmed performance in New York state. (References to specific parts of state tax law that cover nonresident withholding and taxation can be found in the technical memorandum.)

For a free phone consultation on this or any other tax issue or concern please call
Brian Gordon, CPA at (516) 510-6041 or email at bgord520@gmail.com.

File a Protective Claim for New York State MCTMT by April 30, 2013

If you are a self-employed individual, and timely filed the annual Metropolitan Commuter Transportation Mobility Tax Return, MTA-6 for tax year 2009, the deadline to file a protective claim is quickly approaching.  That date is April 30, 2013.  You only have to file a protective claim once.  It will apply to all open and all future periods. 

If you are an employer, and filed the MCTMT quarterly return MTA-305, and have not filed a protective claim for previous quarters, you also have the deadline of April 30, 2013, to file a protective claim for the quarter Jan. - March 2010.  As with self-employed annual filers, the claim will apply to all open and all future periods. 

You are advised to file a protective claim, because the constitutionality of the Metropolitan Commuter Transportation Mobility Tax has been challenged.  It is very easy to do so. 
Just click on the link Protective Claim to get started.

 

First, let me make it clear that until this issue is resolved in the courts, the MCTMT is still in effect and must continue to be filed. 

Responsibility of employers: 

The MCTMT on employers is determined on a quarterly basis. If wages subject to withholding for covered employees exceeds $312,000 for a quarter, MCTMT is due for that quarter.  Employers file form MTA-305.  If in a following quarter, covered employee wages does not exceed $312,000 MCTMT is not due for that quarter.  

Covered employees are those whose predominant responsibilities, base of operations or direction and control is in the Metropolitan Commuter Transportation District (MCTD).  If any of these are not conclusive, then the employees’ residence should be used.


 The (MCTD) includes the counties of New York (Manhattan), Bronx, Kings (Brooklyn), Queens, Richmond (Staten Island), Nassau, Suffolk, Westchester, Orange, Rockland, Putnam and Dutchess. 

Quarterly MCTMT returns must be filed and any MCTMT due must be paid for each calendar quarter by the last day of the month following the end of the quarter as follows:

Quarter                                                          Due Date

 January 1 to March 31                                    April 30

April 1 to June 30                                            July 31

July 1 to September 30                                   October 31

October 1 to December 31                             January 31 

MCTMT payments – The method and due dates for remitting MCTMT payments depend on whether or not the employer is required to or elects to participate in the PrompTax program for New York State withholding tax purposes. 

Responsibility of Self-Employed Individuals (including partners in partnerships and members of LLCs that are treated as partnerships for federal income tax purposes):

If you are a self-employed individual (as defined above) with net earnings from self-employment allocated to the MCTD in excess of $50,000 you are subject to the tax (MCTMT). 

Net earnings from self-employment is generally the amount computed on federal Form 1040, Schedule SE, Section A, line 4 or Section B, line 6 depending on which section you are required to complete. 1

 

If you have net earnings from self-employment allocated to the MCTD from more than one business or partnership, you must use the total of all your net earnings from self-employment allocated to the MCTD for purposes of the $50,000 threshold and to compute the tax.  

 

Please note that this $50,000 threshold is an allocated number.  That is total net income allocated to the MCTD by use of allocation methods according to NYS Personal Income Tax rules (Not NYS Corporation Tax rules). 

Annual MCTMT returns (MTA-6) for self-employed individuals is due on or before the 30th day of the fourth month following the close of the tax year (for calendar-year filers, this will be April 30 of the following tax year).  

Individuals who will owe any MCTMT for the tax year must make estimated MCTMT payments. The estimated tax payments are due quarterly. 

Quarter                                                          Due Date

 

January 1 to March 31                                     April 30

April 1 to June 30                                             July 31

July 1 to September 30                                   October 31


October 1 to December 31                             January 31 

All MCTMT filings and payments may be web filed through the Tax Department website or paper filed with check remitted.
 

 

According to the NYS Department of Taxation and Finance website:

 

The constitutionality of the MCTMT has been challenged in a series of lawsuits. In all but one of these lawsuits in which there has been a decision, the MCTMT has been ruled to be constitutional and the legal challenges have been dismissed. In just one of the challenges, a Nassau County Supreme Court justice recently found the MCTMT to be unconstitutionally enacted, which determination is being appealed by the State of New York and the MTA. The litigation is not concluded and the tax is still in effect. If this requirement to pay the tax and file returns were to change, the department will notify taxpayers. 

All taxpayers who have been paying this tax remain subject to the tax and are required to continue to pay the tax and file the required returns. As with other taxes, failure to make the tax payments and file required returns could subject a taxpayer to penalties. 

For more detailed information on the requirements for the MCTMT, see NYS Publication 420 – Guide to the Metropolitan Commuter Transportation Mobility Tax. 

For a free phone consultation, call Brian Gordon, CPA at 516-510-6041.

Brian Gordon, CPA, is a state and local tax consultant in private practice. Previously, he was with the NYSDTF for more than 30 years, most recently as a District Audit Manager in Manhattan and Brooklyn. He is a member of the NYSSCPA New York, Multistate & Local Taxation Committee and writes and speaks on various tax issues. He can be reached at bgord520@gmail.com or (516-510-6041).   
He also posts a monthly blog called Brian Gordon's STATEments at http://gordonstate.blogspot.com.

 

1: www.tax.ny.gov