Yes, rent paid in relation to a billboard is taxable under the CRT if the billboard is located in the Manhattan neighborhood south of the 96th Street center line. the annual or annualized gross rent is at least $250,000; and the tenant does not meet any other exemption criteria, such as short rental periods, subtenant of residential properties, use for theatrical productions, and not-for-profit status. Download the update on audit issues related to billboards. While the proposed changes are expected to primarily affect small businesses, all businesses that occupy commercial premises in Manhattan should review their CRT compliance obligations to determine how these new revisions affect them. In general, tenants who rent properties for commercial purposes in Manhattan, south of 96th Street, are subject to the CRT. Some exceptions apply to properties leased by government agencies or non-profit organizations, or properties located in the World Trade Center area or commercial revitalization program area. In addition, businesses located in the other four counties of nyC are not subject to this tax. Tenants are subject to the CIS at an effective rate of 3.9% on the base rent paid if their annual base rent is greater than $250,000. Base rent is the rent paid minus amounts received from subtenants and other deductions/exemptions. Rent includes all payments for which the tenant is responsible and for which non-payment deprives the tenant of the right to occupy the rented space.
For example, incidental costs assigned by the landlord that are not measured separately, water and sewer costs, property taxes, and common area maintenance costs are considered rents subject to the RTA. The CRT is due not only on office space, but also on all other “taxable premises” such as a warehouse, store, garage or parking space. It is assumed that all premises are taxable, unless the taxpayer can prove otherwise. The term “taxable premises” is defined for the purposes of the RTA as premises used or intended to be used for the purpose of carrying on a commercial, commercial, professional, professional or commercial activity, including premises used solely for the purpose of leasing to sub-tenants. The CRT is an obscure tax that was first introduced in 1963 to increase New York`s tax revenues. In recent decades, this tax has become increasingly familiar to Manhattan businesses as the New York Department of Finance has stepped up its efforts to identify and audit non-filers. Yet the CRT remains unknown to many taxpayers and is often absurd to those who have become familiar with it (as one of my clients put it: “They charge taxes on rent!”). For the purposes of the RTA, the definition of “rent” is broad and includes expenses that a taxpayer may not consider rent.
Rent includes all payments made by a tenant that are usually paid by a landlord, including a tenant`s payment for property taxes, utilities, water, sewer and insurance. If you are renting more than one location in the same property, group all locations together to determine the base rent. The tax credit is calculated based on income and rent; According to the DOF regulations, income is defined as total income minus cost of goods sold and return and value adjustments. This means that all income, including income from intangible assets and/or intermediary companies, is included in the calculation used to determine the income thresholds. Sarah S. Kim is Senior Director of Tax in Berdon LLP`s State and Local Tax Group with nearly 10 years of professional experience. Sarah advises Fortune 500 and mid-market companies in a variety of industries. She has experience with various types of taxes, including corporate and franchise tax, sales and use tax, income tax, unregistered business tax, commercial rent tax, and real estate transfer tax. In general, fees paid by the tenant for the improvement, repair or maintenance of the tenant`s premises are not included as rent and are therefore not subject to the CRT.
Because of this legal exclusion, many taxpayers automatically assume that expenses related to tenant improvements are not subject to the RTA. However, NYC is of the view that if a lease specifies a dollar amount for a work allowance that the landlord is required to provide, the payment of that obligation by the tenant on behalf of the landlord is subject to the RTA instead of fixed rent payments. If a lease does not require the landlord to pay a certain work allowance, the tenant`s expenses for the improvement of the hereditary building right are not subject to the CRT. Therefore, it is important for tenants to review and analyze the terms of their lease to determine whether expenses related to tenant improvements are subject to the RTA. Submit electronically to www.nyc.gov/eservices.. .