New York City addresses taxation of nonqualified deferred compensation

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July 2018


On June 29, 2018, the New York City Department of Finance issued Finance Memorandum 18-6, Recognition and Allocation of Deferred Income from a Non-Qualified Deferred Compensation Plan.

Memorandum 18-6 addresses the treatment of nonqualified deferred compensation for unincorporated businesses subject to the Unincorporated Business Tax, including sole proprietorships, partnerships, limited partnerships, and limited liability companies treated as partnerships for federal income tax purposes. Memorandum 18-6 also applies to the City’s Business Corporation Tax and General Corporation Tax.

The takeaway

Memorandum 18-6 is similar to guidance issued this past spring by the NYS Department of Taxation and Finance (see NYS Technical Services Bureau Memorandum TSB-M-18(2)C, (3)I (April 6, 2018). Finance Memoranda, similar to NYS Technical Services Bureau Memoranda, are not binding, have no legal force or effect, and are merely advisory. While the memoranda are not binding, it is clear that both the New York State and City are likely to apply the guidance on audit to deferred income from nonqualified compensation plans.

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Peter Michalowski

Peter Michalowski

State and Local Tax Leader, PwC US

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