Avoid common Article 9-A corporation tax filing errors
Follow the tips below to prevent mistakes on your return that may result in bills for additional tax, penalty, and interest.
Use the proper year tax form
If the current tax year form is available, you must file using that year’s tax form. You may only use the prior year’s tax return if you are filing for a short period that begins on or after January 1, 2016 and that short period’s tax form is not yet available.
Mark only the applicable checkboxes
Many of the tax forms contain questions that ask taxpayers to answer by marking a box. The main tax returns, Forms CT-3, CT-3-A and CT-3-A/BC, contain the most checkboxes, but several checkboxes appear on attachments and credit forms as well. Mark only the checkboxes that apply to your circumstances and leave the rest of the checkboxes blank. Inappropriately marking boxes or leaving applicable boxes blank may result in the denial of certain tax benefits or subject you to certain rules that do not pertain to your corporation.
Accurately report codes and values for NYS modifications
You must enter the appropriate modification codes when reporting NYS additions and subtractions used in the computation of entire net income on Forms CT-225, CT-225-A and CT-225-A/B. The codes are listed and described in the instructions to these forms. Also, all amounts must be entered as a positive number on these forms and on the corresponding lines on Forms CT-3 and CT-3-A.
Tips for foreign corporations and corporate partners
Do not enter a $300 fixed dollar minimum amount
For tax years beginning on or after January 1, 2015, the annual maintenance fee of $300 for foreign corporations has been eliminated. You should not be entering $300 as the fixed dollar minimum amount on any form that asks you to enter your fixed dollar minimum tax. Additionally, unless you are required to be included in a combined report with a New York taxpayer, if you are a foreign corporation authorized to do business in NYS by the Department of State but you have no franchise tax nexus in NYS, there is no corporate franchise tax return filing requirement or tax due.
Public Law (PL) 86-272 foreign corporations are exempt from the corporate franchise tax
Foreign corporations disclaiming tax liability in NYS based on PL 86-272 are not required to file Form CT-3 or pay tax on any base under the corporate franchise tax, including the fixed dollar minimum tax. However, if you choose to file Form CT-3 and claim PL 86-272 protection, you must mark the box on Line C on the first part of Form CT-3 and complete the entire form, but report $0 on the tax due after credits line (Part 2, line 4). Note: A nontaxpayer member of a NYS combined group must file Form CT-3-A/BC and include all its receipts and activities on Form CT-3-A/BC and on the combined group’s Form CT-3-A regardless of whether the nontaxpayer member is eligible for the PL 86-272 exemption.
Foreign corporate limited partners making the separate accounting election have specific reporting procedures
If you are a foreign corporate limited partner eligible to make the separate accounting election, you must use specific reporting procedures when preparing your tax return (See Foreign corporate limited partners - separate accounting election.)
Tips for reporting losses
Use losses from tax years prior to 2015 correctly
Losses incurred in tax years beginning prior to January 1, 2015 that were eligible for carryover as of the last day of your 2014 tax year are converted into a Prior Net Operating Loss Conversion (PNOLC) subtraction that is computed on Form CT-3.3. The subtraction is applied against apportioned business income on line 16 of Part 3 of Form CT-3 or CT-3-A. Do not report the value of these losses on line 18 of Part 3 of these forms.
Use losses from tax years beginning in 2015 and after correctly
Apportioned net operating losses (NOLs) incurred in tax years beginning on or after January 1, 2015 are allowed as a net operating loss deduction (NOLD). The amount allowed is computed on Form CT-3.4 and is applied against apportioned business income on line 18 of Part 3 of Form CT-3 or CT-3-A. Do not report the value of these losses on line 16 of Part 3 of these forms.
Do not use a PNOLC or NOLD if you do not have business income
If your apportioned business income reported on line 15 of Part 3 of Form CT-3 or CT-3-A is zero or less, do not report a PNOLC or NOLD subtraction on line 16 or 18, respectively, of Part 3.
Use positive values when reporting a PNOLC or NOLD
The PNOLC and NOLD subtraction values reported on Part 3, lines 16 and 18, respectively, of Forms CT-3 and CT-3-A must be reported as positive values. The values reported on Forms CT-3.3 and CT-3.4 also must be positive values.
Tips for the Business Apportionment Factor Schedule
Complete the Business Apportionment Factor (BAF) Schedule
The BAF Schedule in Part 6 of Forms CT-3 and CT-3-A, as well as the BAF Schedule on Form CT-3-S, must be properly completed, with values entered for types of receipts, even if 100% of your receipts are in NY. Taxpayers that have no receipts required to be included in the denominator of the apportionment factor must mark the box at the beginning of Part 6. Returns that do not have the BAF schedule in Part 6 completed and do not have the box at the beginning of Part 6 marked will generally be recomputed by the Department using a BAF of 100%.
Report interest on bank accounts on the BAF Schedule
Interest on bank accounts is sourced to the bank’s commercial domicile and is reported on the “Interest from other financial instruments” line on the BAF schedule on Form CT-3, CT-3-A or CT-3-S.