On October 16, the New York City Department of Finance (DOF) published a Notice of Public Hearing and Opportunity to Comment on Proposed Rules. The proposed rule is the first of a set of rules following the 2015 tax reform relating to the Business Corporation Tax (BCT).

The DOF’s statement accompanying the proposed rule states that Chapter 11A will provide regulated parties with detailed direction regarding the computation of the BCT. The DOF’s statement says it intends to maintain conformity with the NYS Corporate Tax regulations where corresponding statutory conformity exists, “while weighing the interests of the City to provide a distinct approach in areas where the parity was not historically maintained under the previous iterations of corporate taxes or where the BCT and NYS Corporate Tax statutes diverge.” Chapter 11A will be broken into nine Subchapters that “roughly correspond” to the organization of 20 NYCRR Chapter 1, Subchapter A. The first Section of the City’s proposed rule adds Subchapter 1 of the proposed BCT regulations which will pertain to the imposition of the tax and would generally parallel 20 NYCRR Chapter 1, Subchapter A, Part 1.

• Part 1-1 of the proposed rule would provide definitions of relevant terms.
• Part 1-2 would set forth the required minimum activities in the City for corporations to be subject to tax under the BCT. The proposed nexus rules would generally follow those of the GCT, with the addition of economic nexus provisions. This Part of the proposed rule would include “examples of activity that does not give rise to nexus, corporations that are exempt from the BCT, and detailed guidance for corporations seeking protection under Public Law 86-272.”

Specifically, § 11A-11(a-1) states that “the applicability of Public Law 86-272 to taxes imposed by New York City is determined by the nature of a foreign corporation’s activities in the entire State.” Accordingly, if in addition to protected sales solicitation activities in New York City, a foreign corporation carries on other activities in New York State that would take it outside the scope of Public Law 86-272 protection for state tax purposes, the foreign corporation will not be exempt from taxation.

For a foreign corporation to be exempt under Public Law 86-272, the activities of its employees or representatives in New York State, or activities engaged in via the Internet by such foreign corporation, must be limited to the solicitation of orders for the sale of tangible personal property, including ancillary activities, other than maintaining an office, that serve no independent business function apart from their connection to the solicitation of orders. A foreign corporation that chooses to engage in activities via the Internet for reasons other than solicitation, including interacting with customers or potential customers through such corporation’s website or computer application, will not be protected. However, a foreign corporation will not be subject to tax solely by presenting static text or images on its website.

The City’s proposed rules generally tracks the New York State Public Law 86-272 rules and provides that the following activities would go beyond solicitation:

• Making repairs to or installing such foreign corporation’s products;
• Making credit investigations;
• Collecting delinquent accounts;
• Taking inventory of such foreign corporation’s products for customers or prospective customers;
• Replacing such foreign corporation’s stale or damaged products; and
• Giving technical advice on the use of such foreign corporation’s products after the products have been delivered to the customer.

Both New York State’s regulations and the City’s proposed rules on Public Law 86-272 generally follow the Multistate Tax Commission’s guidance on internet activities as published in August 2021.

The effective date of the proposed rule and future proposed rules adding subsequent subchapters to Chapter 11A will be published after all subchapters of Chapter 11A have completed the rulemaking process.

The DOF will hold a public hearing on the proposed rule on November 20, 2025 at 11:00 AM. The deadline to submit written comments is November 20, 2025. Information related to attending the hearing and submitting comments may be found here: Business Corporation Tax Implementation Rules – NYC Rules.

The Eversheds Sutherland SALT Team will monitor the rulemaking process and publication of proposed rules over the coming months.