Metropolitan Commuter Transportation Mobility Tax

In 2009, New York established the metropolitan commuter transportation mobility tax (MCTMT). This tax will be administered by the New York State Tax Department, and the proceeds from this tax will be distributed to the Metropolitan Transportation Authority.

The MCTMT is imposed on certain employers and self-employed individuals engaging in business within the metropolitan commuter transportation district (MCTD).

The MCTD includes New York City (the counties of New York (Manhattan), Bronx, Kings (Brooklyn), Queens, and Richmond (Staten Island)), and the counties of Rockland, Nassau, Suffolk, Orange, Putnam, Dutchess, and Westchester.

Employers

Effective March 1, 2009, certain employers that have payroll expense within the MCTD are subject to the MCTMT. Employers are subject to the new tax if they are required to deduct and withhold New York State income tax from wages paid to employees, have a payroll expense in excess of $2,500 in any calendar quarter and have employees who work or perform services in the MCTD.

The MCTMT is imposed at a rate of .34% ($34 per $10,000) of an employer's payroll expense for all employees subject to the tax for each calendar quarter. An employer is prohibited from deducting from the wages or compensation of an employee any amount that represents all or any portion of MCTMT.

Individuals with net earnings from self-employment

Effective for tax years beginning on or after January 1, 2009, individuals (including partners in partnerships and members of limited liability companies (LLCs) that are treated as partnerships) who have net earnings from self-employment allocated to the MCTD are subject to the MCTMT. However, if the individual's net earnings from self-employment allocated to the MCTD are $10,000 or less for the tax year, no tax is due. The $10,000 threshold must be applied on an individual basis regardless of the taxpayer's filing status. The amount of the tax is .34% ($34 per $10,000) of the total net earnings from self-employment allocated to the MCTD for the tax year.

Estimated MCTMT payments

Individuals, including partners in a partnership and members of an LLC treated as a partnership, who will owe any MCTMT for the tax year must make estimated tax payments. The estimated tax rules that apply for purposes of New York State personal income tax apply to the MCTMT. However, there is no exception from estimated MCTMT payments for taxpayers who expect to owe less than $300 for the tax year. Therefore, to avoid a penalty for underpayment of the MCTMT for the tax year, the individual's total amount of payment(s) must be at least 90% of the amount of the MCTMT due for the tax year. The estimated MCTMT payments cannot be combined with any estimated New York State personal income tax payments the taxpayer may be required to make.

Special rule for tax year 2009 — The MCTMT is imposed on an individual's net earnings from self-employment allocated to the MCTD if those earnings are more than $10,000 for tax year 2009. However, the individual's MCTMT liability for the 2009 tax year will be computed using ten-twelfths of the total net earnings from self-employment allocated to the MCTD. In the case of a partner in a partnership that operates on a fiscal year basis, the partner will include in the computation ten-twelfths of the net earnings from self-employment allocated to the MCTD for the partnership's entire fiscal year that ends in the 2009 tax year.

If an individual is subject to the MCTMT for 2009, the initial estimated tax payment is due by November 2, 2009 (due to October 31, 2009, falling on a Saturday).

There will be no penalty for the underpayment of estimated tax for periods prior to October 31, 2009, provided the individual includes the total estimated tax due for the period January 1, 2009, through September 30, 2009, in the November 2nd payment.
The estimated MCTMT payment due for the period October 1, 2009, through December 31, 2009, if applicable, is due by February 1, 2010 (due to January 31, 2010, falling on a Sunday).

Partnerships and partners

If a partnership (including an LLC treated as a partnership) is doing business within the MCTD, each partner will be subject to the tax based on his or her share of the partnership's net earnings from self-employment allocated to the MCTD if his or her net earnings from self-employment allocated to the MCTD is more than $10,000 for the tax year. The partnership must provide either the actual amount of net earnings from self-employment allocated to the MCTD or the allocation percentage to each partner so that the partner can determine the amount of the MCTMT due.

Group returns for partnerships

As an alternative to each partner making estimated MCTMT tax payments and filing separate reconciliation returns, a partnership may file one group reconciliation return on behalf of its partners who elect to participate in the group return. The election must be made by September 15th, prior to the end of the tax year. A partnership that chooses to file a group reconciliation return must also make group estimated tax payments on behalf of the electing partners.

Estimated MCTMT payments on behalf of nonresident partners

Partnerships that do business within the MCTD are required to make estimated MCTMT payments on behalf of individual partners who are nonresidents of New York State except in the following circumstances:

• Estimated tax payments are not required for any partner whose estimated MTCMT required to be paid for the tax year by the partnership is $300 or less.
• Estimated tax payments are not required for any partner if the partnership files a group return and the partner has elected to be included on the group return.

Additionally, estimated MCTMT payments are not required for any partner that certifies to the partnership that the partner will comply in his or her individual capacity with the department's MCTMT estimated tax filing requirements.

Estimated MCTMT payments cannot be combined with any estimated New York State personal income tax payments the partnership may be required to make on behalf of nonresident partners.

Penalties and interest

The penalties that apply to the New York personal income tax for individuals also apply to the MCTMT. These penalties may include, but are not limited to: late filing penalty, late payment penalty, failure to file penalty, and penalty for underpayment of estimated tax (self-employed individuals only). Interest will be charged on any MCTMT that is not remitted on or before the payment due date.

For more information please visit the NY State Tax Department's website.

Please contact Feeley & Driscoll's Boston Accounting team by Email or call us at 1 (888) 875-9770.

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