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 section 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.
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 a banking corporation taxable under Article 32 of the New York State Tax Law. Insurance corporations taxable under Article 33 or any corporation taxable under Article 9 can't elect to be a New York S corporation.
- Get consent to the New York S election from all of the corporation's shareholders.
(Note: A qualified subchapter S subsidiary (QSSS) can't make the New York S election. Only the parent corporation of the QSSS can do so.)
Shareholders of eligible federal S corporations that haven't 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 under Tax Law section 660(i) if the corporation's investment income is more than 50% of its federal gross income for that year. This provision only applies to S corporations taxable under Article 9-A.
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.
Under the corporation franchise tax on banking corporations (Article 32), you pay the higher of:
- the tax on entire net income, computed as if the S corporation had not made the federal S corporation election, reduced by the Article 22 tax equivalent; or
- the fixed dollar minimum tax of $250. (Generally, the fixed dollar minimum tax is the higher amount.)
A license fee or maintenance fee may also apply if you're a corporation formed outside of New York.
The metropolitan transportation business tax (MTA surcharge) doesn't apply to a New York S corporation.
The only credit that a New York S corporation may apply against the S corporation's franchise tax is the special additional mortgage recording tax. However, the S corporation may earn other 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 pay tax only on the S corporation items derived from New York sources, which is determined at the corporate level.
Tax credits, other than the special additional mortgage recording tax credit, that are available under Article 9-A and Article 32 flow-through to shareholders to be claimed on the shareholders' returns.
Paying tax if you don't make the New York S election
Federal S corporations that aren't qualified or don't make a New York S election pay the same corporate franchise taxes as regular corporations.
Tax credits are applied against the S 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.
Use Corporation tax Web File to submit Form CT-400. You'll need to first create an Online Services account.
File paper Form CT-400.
How to file and pay
You may have to e-file your return. See e-file and e-pay requirements for certain filers for details.
When to file
|Type of filer ||Due date
||On or before March 15
||Within 2 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 can't meet the filing deadline
Use Corporation tax Web File to submit Form CT-5.4, Request for Six-Month Extension to File New York S Corporation Franchise Tax Return. You'll need to create an Online Services account.
File paper Form CT-5.4, and pay your properly estimated franchise tax on or before the due date of the return.
For more information see:
For information for shareholders of an S corporation see:
- Publication 35, New York Tax Treatment of S Corporations and Their Shareholders - This publication is being updated to reflect legislative changes.