The City of New York is taking a step to address the abundance of empty storefronts littered around town.
On Thursday, Mayor Bill de Blasio, Speaker Melissa Mark-Viverito and Council Member Dan Garodnick unveiled a new bill that would make changes to the commercial rent tax, or CRT, and is intended to help lessen the financial burden on New York’s small businesses.
The CRT affects businesses in Manhattan below 96th Street and above Murray Street that pay at least $250,000 in rent. The effective tax rate is 3.9 percent and has imposed an additional operating expense on small businesses, regardless of their income. For some small businesses, the city said, what they have owed in CRT has at times amounted to more than their net annual income.
Effective July 1, the threshold for Manhattan’s CRT for businesses with income up to $5 million will increase from $250,000 to $500,000 in annual rent, with the benefit provided on a sliding scale for businesses with income between $5 million and $10 million or paying $500,000 to $550,000 in rent. In total, according to de Blasio, the move reduces taxes for 2,700 small businesses, including 1,800 that will no longer pay the tax at all. Under this move, the average business owner will receive between $11,300 and $13,000 in annual tax relief.
This represents the first change to the CRT since 2001 when the threshold was raised from $150,000 to $250,000 and specifically targets Manhattan’s mom-and-pop shops and small businesses. According to the city, 99 percent of the benefit will go to businesses with only one or two taxable locations.
The bill was voted on earlier in the day by the City Council and will be signed by the mayor in the coming weeks.
“Small businesses are the lifeblood of this city,” de Blasio said. “That’s why we designed the bill to ensure that they’re the ones we’re helping. The commercial rent tax in its previous form is outdated and we’re proud to make the first changes in over a decade to bring relief to thousands of small businesses.”
“Manhattan’s small business owners have had to make too many sacrifices just to keep their livelihoods open,” Mark-Viverito added. This bill “would alleviate the financial burden of having to pay a rent tax on top of having to pay the rent itself for the borough’s businesses. Despite vast changes in the Manhattan real estate market and economic landscape over the last 15 years, the commercial rent tax has not been updated to reflect the realities on the ground. So this legislation reflects a long overdue step to provide relief to those businesses who have been struggling for far too long.”
While the passage of the bill is a potential boon to small businesses, it will cost the city $36.8 million in lost revenue in fiscal year 2019.