NYC Business Corporation Tax for Startups: Rates, Minimum Tax, Forms and How It Stacks With New York State

The NYC Business Corporation Tax applies to C-corporations, and entities taxed as corporations, that do business, employ capital, own or lease property, or maintain an office in New York City. A Delaware C-corp with a lease in Brooklyn, employees working from a Manhattan office, or a WeWork desk it uses regularly is squarely inside it.

You can also be subject to the tax without any physical presence. For tax years beginning on or after January 1, 2024, NYC applies economic nexus: a corporation that derives $1,128,000 or more of receipts from activity in the city is taxable. A SaaS company with no NYC staff but large NYC customers can cross that line.

Some common entities are outside the BCT:

• S corporations file under the General Corporation Tax (GCT), which still applies to them in NYC even though New York State recognizes the S election.
• LLCs and partnerships taxed as partnerships fall under the Unincorporated Business Tax. Our post on the NYC Unincorporated Business Tax covers that regime.
• Foreign corporations protected by Public Law 86-272 (sellers of tangible goods whose only city activity is soliciting orders) are exempt, which rarely helps a software company.

A corporation with an officer or employee in the city that is not otherwise subject to the tax may still need to file Form NYC-245, an activities report.

The generally applicable NYC corporation tax rate is 8.85% of business income allocated to the city, for corporations other than financial corporations. That is the number to use for most venture-backed C-corps once they are profitable.

The city publishes three reduced or alternative rates on the business income base:

• Small businesses: 6.5% to 8.85%, depending on income. The lower rate applies at the bottom of the income range and phases up to 8.85% as allocated business income moves from about $1 million to $1.5 million (with a separate phase-in on income before allocation). The precise test is on Schedule H of Form NYC-2, and the computed rate is carried to three decimal places.
• Qualified New York manufacturing corporations: 4.425% to 8.85%.
• Financial corporations (very large banks and similar groups): 9%.

Most startups are loss-making in their first years, so the rate matters less than the minimum tax at that stage. But plan for it. A Series B company with $4 million of income before allocation and a 40% NYC receipts factor has $1.6 million of allocated business income. At 8.85%, the BCT is $141,600 before credits.

The BCT is the highest of three amounts: tax on the business income base, tax on the business capital base, or the fixed dollar minimum. Business income is the primary base; the other two are alternatives that catch companies with little taxable income.

The business income base starts from federal taxable income with city modifications, then is allocated to NYC using a single receipts factor. Receipts from services and digital products are generally sourced to where the customer is, which is why a company headquartered in NYC with mostly out-of-state customers can have a small allocation, and a remote company with NYC customers can have a large one.

The business capital base is taxed at 0.15% for most corporations (0.04% for cooperative housing corporations), with a maximum tax of $10 million. The city also applies a $10,000 reduction in computing the capital tax, and the capital tax cannot go below zero. For an early-stage startup with modest net assets, the capital base rarely produces the winning number.

The fixed dollar minimum is the floor that almost every early-stage NYC C-corp ends up paying in its first years. It is based purely on NYC receipts, as shown below.

The fixed dollar minimum tax is set by the corporation's New York City receipts for the year. The table below is from the city's 2025 Form NYC-2 instructions.

A pre-revenue company with an NYC office still files and pays $25. If you have no NYC receipts at all, the instructions tell you to enter zero rather than leave the line blank, to avoid an erroneous assessment. Short tax years (for example, the year you incorporate) annualize receipts to find the bracket, then prorate.

Most standalone C-corps file Form NYC-2. Corporations that are part of a combined group file Form NYC-2A, and simpler filers may qualify for the short-form NYC-2S. The city uses a combined reporting regime for corporations that meet a more-than-50% ownership or control test and conduct a unitary business, so a parent with an operating subsidiary often files NYC-2A.

Key dates and mechanics:

• Due date: April 15 for calendar-year corporations, or the 15th day of the fourth month after a fiscal year ends.
• Extension: an automatic six-month extension on Form NYC-EXT, filed by the original due date with the tax properly estimated and paid. Up to two further three-month extensions are available on NYC-EXT.1.
• Estimated tax: required on Form NYC-400 if the tax for the following period is expected to exceed $1,000. For calendar-year filers whose second preceding year's tax exceeded $1,000, a 25% installment is due March 15.
• Penalties: a late-filing penalty of 5% per month up to 25% applies unless the failure is due to reasonable cause.

The extension, NYC-400 and NYC-245 can all be filed through NYC e-Services.

A NYC C-corp files a separate New York State return, Form CT-3, and pays state franchise tax in addition to the BCT. The two systems look alike (both use customer-based receipts apportionment and a receipts-based minimum) but they are separate taxes with separate returns.

At the state level, the business income rate is 6.5% for most corporations. For tax years 2021 through 2026, corporations with a business income base over $5 million pay 7.25%, scheduled to return to 6.5% for 2027 and later. That sunset has been extended before, so confirm it when you plan 2027 (checked October 2026).

Companies doing business in the Metropolitan Commuter Transportation District (the five boroughs plus seven surrounding counties) also pay the MTA surcharge on Form CT-3-M. The rate is a permanent 30% of the state franchise tax attributable to activity within the district, for tax years beginning on or after January 1, 2024.

Putting it together for a hypothetical profitable NYC company with $4 million of business income, a 50% New York State apportionment and all New York receipts inside the MTA district: state tax is $130,000 (6.5% of $2 million), the MTA surcharge is $39,000, and the BCT on a 40% city allocation is $141,600. That is about $310,600 of state and city corporate tax on $4 million of income, before credits.

The Metropolitan Commuter Transportation Mobility Tax (MCTMT) is a separate payroll-based tax on employers in the MTA district, and it applies when payroll expense in the district exceeds $312,500 in a calendar quarter. It is easy to confuse with the MTA corporate surcharge, but it is filed quarterly on Form MTA-305, not with the corporate return.

For quarters beginning on or after July 1, 2025, the rate for NYC (Zone 1) employers depends on quarterly payroll expense: 0.60% between $437,500 and $2.5 million, and 0.895% above $2.5 million, with lower rates in the bands below $437,500. Zone 2 rates are lower.

Returns are due April 30, July 31, October 31 and January 31, and New York allows no extensions. Most payroll providers will file MTA-305 for you if you set up the New York withholding account correctly, but check that the box is turned on. A common miss is registering for New York withholding without activating MCTMT filing.

For an early-stage NYC C-corp, the practical work is mostly compliance hygiene: register correctly, file every year even in loss years, and track where your receipts are sourced.

• Calendar the April 15 NYC-2 and CT-3 deadlines together, and file both extensions at once. Many founders extend federally and forget the city.
• Track customer location in your billing system. Both the city and the state source service and digital receipts to the customer, and the receipts factor drives your tax once you are profitable.
• Keep the S election out of NYC planning unless you understand the GCT. An S-corp saves nothing at the city level and loses QSBS eligibility for founders, which is why venture-backed companies stay C-corps.
• Watch the $1,128,000 economic nexus threshold if you are remote but sell into NYC.
• Review state and city credits before you assume you owe the full rate. Our post on New York startup tax incentives covers the main ones.

This is general information, not tax advice for your specific facts. City and state allocation rules have edge cases, particularly for marketplace and advertising revenue, and they are worth a review before your first profitable year.