New York State tax treatment of refunds of certain New York business tax credits
Federal reporting requirements
For federal income tax purposes, the Internal Revenue Service (IRS) has determined that all or a portion of the following New York State business tax credits that are refunded or credited as an overpayment to estimated tax are considered income to the taxpayer:
- empire zone (EZ) investment tax credit,
- empire zone (EZ) wage tax credit, and
- qualified empire zone enterprise (QEZE) credit for real property taxes.
You may have to include all or a portion of any refund or credit to estimated tax from these credits in your federal taxable income or federal adjusted gross income.
New York State reporting requirements
For New York State corporate franchise tax and personal income tax purposes, any amount refunded or credited as an overpayment to estimated tax from the above credits is considered a refund of franchise tax or income tax and is not taxable to New York. Therefore, you are allowed a subtraction modification for the amount of any refund or the amount credited to estimated tax that you included in your federal taxable income or federal adjusted gross income.
How to apply the subtraction modification
For information on how to apply the subtraction modification for tax years 2015, and after, see:
- Form CT-225, New York State Modifications and its instructions for corporate franchise tax,
- Form CT-225-A, New York State Modifications, Form CT-225-A/B, Subsidiary Detail Spreadsheet, and the instructions for these forms for combined filers of corporate franchise tax, and
- Form IT-225, New York State Modifications and its instructions for personal income tax.
For information on how to apply the subtraction modification for tax years prior to 2015, see the instructions for reporting subtraction modifications on the corporate franchise tax return or personal income tax return you are filing. Use the subtraction modification code provided for the QEZE credit for real property taxes to apply a subtraction modification for any of the credits listed above.
For additional information, see:
- TSB-M-10(9)C, (15)I, New York State Tax Treatment of Refunds of the Qualified Empire Zone Enterprise (QEZE) Credit for Real Property Taxes, and
- TSB-M-10(9.1)C, (15.1)I, New York State Tax Treatment of Refunds of Certain New York Business Tax Credits.