New York ~ Corporate, Personal Income Taxes: Effect of Tax Reform on S Corporations and Nonresident Shareholders Discussed

The New York Department of Taxation and Finance has issued a memorandum discussing how the state’s corporate tax reform legislation affects the apportionment factor computation for a New York S corporation, as well as the determination of New York source income for nonresident and part-year resident shareholders of New York S corporations. For tax years beginning on or after January 1, 2015, the business apportionment factor reflects a corporation’s New York market-based receipts. To calculate amounts derived from New York sources, nonresident shareholders apply the S corporation’s business apportionment factor to all New York S corporation items of income, gain, loss, and deduction (and any related Tax Law §612 modifications) that are included in New York adjusted gross income. For part-year resident shareholders, the allocation applies only to the New York S corporation items received during the nonresident period (and any related §612 modifications).

The memorandum emphasizes that, for tax years beginning on or after January 1, 2015, all New York S corporation items entering into a nonresident shareholder’s federal adjusted gross income must be allocated to New York using the business apportionment factor, even if there are amounts that would have qualified as exempt investment income or other exempt income for a New York C corporation filer under Article 9-A. There is no statutory provision in Article 22 to exempt those amounts from personal income tax, or to modify federal adjusted gross income to remove those amounts. The memorandum provides an example to illustrate the application of these provisions.

TSB-M-15(7)C, (6)I, New York Department of Taxation and Finance, December 1, 2015

 

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Wolters Kluwer Tax and Accounting

Wolters Kluwer Tax and Accounting is a leading provider of software solutions and local expertise that helps tax, accounting, and audit professionals research and navigate complex regulations, comply with legislation, manage their businesses and advise clients with speed, accuracy and efficiency. Wolters Kluwer Tax and Accounting is part of Wolters Kluwer N.V. (AEX: WKL), a global leader in information services and solutions for professionals in the health, tax and accounting, risk and compliance, finance and legal sectors. We help our customers make critical decisions every day by providing expert solutions that combine deep domain knowledge with specialized technology and services. Wolters Kluwer reported 2016 annual revenues of €4.3 billion. The company, headquartered in Alphen aan den Rijn, the Netherlands, serves customers in over 180 countries, maintains operations in over 40 countries and employs 19,000 people worldwide. Wolters Kluwer shares are listed on Euronext Amsterdam (WKL) and are included in the AEX and Euronext 100 indices. Wolters Kluwer has a sponsored Level 1 American Depositary Receipt program. The ADRs are traded on the over-the-counter market in the U.S. (WTKWY).

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