MCTD allocation percentage

Determining the Metropolitan Commuter Transportation District allocation percentage for each source of self-employment income:

START-UP NY approved business owners or partners of an approved business who have net earnings from self-employment allocated to either zone of the MCTD, must complete Form IT-6-SNY , Metropolitan Commuter Transportation Mobility Tax (MCTMT) for START-UP NY . If you have other sources of self-employment income allocated to either zone of the MCTD (other than the START-UP NY income), calculate those amounts as shown below. You must include all your net earnings from self-employment allocated to: Zone 1 on Form IT-6-SNY, line 1. Zone 2 on Form IT-6-SNY, line 6.

Note: If the amounts you reported on Form IT-6-SNY, line 1 or 6 exceed $50,000, then you must enter the amounts from Form IT-6-SNY, line 5 or 10 on Form IT-201, line 54a or 54b, as applicable. It is possible that the amounts on Form IT-201, line 54a or 54b may be $50,000 or less.

Example: Mary has total net earnings from self-employment within Zone 1 of $80,000. Since this amount exceeds the $50,000 threshold, Mary is subject to the MCTMT. However, because $45,000 is from the tax-free NY area within Zone 1, Mary will be able to exclude $45,000 from the net earnings base on which Mary will calculate the MCTMT. Therefore, Mary’s net earnings used to compute the MCTMT is $35,000. Mary calculated the MCTMT net earnings base as follows:

Net earnings subject to MCTMT in Zone 1 reported on Form IT-6-SNY, line 1 = $80,000 START-UP NY net earnings in the tax-free area in Zone 1 reported on Form IT-6-SNY, line 4 = $45,000 MCTMT net earnings base for Zone 1 reported on Form IT-6-SNY, line 5 and Form IT-201, line 54a = $35,000

Partners must allocate partnership income to each zone of the MCTD based on the partnership's allocation. Partners will receive their Zone 1 or Zone 2 (or both) allocation percentage from their partnership on Form IT-204-IP, New York Partner's Schedule K-1 . Zone 1- Multiply your net partnership income by the Zone 1 allocation percentage from Form IT-204-IP, line 29b, to determine the amount to include on line 54a. Zone 2- Multiply your net partnership income by the Zone 2 allocation percentage from Form IT-204-IP, line 29c, to determine the amount to include on line 54b.

If you are a partner in more than one partnership, calculate the amount separately for each partnership.

Example: Pat is a partner in a partnership XYZ doing business in Zone 1. Pat also reports net earnings from self-employment from two businesses that report their activity on federal Schedule C (Form 1040). Business A carries on business both in and out of Zone 1. Business B carries on business only inside Zone 1. Pat calculates the amount to enter on Line 54a as follows:

1. Net partnership income of $80,000 multiplied by 65% (.65), the Zone 1 allocation percentage shown on Form IT-204-IP, line 29b = $52,000 2. Business B's net earnings from self-employment of $36,000 = $36,000 3. Business A's net earnings from self-employment of $30,000. Since the business is carried on both in and out of Zone 1, use Form IT-203-A to calculate the amount to include: Net earnings of $30,000 × 40% (Form IT-203-A, line 8) = $12,000 Total amount to be included on line 54a = $100,000

All others: Zone 1 – If all your net earnings from self-employment are from business activity carried on inside Zone 1 , all your net earnings from self-employment are allocated to Zone 1. Include the total net earnings from self-employment for that source on line 54a . If your net earnings from self-employment are from business activity both inside and outside Zone 1, you must complete Form IT-203-A , Business Allocation Schedule, to calculate the amount to include on line 54a . Zone 2 – If all your net earnings from self-employment are from business activity carried on inside Zone 2 , all your net earnings from self-employment are allocated to Zone 2. Include the total net earnings from self-employment for that source on line 54b . If your net earnings from self-employment are from business activity both inside and outside Zone 2, you must complete Form IT-203-A , Business Allocation Schedule, to calculate the amount to include on line 54b .

Note: For the definition of business activity inside and outside either zone of the MCTD, see Form IT-203-A-I , Instructions for Form IT-203-A .

Net earnings from self-employment generally is the amount reported on federal Schedule SE (Form 1040), Part 1, line 6, derived from the source of self-employment income.

Under IRC section 1402, income from certain employment is treated as income from a trade or business, and is reported on federal Schedule SE (Form 1040) as net earnings from self-employment. Accordingly, the income is included in an individual's computation of net earnings from self-employment allocated to the MCTD and is subject to the MCTMT.

Types of employment treated as a trade or business under IRC section 1402 include but are not limited to:

services performed by a United States citizen employed by a foreign government, the United Nations, or other international organization;

services performed by a church employee if the church or other qualified church-controlled organization has a certificate in effect electing an exemption from employer Social Security and Medicare taxes; and

qualified services performed by a minister, a member of a religious order who has not taken a vow of poverty, or a Christian Science practitioner or reader.

If your net earnings from self-employment are not subject to federal self-employment tax (for example, nonresident noncitizens), use federal Schedule SE (Form 1040) to compute your net earnings from self-employment as if they were subject to the tax.

Note: In determining if the exclusion under IRC § 1402(a)(13) applies, an individual shall not be considered a limited partner if they directly, or indirectly, take part in the control, or participate in the management or operations of the partnership such that they are not a passive investor, regardless of their title or characterization in a partnership or operating agreement. In this case, you must include the distributive share from such partnership in your net earnings from self-employment [Tax Law § 800(e)].

Line 54c: MCTMT for Zone 1

Multiply the amount on line 54a by .47% (.0047).

Line 54d: MCTMT for Zone 2

Multiply the amount on line 54b by .34% (.0034).

Example: You have net earnings from self-employment totaling $110,000 in the MCTD with $40,000 allocated to Zone 1, and $70,000 allocated to Zone 2. The amount allocated to Zone 1, $40,000, is exempt from the MCTMT since it is less than the $50,000 threshold. However, the amount allocated to Zone 2, $70,000, exceeds the $50,000 threshold. Therefore, you calculate your MCTMT as follows:

$70,000 (amount allocated to Zone 2) x .0034 (Zone 2 rate) = $238 (amount entered on line 54d)

Example: You have net earnings from self-employment totaling $110,000 in the MCTD with $53,000 allocated to Zone 1, and $57,000 allocated to Zone 2. The net earnings allocated to both zones exceed the $50,000 threshold. Therefore, you calculate your MCTMT as follows:

$53,000 (amount allocated to Zone 1) x .0047 (Zone 1 rate) = $249 (amount entered on line 54c)

$57,000 (amount allocated to Zone 2) x .0034 (Zone 2 rate) = $194 (amount entered on line 54d)

$249 + $194 = $443 (amount entered on line 54e)