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Why is the flow-through entity issue unique in New York City?

Why is the flow-through entity issue unique in New York City?. NYC has a unique UBT structure We have a local personal income tax We do not recognize S corporations. Partnership Issues. A Partnership is a flow through entity Aggregate Theory v. Entity Theory

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Why is the flow-through entity issue unique in New York City?

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  1. Why is the flow-through entity issue unique in New York City? • NYC has a unique UBT structure • We have a local personal income tax • We do not recognize S corporations

  2. Partnership Issues • A Partnership is a flow through entity • Aggregate Theory v. Entity Theory • Other interesting issues worth clarifying

  3. Sole Proprietors & the Unincorporated Business Tax

  4. History of the UBT • UBT enacted in 1966 to capture revenue from businesses structured to sidestep corporate taxes. • Tax unintentionally captured additional segment of the workforce: independent workers.

  5. Most UBT filers don’t owe tax • Of 106,000 sole proprietor UBT filers, only 21% paid tax (accounting for only 13% of total UBT revenues.) • The City of NY incurred expenses to process 83,000 sole proprietor UBT returns (79% of those filed) w/ $0 in receipts. • Due to complex nature of this tax and fears of non-compliance, filers paid tax professionals to prepare their UBT returns.

  6. Economic Development • Independent workers account for 2/3 of NYC’s job base growth since 1975. • Need to nurture and sustain this vital part of the workforce. • Middle class is struggling more than ever—time to refocus UBT on its original target: high-income partnerships.

  7. Recommendations: • Short term: • Exempt sole proprietors who earn less than $150,000/yr from filing for UBT • Long term: • Exempt sole proprietors from filing & paying the UBT

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