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ARTICLE 9-A─FRANCHISE TAX ON S CORPORATIONS

Information on this page relates to a tax year that began on or after January 1,
2015. See S corporations - tax years beginning before January 1, 2015, for S
corporation information for years prior to corporate tax reform. 

If your shareholders have made an S election for federal purposes, you should be
aware that New York State does not automatically treat your company as a New
York S corporation unless you are mandated to file as an S corporation under Tax
Law § 660(i). Therefore, unless you are mandated, you need to qualify to make
the election to be a New York S corporation and follow the steps outlined below.


INFORMATION


WHO QUALIFIES TO MAKE THE NEW YORK S ELECTION

To qualify for New York S corporation treatment, your corporation must:

 * be a federal S corporation;
 * be a general business corporation taxable under Article 9-A or be the parent
   of a qualified subchapter S subsidiary that is taxable under Article 9-A of
   the New York State Tax Law (Insurance corporations taxable under Article 33
   or any corporation taxable under Article 9 cannot elect to be a New York S
   corporation.); and
 * get consent to the New York S election from all of the corporation's
   shareholders.

(Note: A qualified subchapter S subsidiary cannot make the New York S election.
Only the parent corporation of the qualified subchapter S subsidiary can do so.)


MANDATORY NEW YORK S ELECTION

Shareholders of eligible federal S corporations that have not made the election
to be treated as a New York S corporation for the current tax year will be
deemed to have made that election if the corporation's investment income is more
than 50% of its federal gross income for that year.

 * For purposes of the mandated New York State S election, investment income
   means the sum of an eligible S corporation's gross income from:
   * interest,
   * dividends,
   * royalties,
   * annuities,
   * rents, and
   * gains derived from dealings in property, including the corporation's share
     of such items from:
     * a partnership,
     * estate, or
     * trust,

to the extent such items would be includable in the corporation's federal gross
income for the tax year (Tax Law § 660(i)(3)).

 * In determining whether an eligible S corporation is deemed to have made the
   New York S election, the income of a qualified subchapter S subsidiary owned
   directly or indirectly by the eligible S corporation shall be included with
   the income of the eligible S corporation.
 * If deemed to have made the New York S election, the taxpayer must file form
   CT-3-S.


WHAT TO DO IF YOU HAVE A QUALIFIED SUBCHAPTER S SUBSIDIARY

In most instances, New York will follow the federal qualified subchapter S
subsidiary treatment in the Article 9-A franchise taxes, but different
situations may apply when the parent is not a New York S corporation.

See New York qualified subchapter S subsidiary treatment for additional
information.


HOW TO MAKE OR TERMINATE THE NEW YORK S ELECTION

 * To make the New York S election, file Form CT-6, Election by a Federal S
   Corporation to be Treated As a New York S Corporation.
 * To terminate the New York S election, file Form CT-6.1, Termination of
   Election to be Treated As a New York S Corporation.


PAYING TAX AS A NEW YORK S CORPORATION

 * Under the corporation franchise tax (Article 9-A), you pay a fixed dollar
   minimum tax based on New York receipts.
 * The metropolitan transportation business tax (MTA surcharge) does not apply
   to a New York S corporation.
 * S corporations may qualify to earn certain tax credits that flow-through to
   the S corporation shareholders to be claimed on the shareholders' individual
   returns. 


PAYING TAX AS A SHAREHOLDER OF A NEW YORK S CORPORATION

 * Shareholders pay New York tax on their pro rata share of the S corporation
   pass-through items of income, gain, loss, and deduction that are includable
   in their federal adjusted gross income.
 * Nonresident shareholders and part-year resident shareholders pay tax only on
   the S corporation items derived from New York sources, which is determined at
   the corporate level.
 * Tax credits available under Article 9-A flow-through to shareholders to be
   claimed on the shareholders' returns, except for the special additional
   mortgage recording tax credit. 


PAYING TAX IF YOU DO NOT MAKE THE NEW YORK S ELECTION

 * Federal S corporations that are not qualified or do not make a New York S
   election pay the same corporate franchise taxes as C corporations.
 * Tax credits are applied against the corporation's tax liability and do not
   flow-through to shareholders.
 * Resident shareholders pay tax on actual distributions of cash or other
   property from the corporation rather than on their pro rata share of the S
   corporation pass-through items.
 * Nonresident shareholders do not pay tax on actual distributions of cash or
   other property or on their pro rata share of the S corporation pass-through
   items.


PAYING ESTIMATED TAX

If your corporation reasonably expects to owe more than $1,000 in franchise tax
after credits, you must file estimated tax forms (CT-400, Estimated Tax for
Corporations) and make quarterly payments of all estimated tax due. Most
corporations are mandated to e-file the estimated tax. You must use one of the
following methods to file:

 * Use Corporation Tax Web File to submit Form CT-400. You'll need to first
   create an Online Services account.
 * Use tax preparation approved software to submit Form CT-400. Or
 * File paper CT-400.


HOW TO FILE AND PAY

 * New York S corporations that are general business corporations file Form
   CT-3-S, New York S Corporation Franchise Tax Return.
 * Most general business corporations are mandated to e-file returns.


WHEN TO FILE

When to file Type of filer Due date Calendar year On or before April 15 Fiscal
year Within 3 ½ months after end of reporting period

If your due date falls on a Saturday, Sunday, or legal holiday, you may file
your return on or before the next business day.


IF YOU CANNOT MEET THE FILING DEADLINE

If you cannot meet the filing deadline, you may request a six-month extension of
time by filing Form CT-5.4, Request for Six-Month Extension to File New York S
Corporation Franchise Tax Return, and paying your properly estimated franchise
tax on or before the due date of the return. Most general business corporations
are mandated to e-file the extension.

 * Use Corporation Tax Web File to submit Form CT-5.4. You will need to first
   create an Online Services account. Or
 * Use tax preparation approved software to submit Form CT-5.4.


FOR MORE INFORMATION SEE:

 * Corporation tax forms and instructions (current year) or (prior years)
 * Corporate Tax Reform 2015
 * Corporation Tax Publications
 * Corporation Tax Memos (TSB-Ms)
 * Corporation Tax Advisory Opinions

Page last reviewed or updated: March 12, 2024
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