DRAFT BILL RELEASED IMPLEMENTING A NEW YORK STATE UNINCORPORATED BUSINESS TAX -

The New York State Department of Taxation and Finance has released a “discussion draft” of a bill that would implement a New York State unincorporated business tax (“UBT”) as a way to mitigate the effects of the $10,000 cap on state and local tax deductions for certain non-wage income. Unincorporated Business Tax, Bill Discussion Draft, Article 24-A (released May 15, 2018). Although New York City imposes a UBT, there has not been a State-level UBT since 1981. The goal of the State UBT would be to shift non-deductible individual State income taxes to a deductible unincorporated business tax on pass-through entities, and to credit the value of the UBT paid by the business to the individual owners against their personal income taxes.

Overview of the Draft UBT -

Imposition and Tax Rate. The draft bill would impose a 5% tax on the unincorporated business taxable income (“UBTI”) of every partnership (including limited liability companies treated as partnerships) doing business in the State, effective for tax years commencing after 2018. The tax would be imposed on all partnerships regardless of the amount of their taxable income, but would not apply to S corporations, sole proprietorships, or single-member limited liability companies that are owned by individuals.