Subtraction modification for small businesses (Article 22)

The subtraction modification for small businesses has been expanded.

For tax years beginning on or after January 1, 2022, certain taxpayers who are a small business or are a member, partner, or shareholder of a limited liability company (LLC), partnership, or New York S corporation, that is a small business, may now subtract 15% of the net items of income, gain, loss and deduction included in federal adjusted gross income attributable to a small business and/or farm business when computing New York adjusted gross income (NYAGI).

Additionally, certain taxpayers that are members, partners, or shareholders of LLCs, partnerships, or New York S corporations, respectively, that are non-farm small businesses may now be eligible for this subtraction modification if, during the tax year, their income attributable to the net business income from their ownership interests in non-farm LLCs, partnerships, or New York S corporations is less than $250,000. To qualify as a non-farm small business, an LLC, partnership, or New York S corporation must, during the taxable year:

employ one or more persons, and

have New York gross business income attributable to a non-farm business that is greater than zero but less than $1.5 million.

Note: For purposes of this modification, New York gross business income, for an LLC or a partnership, means New York source gross income as defined in Tax Law section 658(c)(3)(B). For a New York S corporation, New York gross business income means the New York receipts included in the numerator of the apportionment factor determined under Tax Law section 210-A.

For more information on this modification, see:

Form IT-225 , New York State Modifications , and its instructions .

Form CT-225 , New York State Modifications , and its instructions .

TSB-M-14(3)C, (5)I , Small Business Subtraction Modification

[Part C of Chapter 59 of the Laws of 2022; Tax Law § 612(c)(39); Administrative Code of the City of New York § 11-1712(c)(35)]