In early February, Governor Kathy Hochul introduced a revenue bill as part of the New York State’s FY 2024 executive budget. Included as part of this legislation is a provision that will require, beginning in 2024, that all federal S corporations that are subject to tax in New York be treated as S corporations for New York State tax purposes (unless the S corporation is a qualified New York manufacturer that elects C corporation status). If this provision remains in the final version of the legislation, scheduled to be passed by the legislature before the end of March, S corporations in New York will no longer have a choice between being treated as a C corporation or an S corporation for New York State tax purposes.
Under current New York law, if a corporation’s shareholders have made an S election for federal purposes, New York State does not automatically treat that corporation as a New York S corporation. Instead, unless certain parameters are met that mandate that the corporation file as an S corporation, in which case the corporation will be deemed to have made the election, the shareholders may choose whether to make an election to be a New York S corporation by filing Form CT-6. If the election is not made, the corporation will be subject to the same New York corporate franchise taxes as C corporations. This is unlike most other states that generally follow the federal income tax treatment of S corporations.
A copy of the Revenue Bill can be found here: https://lnkd.in/eyFEAmnK
Thank you to Farrell Fritz Attorney Colleen Spain for this week’s Tax Tracker post.