BILL NUMBER: S451

SPONSOR: HOYLMAN-SIGAL
 
TITLE OF BILL:

An act to amend the administrative code of the city of New York, in
relation to reducing certain commercial rent taxes for premises occupied
by certain retail and food services businesses

 
SUMMARY OF SPECIFIC PROVISIONS:

Section 1 of the bill amends section 11-704(h)(2) of the New York City
Administrative Code ("Exemptions and deductions from base rent") to
exempt taxable commercial retail and food services premises with an
annualized base rent of less than $1 million from the Commercial Rent
Tax levied on premises in Manhattan south of 96th Street.

Section 2 of the bill is the effective date: July 1st, next succeeding
the date on which it shall become law.

 
JUSTIFICATION:

              

New York City's restaurant, retail, and recreation businesses were hard-
est hit during the pandemic. These sectors lost 169,700 jobs since
2020-41% of all private sector jobs lost in New York City during the
pandemic, according to Comptroller DiNapoli. Restaurants in particular
laid off 70% of their workforce in March 2020, and the industry has yet
to recover to pre-pandemic levels. Retail jobs, too, are down 11% since
before the pandemic.

New York City currently imposes an effective 3.9% tax on commercial
tenants with a base rent $250,000 or more that are located in Manhattan
south of 96th Street. Though New York City relaxed that tax burden in
2018 by exempting businesses with income less than $5 million and rents
under $500,000 from the Commercial Rent Tax, hundreds of small busi-
nesses continue to pay out year after year. As Manhattan rents continue
to rise and inflation squeezes the industry's already tight profit
margins, New York's restaurants and retailer s are struggling to make
ends meet. New York state can ease the burden on these small businesses
and recovering industries by exempting them from the commercial rent
tax.

The original tax was enacted in 1963, and today New York and Florida are
the only two jurisdictions to levy a tax on commercial rents.  The
relief this carveout would deliver to struggling industries is enormous,
but the impact on tax revenues would be manageable: food and retail
businesses made up just 18.9% of commercial rent taxpayers and 17.6% of
commercial rent tax liability in 2022.

In 2019, New York restaurants and retailers employed over 600,000
people, paid over $26 billion in wages, and made nearly $82 billion in
taxable sales. Granting this relief will allow hundreds of businesses to
keep their doors open, lower the burden for New Yorkers looking to start
a business, and assist these crucial industries in returning to their
pre-pandemic levels of productivity.

 
PRIOR LEGISLATIVE HISTORY:

S.6555 of 2023-2024 (Hoylman-Sigal): Died in Cities
 
FISCAL IMPLICATIONS:

To be determined.

 
EFFECTIVE DATE:
This act shall take effect immediately.