Tax deadline day.
But according to advocacy groups in New York some corporations won’t be filing as much as they should be, and they’re costing taxpayers $350 million.
Groups like New Yorkers for Fiscal Fairness an the Fiscal Policy Institute are out protesting banking and hedge fund giants today to highlight corporate tax loopholes.
So: What are some of the most commonly exploited loopholes in the city and state tax code?
If you have information or insight to share, write us, tweet @thenyworld or comment below.
What we found
A coalition of advocacy groups that includes the Fiscal Policy Institute and Citizen Action of New York has calculated that New York City loses upwards of $300 million a year because of corporate tax loopholes every year. Avoidance of the Unincorporated Business Tax alone accounts for $160 million of that total.
While New York City taxes managing partner fees in private equity and hedge funds, “carried interest” is exempt from taxation. Carried interest is the profit share made by managing partners, and it accounts for about 20 percent of total profits in any firm.
The UBT is one of the city’s biggest taxes, generating more than $1.5 billion in revenue each year. Eleven of the world’s 50 largest private equity firms are based here.
The federal government taxes “carried interest” to corporations, just at a lower capital gains rate, and The Fiscal Policy Institute recommends a similar scenario be carried out locally.
Similarly the Institute, along with other advocacy groups, recommends the state extend the Nonresident Personal Income tax to cover carried interest as income instead of tax- free capital gains. It estimates $100 million is lost in revenue each year because many of New York’s richest don’t actually live in the city — or claim they don’t — and therefore receive a 23 percent UBT deduction on their income tax.
Finally, you could be forgiven for missing New York’s most recent tax loophole. Highlighted in the Times Union last week, a tiny change to the wording of the state budget has ensured that investment management companies like BlackRock are given the option of being taxed by the city UBT or the state bank tax. Previously they weren’t given a choice and were forced a higher tax rate. Michael Kink from Strong Economy for All, a coalition of unions and civic groups, says the changed language means BlackRock, by not defining itself specifically as a bank, can halve its tax bill.