The New York City Commercial Rent Tax (CRT) is imposed on tenants that occupy or use a property for commercial activity in Manhattan, south of the centerline of 96th Street. Recent changes to the CRT may affect certain small businesses renting commercial premises in Manhattan. Under the changes, these small businesses may no longer be required to pay tax or may have their CRT liability reduced.
The changes became law when Mayor Bill de Blasio, on December 22, 2017, signed Local Law 254 (Int. 799-B). Under the new law, a Small Business Tax Credit (the credit) is established to fully or partially offset the CRT for taxpayers that have total incomes of $10 million or less and pay no more than $550,000 rent per year. The new provision was revised on June 23, 2018, to change the effective date to June 1, 2018 (originally July 1, 2018) per Local Law 121 (Int. 882).
We are seeing more companies receiving CRT notices or learning they have filing obligations even though the CRT has been around for over 50 years (it was first introduced in 1963 and the new provision is the first change to the CRT law since 2001). The changes effective June 1, 2018, are intended to alleviate the strain on small business given the high rents and growing online commerce competition. All tenants with no more than $10 million in total income and occupying commercial premises in Manhattan should review whether they qualify for the new credit.
In addition, the CRT is often overlooked and many tenants located in Manhattan, south of 96th Street, are unaware of the CRT and their filing obligations under this tax. For example, billboards are considered taxable premises for CRT purposes. Delinquent taxpayers may mitigate unpaid CRT liability for unreported tax years by requesting a partial amnesty through the NYC Voluntary Disclosure and Compliance Program (Program). Depending on circumstances, the Program offers a limited look-back period of three or six years and a waiver of all penalties.