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.
Paying tax as a shareholder of a New York S corporation S corporations may earn tax credits that flow-through to the S corporation shareholders to be claimed on the shareholders' individual returns. The metropolitan transportation business tax (MTA surcharge) doesn't apply to 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. To terminate the New York S election, file Form CT-6.1, Termination of Election to be Treated As a New York S Corporation. 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.
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How to make or terminate the New York S election See New York QSSS treatment - tax years beginning on or after January 1, 2015 for additional information. In most instances, New York will follow the federal QSSS treatment in the Article 9-A franchise taxes, but different situations may apply when the parent is not a New York S corporation. If deemed to have made the New York S election, the taxpayer must file form CT-3-S. 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 (QSSS) owned directly or indirectly by the eligible S corporation shall be included with the income of the eligible S corporation. 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 section 660(i)(3)). 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. Only the parent corporation of the QSSS can do so.) Mandatory New York S election (Note: A qualified subchapter S subsidiary (QSSS) can't make the New York S election. Get consent to the New York S election from all of the corporation's shareholders.Insurance corporations taxable under Article 33 or any corporation taxable under Article 9 can't elect to be a New York S corporation. Be a general business corporation taxable under Article 9-A or be the parent of a QSSS that is taxable under Article 9-A of the New York State Tax Law.To qualify for New York S corporation treatment, your corporation must: Who qualifies to make the New York S election 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. 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).
See TSB-M-15(7)C, (6)I for additional information on the impact of corporate tax reform on New York S corporations and their shareholders. See S corporations - tax years beginning before January 1, 2015, for S corporation information for years prior to corporate tax reform. The information on this page is applicable for tax years beginning on or after January 1, 2015, as corporate tax reform significantly altered the Article 9-A tax for such tax years. S corporations - tax years beginning on or after January 1, 2015
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