PwC alternatives alert, May 19, 2009

New York State metropolitan commuter transportation mobility tax enacted


On May 7, 2009, Governor Patterson signed into law the Metropolitan Commuter Transportation Mobility Tax ("MTA Payroll Tax"). This bill was written to alleviate fare hikes and service cuts that were adopted as part of the Metropolitan Transportation Authority's budget in April. This bill imposes a new payroll tax on employers within the 12 counties of the Metropolitan Commuter Transit District ("MCTD"), including all five boroughs of New York City, Nassau, Suffolk, Westchester, Orange, Dutchess, Putnam and Rockland counties.

Here are some of the highlights of the bill as it impacts both employers, who have employees in the MCTD, and self-employed individuals (i.e., partners of partnerships) who have apportioned income sourced to the MCTD.

Overview for employers

  • The legislation would require an employer to pay tax on .34% of the payroll expense paid to employees that are employed within the MCTD.
  • Payroll expense means wages and compensation as defined in Sections 3121 and 3231 of the Internal Revenue Code (without regard to section 3121(a)(1) and Section 3231(e)(2)(a)(i)), paid to all covered employees.
  • The MCTD includes the five boroughs on New York City and the following suburban counties: Nassau, Suffolk, Westchester, Rockland, Dutchess, Orange and Putnam.
  • The legislation prohibits an employer from deducting this tax from the wages or compensation of any employee.
  • Any federal deduction for this tax would be disallowed for New York State and New York City purposes.

Overview for partners of partnerships & LLCs

  • The .34% tax also applies to partners of partnerships on apportioned net earnings from self-employment that is attributable to the MCTD if such earnings exceed $10,000 for the tax year.
  • Apportionment is based on the MCTD Apportionment (3 factor - equally weighted property, payroll and receipts in the MCTD/everywhere property, payroll and receipts).
  • Partners have to make quarterly estimated payments of the payroll tax.
  • The estimated tax payment dates will be the same dates as the due dates for employer quarterly payments (see below).
  • There will be a separate return to be filed for partners which will be due 30 days of the 4th month after the close of the tax year (April 30th).

Administration for employers

  • The tax on employers will take effect on and after March 1, 2009.
  • The tax must be remitted along with the employer's regular withholding remittance obligations.
  • For electronic filers, the initial payment, covering the period beginning on March 1, 2009, must be included in the first payment that is due on or after October 31, 2009.
  • For other filers, the initial payment of the payroll tax must be made along with the employer's third quarterly payment due in tax year 2009.
The forms to make estimated payments for partners as well as the separate return have not been released. Another PwC alternatives alert will be sent to you when the new forms become available.

For additional information, please contact your PwC engagement team or any of the partners in our practice.