The Real Deal New York

Freedom! 2,000 businesses to escape commercial rent tax

City Council approved bill that changes how tax is applied
By Kathryn Brenzel | December 01, 2017 08:59AM

Dan Garodnick, Bill de Blasio, Mel Gibson as William Wallace, and a vacant NYC storefront (Credit: Icon Productions)

Some 2,000 businesses in Manhattan won’t have to pay a pesky commercial rent tax.
The City Council approved a bill on Thursday that will change who pays a 3.9 percent tax on base rent. In its current form, the tax applies to tenants who pay more than $250,000 a year. The bill changes that threshold so that tenants who make $5 million or less in annual income and who pay less than $500,000 in rent are free from the tax.
The measure also gives a break to businesses that don’t quite meet those parameters. Commercial tenants who make $5 million or less and pay between $500,000 and $550,00 in annual rent, as well as businesses who bring in between $5 million and $10 million and pay less than $550,000 per year, can receive a partial, sliding credit. Council member Dan Garodnick, who proposed the bill in 2015, said during a press conference on Thursday that another 900 stores will receive some relief.
The legislation is expected to cost the city $38.6 million in foregone revenue in fiscal year 2019. This was a sticking point for the de Blasio administration, which criticized the bill in August.
The measure aims to help struggling mom-and-pop stores stay afloat as rents and vacancies rise in the city. Garodnick, whose term ends at the end of the year, billed the legislation as a tool to combat the proliferation of banks and chain stores and to help other small stores stay in business.
“Finding ways to address the retail crisis is going to be very important,” Garodnick told The Real Deal in an interview earlier this month. “We have too many vacant storefronts and a need to think creatively on how to combat that problem.”