The NYC Hospitality Alliance helped deliver an important victory for nearly 400 restaurants that will now either be exempt from paying Commercial Rent Tax (CRT), or have their tax burden reduced.
The Commercial Rent Tax is effectively a 3.9% surcharge that only businesses located south of 96th street in Manhattan pay on their annual rent when it exceeds $250,000. The CRT reform was just voted on and passed by the City Council last month. While it will double the annual CRT exemption threshold from $250,000 to $500,000, the new version contains a revenue cap, so if your business pays less than $500,000 in annual rent and generates less than $5 million in revenue, your business will no longer pay any Commercial Rent Tax. But, if your business pays between $250,000 and $500,000 in annual rent and generates between $5 million and $10 million in revenue, you get a partial CRT credit.
If your business generates more than $10 million in revenue, you will still pay CRT. Companies that operate multiple businesses where their annual rent is less than $500,000 but commingle their revenue and file a single tax return that exceeds $5 million will still be required to pay CRT. For the purpose of this CRT reform, the city will determine a business’s revenue by subtracting the cost of goods sold from its gross receipts, plus a few other factors, so we recommend that you speak with a tax professional about eligibility.
The NYC Hospitality Alliance worked hard to reform the Commercial Rent Tax, and we’re happy to deliver another regulatory reform for the businesses community. Unfortunately, in order for the CRT reform to get the support it needed to pass and be signed into law, the original reform was amended in a way that will require a few hundred restaurants to continue to pay the CRT, which would have been exempt under the original proposal.
This amendment is unwelcome news to hundreds of restaurants that have small profit margins, high labor costs and also need financial relief. So while the announcement is definitely a victory for many of our members, rest assured that the NYC Hospitality Alliance aims to continue to work with the de Blasio administration and the next City Council to eliminate the unjust Commercial Rent Tax for even more deserving businesses.
The NYC Hospitality Alliance gives a big THANK YOU to Council Member Daniel Garodnick for his leadership as the prime sponsor of this Commercial Rent Tax reform!