Local Tax Changes Proposed, May Help Small Biz
February 7, 2017
The MTA is raising Metro Card fares…again. Perhaps it’s time for that CitiBike membership or to finally buy a bike? 2016 was the hottest year on record. Fewer coats, more closet space. And even décor was not spared, as the curtains in the Oval Office were changed from crimson red to gold on day one of the new administration. Quelle horreur!
While the seemingly endless stream of shocks and tremors flow from state agencies and the federal government, remember: all politics is local.
For a long time, talk in New York City has been about how to protect, preserve, and promote Mom-and-Pop shops, long considered the soul of New York. Thanks to Dan Garodnick and Corey Johnson, Council members who together represent all of midtown, parts of the Upper East and West Sides, Chelsea, Flatiron, Stuyvesant Town, and the Meatpacking District, a possible lifeline to small commercial leaseholders may be on the way.
Under the bill, Intro 799-A, commercial tenants paying less than $500,000 per year in rent would be exempt from the Commercial Rent Tax (CRT); those paying between $500,000 – $550,000 per year in rent would receive a sliding scale credit against the tax owed. Current law imposes the 3.9% CRT on any tenant south of 96th Street paying more than $250,000. It was created in the 1960s; businesses uptown and in outer boroughs were exempt from it in the 1990s. When it was put into effect, it only affected the largest of companies. Times have changed yet the threshold remains the same.
Reform is on the table. Will it go anywhere? Frankly, it’s a matter of advocacy. The City Council included this bill in its budget response in 2016, but it was not included in the final budget agreement.
The bill is not net neutral. In other words, it will reduce tax revenues, thereby costing the city money to implement. But there are quite a few counter points. For one, the existing tax is only applied only to businesses and commercial space south of 96th Street in Manhattan, giving those operating outside there a competitive advantage. Two, the cost to the city is negligible when tallying revenues and jobs created by commercial entities that will be aided by the change. And finally, commercial and retail business trends are changing – why keep a tax on the books that dates back to the 1960s when the landscape was very different?
Last year, the Manhattan Chamber of Commerce estimated this reform would provide immediate relief for over 2,500 small businesses. That’s a hefty number when you realize the existing tax and its subsequent relief will only impact commercial spaces south of 96th Street? You might consider doing something about this bill and investigate whether or not it will affect you.
For a bill to become law in the city, it must be passed by the City Council and signed by the Mayor. The Council holds hearings on legislation it is proposing and the Administration often testifies about the bill, sending the appropriate agency commissioner to represent its position.
That’s where you come in! The City Council Finance Committee will hold a hearing at City Hall on Monday, February 13 at 1:00pm on Intro 799-A. Testimony in support of the proposal will be important since we do not know where the Administration stands on the bill.
If you’d like to testify, submit a letter, or have more questions about this legislation, please reach out to Jeffrey in our office.