§ 28-02 Unincorporated Business Defined.
RCNY § 28-02
(a)General. (Administrative Code § 11-502(a)).
(1)Except as otherwise specifically provided in this chapter of these rules, an unincorporated business means any trade, business, profession or occupation conducted, engaged in or being liquidated by an individual or by an unincorporated entity, including a partnership or fiduciary, a corporation in liquidation, or an unincorporated entity that has elected under § 11-602(1)(b) of the Administrative Code to continue to be subject to the tax imposed by Chapter 5 of Title 11 of the Administrative Code for the period during which such election is in effect, but not including any entity subject to any city corporate business tax imposed pursuant to Chapter 6 of Title 11 of the Administrative Code.
(2)For all taxable years beginning on or after January 1, 1978, the term "unincorporated business" shall not include any entity conducting an insurance business as a member of the New York Insurance Exchange as described in Article 62 of the State Insurance Law.
(3)(i) An unincorporated business which is a utility business subject to the supervision of the State Department of Public Service and which is subject to the tax on utilities pursuant to Chapter 11 of Title 11 of the Administrative Code shall not be subject to tax under Chapter 5 of Title 11 of the Administrative Code.
(ii)An incorporated business which is subject to the tax on vendors of utility services under Chapter 11 of Title 11 of the Administrative Code shall be subject to the Unincorporated Business Tax under Chapter 5 of Title 11 of the Administrative Code on a portion of its entire net income allocable to the city under § 11-508 of the Administrative Code (see: 19 RCNY § 28-07). Entire net income is the unincorporated business gross income as defined by § 11-506 of the Administrative Code (see: 19 RCNY § 28-05) less the unincorporated business deductions allowed by § 11-507 of the Administrative Code (see: 19 RCNY § 28-06). The portion of the unincorporated business entire net income subject to the unincorporated business tax shall be calculated by multiplying the entire net income allocable to the City by a fraction the numerator of which shall be the total receipts of the unincorporated business less those receipts subject to the tax imposed by Chapter 11 of Title 11 and the denominator of which shall be the total receipts of the unincorporated business. Example: An unincorporated business has total receipts of $1,000,000. $300,000 of these receipts is subject to the tax imposed by Chapter 11 of Title 11 of the Administrative Code. The entire net income of the business which is allocable to the City is $500,000. $350,000 will be subject to the Unincorporated Business Tax ($700,000 × $500,000 = $350,000) $1,000,000 (4) (i) Where an individual or other unincorporated entity carries on in whole or in part in the City, two or more distinct unincorporated businesses, all such businesses carried on in whole or in part in the City shall be treated as one unincorporated business for the purposes of Chapter 5 of Title 11 of the Administrative Code. The gross business income and the unincorporated business deductions of all such businesses must be reported in one return. The deductions for the compensation for services of the proprietor or the active partners and the unincorporated business exemptions must be computed without regard to the fact that more than one business activity is carried on by the entity.
(iii)Where a husband and wife each carry on a separate and independent business, each must file a separate and independent tax return even if they file jointly for purposes of the Federal, State or City personal income taxes. Losses incurred in one spouse's business may not be used to reduce the taxable income of the other spouse's business.
(5)In general, the trades, businesses, professions or occupations which constitute an unincorporated business when conducted, engaged in or being liquidated by an individual or an unincorporated entity include, without limitation, all phases of activities such as manufacturing and processing, merchandising, at wholesale or retail, banking and financing, the practice of law, medicine, accounting and other professions, trucking and other transportation services, brokerage services of all types and any other activity which involves the leasing of or trading or dealing in real or personal property or the performing of services of any kind. Where a doubt as to the status of an activity exists, all the relevant facts and circumstances must be considered in determining whether the activity or the transactions involved constitute a trade, business, profession or occupation for the purposes of this section. Generally, the continuity, frequency and regularity of activities, as distinguished from casual or isolated transactions, and the amount of time and resources devoted to the activity or transactions are the factors which are to be taken into consideration. Example: The composition of a single song by an individual who is not a songwriter by profession does not constitute carrying on an unincorporated business so as to subject his royalty income to the tax.
(6)Ordinarily, an individual or other unincorporated entity, not otherwise subject to tax, engaging in activities relating to the investment and reinvestment of his or its own funds and the receipt or collection of income therefrom, or the sale, purchase or writing of stock options for his or its own account or the consummation of isolated or incidental transactions connected with such investment activities will not be considered to be the carrying on of a trade, business or occupation. See 19 RCNY § 28-02(g). However, a taxpayer who or which invests funds in the purchase of an operating unincorporated business, such as a manufacturing plant, mercantile organization, hotel or other unincorporated activity of the type where the carrying on of business is necessary to realizing on the investment, will be deemed to be engaged in the conduct of a taxable trade, business, profession or occupation, even though only a limited amount of time, thought and energy may be devoted to the activity by the individual taxpayer, or by the members of a partnership or other unincorporated entity.
(7)(i) An individual will not be treated as engaged in any trade, business, profession or occupation carried on within or without the City by an unincorporated entity in which such individual owns an interest.
(b)Persons and entities subject to this tax.
(c)Special rules for partnerships, syndicates, groups, pools, joint ventures.
(d)Effect of elections made for federal income tax purposes.
