Tax Nonresidents Working in NYC

Section 1. Chapter 5 of the laws of 1999, amending the tax law and the general city law relating to the definition of nonresident for the purpose of imposing the earnings tax on nonresidents and to repeal such tax in the event of certain judicial determinations, is REPEALED.

§ 2. The general city law is amended by adding a new article 2-E to read as follows:

ARTICLE 2-E

CITY EARNINGS TAX ON NONRESIDENTS Section 25-m. Authorization to impose tax.

25-n. Administrative provisions.

25-o. Deposit and disposition of revenues.

§ 25-m. Authorization to impose tax. In addition to any other taxes, now authorized by law, any city having a population of one million or more is hereby authorized and empowered to adopt and amend local laws imposing a tax on the earnings of nonresidents of such city to be administered in the manner provided for in this article by the administrator as defined in section one of the model local law hereinafter set forth.

The tax authorized by this article may be imposed only if the city imposing the tax authorized by this article also imposes a tax on the personal income of its residents. The rates of such tax shall be the

EXPLANATION--Matter in italics (underscored) is new; matter in brackets

[ ] is old law to be omitted.

LBD04620-01-9

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rates contained in either section two or two-A of the model local law and such rates may be reduced and increased, provided that the rates shall not be fixed higher than those contained in section two-A of such model local law.

The terms of such local law shall be substantially the same as the following model local law except that the appendix and the supplement to the appendix in such local law may be amended for the purpose of conforming it with the United States internal revenue code or other federal laws relating to taxation as presently in effect or as they may be amended.

EARNINGS TAX ON NONRESIDENTS

Sec. 1. Meaning of terms.--As used in this local law, the following terms shall mean and include: (a) "Administrator" means the finance administrator or other fiscal officer of the city charged with administration of the tax on earnings of nonresidents imposed by this local law, except with respect to taxes imposed for any taxable year beginning on or after January first, nineteen hundred seventy-six, such term shall mean state tax commission.

(b) "City" means the city imposing the tax.

(c) "Payroll period" and "employer" shall mean the same as payroll period and employer as defined in subsections (b) and (d) of section thirty-four hundred one of the internal revenue code, and "employee" shall also include all those included as employees in subsection (c) of such section of such code.

(d) "Wages" shall mean wages as defined in subsection (a) of section thirty-four hundred one of the internal revenue code, except that (1) wages shall not include payments for active service as a member of the armed forces of the United States and shall not include, in the case of a nonresident individual or partner of a partnership doing an insurance business as a member of the New York insurance exchange described in section six thousand two hundred one of the insurance law, any item of income, gain, loss or deduction of such business which is such individual's distributive or pro rata share for federal income tax purposes or which such individual is required to take into account separately for federal income tax purposes and (2) wages shall include (i) the amount of member or employee contributions to a retirement system or pension fund picked up by the employer pursuant to subdivision f of section five hundred seventeen or subdivision d of section six hundred thirteen of the retirement and social security law or section 13-225.1, 13-327.1, 13-125.1, 13-125.2 or 13-521.1 of title thirteen of the administrative code of the city of New York or subdivision nineteen of section twentyfive hundred seventy-five of the education law, (ii) the amount deducted or deferred from an employee's salary under a flexible benefits program established pursuant to section twenty-three of the general municipal law or section twelve hundred ten-a of the public authorities law, (iii) the amount by which an employee's salary is reduced pursuant to the provisions of subdivision b of section 12-126.1 and subdivision b of section 12-126.2 of the administrative code of the city of New York, and (iv) the amount of member or employee contributions to a retirement system or pension fund picked up or paid by the employer for members of the Manhattan and Bronx surface transportation authority pension plan and treated as employer contributions in determining income tax treatment under section 414(h) of the Internal Revenue Code.

(e) "Net earnings from self-employment" shall mean the same as net earnings from self-employment as defined in subsection (a) of section fourteen hundred two of the internal revenue code, except that the

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deduction for wages and salaries paid or incurred for the taxable year which is not allowed pursuant to section two hundred eighty-C of such code shall be allowed, and except that an estate or trust shall be deemed to have net earnings from self-employment determined in the same manner as if it were an individual subject to the tax on self-employment income imposed by section fourteen hundred one of the internal revenue code diminished by (1) the amount of any deduction allowed by subsection (c) of section six hundred forty-two of the internal revenue code and (2) the deductions allowed by sections six hundred fifty-one and six hundred sixty-one of said code to the extent that they represent distributions or payments to a resident of the city. However, "trade or business" as used in subsection (a) of section fourteen hundred two of such code shall mean the same as trade or business as defined in subsection (c) of section fourteen hundred two of such code, except that paragraphs (4), (5) and (6) of such subsection shall not apply in determining net earnings from self-employment taxable under this local law. Provided however, in the case of a nonresident individual or partner of a partnership doing an insurance business described in section six thousand two hundred one of the insurance law, any item of income, gain, loss or deduction of such business which is the individual's distributive or pro rata share for federal income tax purposes or which the individual is required to take into account separately for federal income tax purposes shall not be considered to be "net earnings from self-employment".

