Tax Committee Encourages Further UBT Reform

By James A. Woehlke, CPA

The NYSSCPA New York State, Municipal, and Local Taxation Committee recently drafted a letter to New York City Deputy Mayor for Economic Development Randy Levine to encourage further reform of the unincorporated business tax (UBT).

"We wanted to encourage Mayor Giuliani's administration to continue its work in reforming the UBT," committee Chair Barry Horowitz said. "The logical next step in the reform process is legislation that would conform the UBT rules to those of the general corporation tax, the GCT, regarding the receipts factor of the business allocation percentage where the receipts are solely derived from the performance of services."

The committee has worked with Associate Commissioner Israel Schupper to advance this and other New York City tax reforms. The Society sent the letter under the signatures of NYSSCPA President George Foundotos (Suffolk), Harold Soshnick, chair of the Tax Division Executive Committee and a nominee for Society vice president, and Horowitz.

To date, the Giuliani administration's UBT reform efforts include creating a credit for New York City residents subject to the UBT.

"The two tax systems [the GCT and UBT] use different rules to determine whether services are 'sourced' within the city, that is, whether service income is taxable under the applicable city tax," said Steven Eller, a committee member and primary author of the letter. "Under the GCT rules, services are sourced in the city if they are performed in the city. UBT rules, on the other hand, consider services sourced in the city if the service provider is based in the city, even if performance occurs outside the city."

The committee noted in its letter that although the GCT and the UBT are two different tax systems, there is precedent to apply similar administrative rules to both.