Deriving receipts for Article 9-A tax and MTA surcharge

When determining whether the deriving receipts threshold is met for a unitary group, the group must aggregate only receipts from corporations conducting a unitary business that meet the ownership requirements under Tax Law § 210-C that are at or above the following thresholds:

• $10,000 for tax years beginning on or after January 1, 2015, and before January 1, 2022;
• $11,000 for tax years beginning on or after January 1, 2022, and before January 1, 2024; and
• $12,000 for tax years beginning on or after January 1, 2024, and before January 1, 2027.

If the total New York or MCTD receipts of the unitary group meet or exceed the deriving receipts threshold, the group has nexus and all members that meet the thresholds above are taxable.

In determining if a unitary group meets or exceeds the deriving receipts threshold, the receipts of the following corporations are excluded from the computation per Tax Law § 210-C.2(c):

• A corporation that is (or if taxable, would be) subject to the tax imposed under Article 9 or 33;
• A real estate investment trust (REIT) that is not a captive REIT;
• A regulated investment company (RIC) that is not a captive RIC;
• A New York S corporation; and
• An alien corporation that is not treated as a domestic corporation and has no effectively connected income for the taxable year.

Example

For the tax period beginning January 1, 2025, Corporations A, B, C, and D are conducting a unitary business and meet the ownership requirements under Tax Law § 210-C. Corporation A has $600,000 in New York receipts. Corporation B has $900,000 in New York receipts. Corporation C has $1,800 in New York receipts. Corporation D has $50,000 in New York receipts and is subject to tax under Article 33. 

Corporation C’s receipts are excluded from the calculation because they are less than $12,000.  Corporation D’s receipts are excluded because it is subject to tax under a separate tax article. 

The unitary group of Corporations A, B, and C meets the deriving receipts threshold by virtue of Corporation A and B’s receipts alone exceeding the threshold.

If a partnership or limited liability company meets or exceeds the deriving receipts threshold, any general corporate partner is deemed to meet the threshold.

In certain instances, a corporation that is a corporate partner or member must add its own receipts to the receipts of the partnership or limited liability company to determine if the deriving receipts threshold is met. This is required when a corporation is:

• A general corporate partner;
• A limited corporate partner that is engaged, directly or indirectly, in managing or controlling any of the partnership’s business activities;
• A member of a limited liability company where the company’s operating agreement does not limit the member’s participation in the management of the company; or
• A member of a limited liability company where the company’s operating agreement does limit the member’s participation in management of the company, but the member is engaged, directly or indirectly, in managing or controlling any of the company’s business activities.

For the purposes of the rules above, a corporation's New York or MCTD receipts include its distributive share of New York or MCTD receipts from any partnership or limited liability company of which it is a partner or member. 

In determining if the deriving receipts threshold is met, a corporate partner of a portfolio investment partnership or a corporate member of a limited liability company that is treated as a portfolio investment partnership is not required to combine its own receipts with that of the partnership.

Examples

Example A

For the tax period beginning January 1, 2025, Partnership A has two general corporate partners: Partner B which owns 60% of the partnership and Partner C which owns 40%. Partnership A has $850,000 of New York and MCTD receipts. Separately, Partner B has $700,000 of New York and MCTD receipts and Partner C has $600,000 of New York and MCTD receipts.

In determining if the deriving receipts threshold is met, both corporate partners B and C would be treated as having $850,000 of New York and MCTD receipts from the partnership. Combined with their own receipts, both general corporate partners exceed the deriving receipts threshold ($1,550,000 for Partner B and $1,450,000 for Partner C). Therefore, both general corporate partners are subject to the Article 9-A franchise tax and MTA surcharge.

Example B

For the tax period beginning January 1, 2025, Limited Liability Company J, which is treated as a partnership, has several corporate members and has $1,000,000 of New York receipts. Separately, Member K has $600,000 of New York receipts and Member L has $500,000 of New York receipts. The limited liability company’s operating agreement imposes limitations on both Member K’s and Member L’s participation in the management of the limited liability company.

Member K is not engaged, directly or indirectly, in the participation in or the domination or control of all or any portion of the business activities or affairs of the limited liability company. Member L is indirectly engaged in the control of the business activities of the limited liability company.

In determining if the deriving receipts threshold is met, Member L would be treated as having $1,000,000 of New York receipts from the limited liability company, since it is indirectly engaged in the control of the business activities of the limited liability company. Member K would not include any receipts from the limited liability company, since it is not engaged, directly or indirectly, in the participation in or the domination or control of all or any portion of the business activities or affairs of the limited liability company and, therefore, does not meet the deriving receipts threshold. Combined with its own receipts, Member L exceeds the deriving receipts threshold due to having New York receipts in the amount of $1,500,000. Therefore, Member L is subject to the Article 9-A franchise tax.