(f) "Taxable year" shall mean the taxpayer's taxable year for federal income tax purposes.

(g) Resident individual.--A resident individual means an individual:

(1) who is domiciled in the city, unless (A) he or she maintains no permanent place of abode in the city, maintains a permanent place of abode elsewhere, and spends in the aggregate not more than thirty days of the taxable year in the city, or (B) (i) within any period of five hundred forty-eight consecutive days he or she is present in a foreign country or countries for at least four hundred fifty days, and (ii) during such period of five hundred forty-eight consecutive days he or she is not present in the city for more than ninety days and does not maintain a permanent place of abode in the city at which his spouse (unless such spouse is legally separated) or minor children are present for more than ninety days, and (iii) during any period of less than twelve months, which would be treated as a separate taxable period based on a change of resident status, and which period is contained within such period of five hundred forty-eight consecutive days, he or she is present in the city for a number of days which does not exceed an amount which bears the same ratio to ninety as the number of days contained in such period of less than twelve months bears to five hundred fortyeight, or

(2) who is not domiciled in the city but maintains a permanent place of abode in the city and spends in the aggregate more than one hundred eighty-three days of the taxable year in the city, unless such individual is in active service in the armed forces of the United States.

(h) Nonresident individual.--A nonresident individual means an individual who is not a resident.

(i) Resident estate or trust.--A resident estate or trust means: (1) the estate of a decedent who at his or her death was domiciled in the city,

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(2) a trust, or a portion of a trust, consisting of property transferred by will of a decedent who at his or her death was domiciled in the city, or

(3) a trust, or portion of a trust, consisting of the property of:

(A) a person domiciled in the city at the time such property was transferred to the trust, if such trust or portion of a trust was then irrevocable, or if it was then revocable and has not subsequently become irrevocable; or

(B) a person domiciled in the city at the time such trust, or portion of a trust, became irrevocable, if it was revocable when such property was transferred to the trust but has subsequently become irrevocable. For the purposes of the foregoing, a trust or portion of a trust is revocable if it is subject to a power, exercisable immediately or at any future time, to revest title in the person whose property constitutes such trust or portion of a trust, and a trust or portion of a trust becomes irrevocable when the possibility that such power may be exercised has been terminated.

(j) Nonresident estate or trust.--A nonresident estate or trust means an estate or trust which is not a resident.

(k) Unless a different meaning is clearly required, any term used in this local law shall have the same meaning as when used in a comparable context in the laws of the United States relating to federal taxes but such meaning shall be subject to the exceptions or modifications prescribed in or pursuant to the laws of this state. Any reference in this local law to the internal revenue code, the internal revenue code of nineteen hundred eighty-six or to the laws of the United States shall mean the provisions of the internal revenue code of nineteen hundred eighty-six (unless a reference to the internal revenue code of nineteen hundred fifty-four is clearly intended), and amendments thereto, and other provisions of the laws of the United States relating to federal taxes, as the same are included in this local law as an appendix and supplement to the appendix or as included by reference to an appendix and supplement to the appendix of a title enacted by the same local law as enacts this local law. (The quotation of the aforesaid laws of the United States is intended to make them a part of this local law and to avoid constitutional uncertainties which might result if such laws were merely incorporated by reference. The quotation of a provision of the federal internal revenue code or of any other law of the United States shall not necessarily mean that it is applicable to or has relevance to this local law.)

(l) The term "partnership" shall include, unless a different meaning is clearly required, a subchapter K limited liability company. The term "subchapter K limited liability company" shall mean a limited liability company classified as a partnership for federal income tax purposes.

The term "limited liability company" means a domestic limited liability company or a foreign limited liability company, as defined in section one hundred two of the limited liability company law, a limited liability investment company formed pursuant to section five hundred seven of the banking law, or a limited liability trust company formed pursuant to section one hundred two-a of the banking law.

Sec. 2. Persons subject to tax.--(a) Imposition of tax.--A tax is hereby imposed for each taxable year ending on or after July first, nineteen hundred sixty-six on the wages earned, and net earnings from self-employment, within the city, of every nonresident individual, estate and trust which shall comprise:

(1) A tax at the rate of one-fourth of one percent on all wages.

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(2) A tax at the rate of three-eighths of one percent on all net earnings from self-employment.

(b) Exclusion.--(1) In computing the amount of wages and net earnings from self-employment taxable under subsection (a), there shall be allowed an exclusion against the total of wages and net earnings from self-employment in accordance with the following table:

Total of Wages and Net Earnings

From Self-Employment Exclusion Allowable

Not Over $10,000 $3,000

Over $10,000 But Not Over $20,000 $2,000

Over $20,000 But Not Over $30,000 $1,000

Over $30,000 NONE

(2) The exclusion allowable shall be applied pro rata against wages and net earnings from self-employment.

(3) For taxable periods of less than one year, the exclusion allowable shall be prorated pursuant to regulations of the administrator.

(c) Limitation.--In no event shall a taxpayer be subject to the tax under this local law in an amount greater than he or she would be required to pay if he or she were a resident of the city and subject to a tax on personal income of residents of the city adopted by the city pursuant to authority granted by the general city law.