(4)Election under Section 1362 of the Internal Revenue Code. An election by a small business corporation under Section 1362 of the Internal Revenue Code, to be an S corporation (or for taxable years beginning prior to January 1, 1983 the comparable election under former Section 1372 of the Internal Revenue Code), does not alter the corporate status for other than Federal income tax purposes and does not make the electing corporation or its shareholders subject to the provisions of Chapter 5 of Title 11 of the New York City Administrative Code.
(e)Services as employee, officer, director or fiduciary.
(i)The term "employee" as used in this subdivision (e) means an individual performing services for an employer under an employer-employee relationship. Generally, the relationship of employer and employee exists when the person for whom services are performed has the right to control and direct the individual who performs the services, not only as to the result to be accomplished, but also as to the details and means by which that result is to be accomplished. That is, an employee is subject to the will and control of the employer not only as to what shall be done but as to how it shall be done. He will usually be required to work during stated days and hours and be subject to company-established production standards. Other factors characteristic of employment, but not necessarily required or present in every case, are the providing of equipment and the furnishing of a place to work to the individual who performs the services.
(f)Professions.
(g)Purchase and sale of property for own account. (Administrative Code § 11-502(c)).
(iv)$25,000 test. Notwithstanding anything to the contrary, for taxable years beginning after June 30, 1994, if an individual or unincorporated entity is engaged in the purchase and sale of real or personal property, or the purchase, writing and sale of stock option contracts, other than as a dealer, for his, her, or its own account, and that individual or unincorporated entity also is engaged in one or more unincorporated businesses carried on in whole or in part in the City, such individual or entity will continue to be treated as engaged solely in the purchase and sale of property for the individual's or entity's own account and, therefore, eligible for the full exemption, provided such individual or entity does not receive more than $25,000 of gross receipts during the taxable year (determined without regard to any deductions) from all such unincorporated businesses wholly or partly carried on within the City.
(v)Taxable years beginning after 1995. For taxable years beginning on or after January 1, 1996, an individual or unincorporated entity, other than a dealer as defined in paragraph (2) of this subdivision (g), shall not be considered engaged in an unincorporated business solely by reason of: (A) the purchase, holding, and sale for his, her, or its own account of property as defined in paragraph (3) of this subdivision (g); (B) the entry into, assumption, offset, assignment, or other termination of a position in any property as defined in paragraph (3) of this subdivision (g); (C) the acquisition, holding or disposition, other than in the ordinary course of a trade or business, of interests in unincorporated entities engaged solely in the activities described in subparagraphs (v)(A) through (v)(D) of this paragraph (1); or (D) any combination of the activities described in subparagraphs (v)(A) through (v)(C) of this paragraph and any other activity not constituting an unincorporated business subject to the tax imposed by Chapter 5 of Title 11 of the Administrative Code.
(vi)Self-trading activities of individuals. An individual, other than a dealer as defined in paragraph (2) of this subdivision (g), engaged in the purchase and sale of real or personal property for his or her own account, including, for taxable years beginning after December 31, 1976, the purchase, sale or writing of stock option contracts, and, for taxable years beginning after December 31, 1995, the activities described in subparagraphs (v)(A) and (v)(B) of this paragraph, will not be deemed to be engaged in an unincorporated business wholly or partly in the City for purposes of this paragraph (1) unless (A) such transactions and activities are connected with a business regularly carried on wholly or partly in the City by the individual himself or herself and (B) for taxable years beginning after June 30, 1994, the individual receives more than $25,000 in gross receipts during the taxable year from such business regularly carried on. See 19 RCNY § 28-02(a)(7)(i) and (g)(1)(iv) of these rules. For purposes of this paragraph (1), such transactions and activities will be considered to be connected with a business regularly carried on wholly or partly in the City if such transactions are effected in the name of the business, are effected using funds held in banks or other financial institutions in the name of the business or if the assets resulting from such transactions are held in the name, or for the account, of the business. Where the purchase and sale of real or personal property or, for taxable years beginning after December 31, 1995, the activities described in subparagraphs (v)(A) and (v)(B) of this paragraph, are connected with an unincorporated business otherwise regularly carried on by the individual, the profits and income from such transactions will be includible in the unincorporated business gross income of the individual.
(vii)The provisions of this paragraph (4) do not apply to individuals. See 19 RCNY § 28-02(a)(7)(i), which provides that an individual is not considered to be engaged in activities carried on by unincorporated entities in which the individual holds an interest.
(h)Holding, leasing or managing real property. (Administrative Code § 11-502(d)).
(j)Exempt trusts and organizations. (Administrative Code § 11-502(f)). A trust or other unincorporated organization which by reason of its purposes or activities is exempt from Federal income tax shall not be deemed an unincorporated business. Whether a trust or other unincorporated entity is exempt from Federal income taxes for the purposes of this subdivision (j) shall be determined without regard to whether, pursuant to Section 511 of the Internal Revenue Code, it is subject to Federal income taxes on unrelated business income. This subdivision (j) applies only to those trusts and organizations which are exempt from Federal income taxes solely by reason of the provisions of subchapter F, subtitle A, of the 1954 Internal Revenue Code, pertaining to such organizations as qualified pension, profit-sharing, stock bonus and certain other employee benefit plans, organizations of the class or type commonly known as religious, charitable, scientific or educational organizations, certain business or civic leagues, labor or agricultural organizations, social clubs, fraternal associations and various other nonprofit organizations which operate for and serve a public rather than a private interest. If the provisions of this subdivision (j) do not apply to a trust or an organization, the unincorporated business tax status of such trust or organization shall be determined under the other provisions of these regulations.
