Frequently asked questions about Form CT-300
Line 5 is available as an option to taxpayers to satisfy the payment of the mandatory first installment (MFI) of estimated corporate tax (CT) by using overpayments from prior periods instead of remitting additional money. You are not required to apply overpayments to MFI.
Even though Form CT-300 is due one month before the due date of the return for the preceding tax year (TY), you are allowed to apply an amount of overpayment of CT that you expect to compute when you file your preceding tax year return. For example, a calendar year filer is filing Form CT-300 by 3/15/2017 to make the MFI for 2017. The filer reasonably believes that in filing its 2016 return, due on 4/15/2017, it will have an overpayment for 2016. In filing Form CT-300, the taxpayer is allowed to include on line 5 any portion of the 2016 overpayment as partial or full payment of the 2017 MFI requirement, even though the 2016 return has not yet been filed.
You must then take into account the amount that you included on Form CT-300, line 5 to determine the overpayment amount, or the balance due amount, on the return due one month later.
Note: The Tax Department applies all CT payments to satisfy the earliest tax liability first. For example, the application of funds may differ if the final tax computed for TY 2016 does not produce the amount of CT overpayment you applied toward your TY 2017 MFI payment. Thus, amounts used on Form CT-300 for 2017 MFI purposes could be redirected or reduced to satisfy your TY 2016 CT liability. In such instances, you may incur penalties and interest.
If you have any uncertainty about the available amount of CT overpayment that could be applied on Form CT-300, line 5, you should satisfy the MFI for TY 2017 with a payment of new funds and disregard line 5.
Corporation A filed a TY 2015 CT return and computed a $3 million tax due. It computed a TY 2016 MFI due of $1.2 million (40% of $3 million). It also remitted a total of $4.7 million for TY 2015 estimated CT payments during the year. When the taxpayer filed its TY 2015 return, it showed:
|2015 tax plus 2016 MFI||$3 million + $1.2 million = $4.2 million|
|Sum of 2015 estimated payments (2015 MFI due shown on 2014 return plus payments 2, 3, and 4)||$4.7 million|
|Overpayment on 2015 return credited to the next period||$4.7 million – $4.2 million = $0.5 million|
After making the 40% MFI payment of $1.2 million for the 2016 tax year, the taxpayer made three (3) installment payments of $600,000 each. Therefore, it had $3.5 million available to apply to TY 2016 CT liability, comprised of the following:
- $0.5 million overpayment on the TY 2015 tax return
- $1.2 million TY 2016 MFI, reported on the TY 2015 tax return
- $1.8 million from TY 2016 estimated tax payments 2, 3, and 4
When Corporation A files its Form CT-300 to compute and remit its TY 2017 MFI in March 2017, it estimates that its TY 2016 liability, which it will report on an extension request to be filed in April 2017, will be $3.1 million. Based on its TY 2015 CT overpayment and its TY 2016 estimated CT payments, Corporation A has available overpayments of $400,000 to use on Form CT-300, line 5; that is $3.5 million available (representing TY 2015 overpayments and 2016 estimated payments made) minus $3.1 million in TY 2016 estimated tax due.
Note that the above available amount is not sufficient to satisfy the 40% MFI requirement for tax year 2017, which is $1.2 million and is based on the second preceding year’s tax (2015), so Corporation A must supplement the application of the $400,000 overpayment with an additional $800,000 payment.
If completing Form CT-5 to request an extension of time to file your 2016 franchise tax return, you do not take into account any amount of estimated 2016 overpayment you previously used to satisfy the 2017 MFI on Form CT-300. You will account for this amount when you file your 2016 return.
To determine the amount of CT overpayment, or balance due, you will report on the return due one month after Form CT-300, you must take into account the portion of such estimated overpayment that was used to satisfy the MFI requirement on Form CT- 300, line 5. You must either:
- reduce the total amount of actual overpayment calculated on the return by the amount previously claimed on Form CT-300. For example, a Form CT-3 filer should reduce the amount otherwise computed for Part 2, line 24 by the amount applied on the CT-300. Other impacted taxpayers would make a similar adjustment on the corresponding lines on the return they file; or
- when filing your return, increase your balance due, or report a balance due. The amount of such balance due, would equal:
- total prepayments, minus
- tax due after credits, minus
- the estimated overpayment amount used on Form CT-300.
For example, for a Form CT-3 filer, the amount would be:
- Part 2, line 22, minus
- Part 2, line 4, minus
- the estimated overpayment used on Form CT-300, line 5
You must enter this result as a positive amount on Part 2, line 23 Other impacted taxpayers would make a similar adjustment on the corresponding lines on the return they file.
Second preceding tax year
Starting with MFI payments due on or after March 15, 2017, each of the following corporations is required to use the tax from its second preceding tax year when determining whether it must make an MFI payment of estimated tax and when computing the amount of its MFI payment:
- New York C corporations subject to tax under Article 9-A;
- corporations subject to tax under Article 9, sections 184, 186-a, and 186-e; and
- corporations subject to tax under Article 33.
The “second preceding tax year” is the corporate taxpayer’s tax year occurring two taxable years prior to the tax year for which the MFI payment is due. A corporate taxpayer that was not required to file a return for the second preceding tax year does not have to make an MFI payment.
Corporation A is a calendar-year filer and New York C corporation subject to tax under Article 9-A.
Corporation A must use the tax from its calendar tax year ending December 31, 2015, to:
- determine if it’s required to make an MFI payment for the 2017 calendar tax year, and
- calculate the amount of the MFI payment that is due on March 15, 2017, on Form CT-300, Mandatory First Installment (MFI) of Estimated Tax for Corporations.
Yes, each short period is considered a stand-alone tax year when determining the second preceding tax year.
Corporation B is a calendar-year filer. It must make its MFI payment for the 2018 tax year on March 15, 2018. It was a full-year calendar filer in 2017. In 2016, it had two short periods:
- January 1, 2016–April 30, 2016: liability of $150,000
- May 1, 2016–December 31, 2016: liability of $190,000
When computing its 2018 MFI payment, Corporation B’s second preceding tax year is the short period beginning on May 1, 2016. Therefore, its MFI payment is $76,000 (40% × $190,000).
Corporation C is a calendar-year filer. It must pay its MFI for the 2018 tax year on March 15, 2018. It had two short periods in 2017:
- January 1, 2017–August 31, 2017: liability of $710,000
- September 1, 2017–December 31, 2017: liability of $340,000
When computing its 2018 MFI payment, Corporation C’s second preceding tax year is the short period beginning January 1, 2017. Therefore, its MFI payment is $284,000 (40% × $710,000).
Short periods are considered distinct tax years and the MFI requirements apply even when a tax year is shorter than 12 months. If the tax liability for the short period’s second preceding tax year exceeds $1,000, an MFI payment is due on or before the 15th day of the 3rd month following the close of the short period.
Corporation D has a short period from January 1, 2017, to September 30, 2017. It also has a second short period from October 1, 2017, to December 31, 2017.
Corporation D has an MFI payment due December 15, 2017, after the close of the short period from January 1, 2017, to September 30, 2017.
Corporation D also has an MFI payment due March 15, 2018, after the close of the short period from October 1, 2017, to December 31, 2017.
Yes, it owes an MFI payment based on its second preceding year’s tax even if its upcoming tax year is or will be a short period.