S corporations - tax years beginning on or after January 1, 2015
The Tax Department issued guidance regarding the treatment of IRC § 965 repatriation amounts for tax year 2017. See N-18-8, Tax Treatment of IRC § 965 Repatriation Amounts for Tax Year 2017 for Flow-through Entities.
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. See S corporations - tax years beginning before January 1, 2015, for S corporation information for years prior to corporate tax reform.
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.
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). 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.
Who qualifies to make the New York S election
To qualify for New York S corporation treatment, your corporation must:
- Be a federal 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. Insurance corporations taxable under Article 33 or any corporation taxable under Article 9 can't elect to be a New York S corporation.
- Get consent to the New York S election from all of the corporation's shareholders.
(Note: A qualified subchapter S subsidiary (QSSS) can't make the New York S election. Only the parent corporation of the QSSS can do so.)
Mandatory New York S election
Shareholders of eligible federal S corporations that haven't 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 under Tax Law section 660(i) if the corporation's investment income is more than 50% of its federal gross income for that year. See TSB-M-07(8)I or TSB-M-08(1)C for more information on the mandatory New York S corporation election. When determining a corporation's investment income under Tax Law section 660(i) the investment income of a QSSS owned directly or indirectly by the corporation is included.
What to do if you have a QSSS
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. See New York QSSS treatment - tax years beginning on or after January 1, 2015 for additional information.
How to make or terminate the New York S election
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.
To terminate the New York S election, file Form CT-6.1, Termination of Election to be Treated As a New York S Corporation.
Paying tax as 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.
The metropolitan transportation business tax (MTA surcharge) doesn't apply to 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.
Paying tax as a shareholder of a New York S corporation
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.
Nonresident shareholders and part-year resident shareholders pay tax only on the S corporation items derived from New York sources, which is determined at the corporate level.
Tax credits that are available under Article 9-A flow-through to shareholders to be claimed on the shareholders' returns, except for the special additional mortgage recording tax credit.
Paying tax if you don't make the New York S election
Federal S corporations that aren't qualified or don't make a New York S election pay the same corporate franchise taxes as C corporations.
Tax credits are applied against the corporation's tax liability, and do not flow-through to shareholders.
Resident shareholders pay tax on actual distributions of cash or other property from the corporation rather than on their pro rata share of the S corporation pass-through items.
Nonresident shareholders do not pay tax on actual distributions of cash or other property or on their pro rata share of the S corporation pass-through items.
Paying estimated tax
If your corporation reasonably expects to owe more than $1,000 in franchise tax after credits, you must file estimated tax forms (CT-400, Estimated Tax for Corporations) and make quarterly payments of all estimated tax due. Most corporations are mandated to e-file the estimated tax.
- Use Corporation tax Web File to submit Form CT-400. You'll need to first create an Online Services account.
- Use tax preparation approved software to submit Form CT-400.
How to file and pay
- New York S corporations that are general business corporations file Form CT-3-S, New York S Corporation Franchise Tax Return.
You may have to e-file your return. See e-file and e-pay requirements for certain filers for details.
|Type of filer||Due date|
|Calendar year||On or before March 15|
|Fiscal year||Within 2 ½ months after end of reporting period|
If your due date falls on a Saturday, Sunday, or legal holiday, you may file your return on or before the next business day.
If you can't meet the filing deadline
If you cannot meet the filing deadline, you may request a six-month extension of time by filing Form CT-5.4, Request for Six-Month Extension to File New York S Corporation Franchise Tax Return, and paying your properly estimated franchise tax on or before the due date of the return. Most general business corporations are mandated to e-file the extension.
- Use Corporation Tax Web File to submit Form CT-5.4. You will need to first create an Online Services account.
- Use tax preparation approved software to submit Form CT-5.4.
For more information see:
- Corporation tax forms and instructions (current year) or (prior years and periods)
- Corporate Tax Reform 2015
- Corporation Tax Publications
- Corporation Tax Memos (TSB-Ms)
- Corporation Tax Advisory Opinions
- Business Answer Center FAQs
For information for shareholders of an S corporation see:
- TSB-M-15(7)C, (6)I, Impact of New York State Corporate Tax Reform on New York S Corporations and their Nonresident and Part-Year Resident Shareholders
- Publication 35, New York Tax Treatment of S Corporations and Their Shareholders - This publication is being updated to reflect legislative changes.