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September 20, 2019

New York City payroll tax is proposed for child care funding

Legislation has been introduced under Senate Bill S6709 to impose a New York City payroll tax paid by the city's employers to fund expanded child care services. The proposal comes as a result of the New York City Comptroller's "NYC Under Three" plan, which lays out the reasoning for implementing a plan to make childcare affordable for New York City families.

The legislature is expected to consider the bill in the 2020 legislative session; the bill would be effective immediately upon enactment.

The NY Under 3 Act as proposed

Senate Bill S6709 would add new article 24-A (NY Under 3 Act), which would require payment of the child care payroll tax by employers that are subject to New York State income tax withholding under New York Tax Law section 671, with the exception of:

  • Any agency or instrumentality of the United States
  • The United Nations
  • An interstate agency or public corporation created under an agreement or compact with another state or Canada
  • Any nonprofit early childhood services provider that receives funding from the federal or state government, or any municipal state or federal agency or political subdivision
  • Covered employees. A covered employee is an individual who is employed in any city within New York having a population of one million or more (currently, New York City).
  • Payroll expense (covered wages). The payroll tax would apply to those same wages on which the federal Medicare tax applies.
  • Payroll tax rates. The payroll tax, which cannot be deducted from employees' wages, would be graduated based on the employer's quarterly payroll expense as follows:
    • .15% of the payroll expense for employers with payroll expense over $625,000 and not more than $1.25 million*
    • .18% of the payroll expense for employers with payroll expense over $1.25 million and not more than $2.5 million*
    • .22% of the payroll expense for employers with payroll expense over $2.5 million*
  • *Note that some news sources are reporting the rates as .015%, .018% and .022%, respectively.
  • Payment of tax. The payroll tax would be remitted at the same time that New York income tax withholding is paid (or when New York income tax withholding is required to be electronically remitted). (See New York Tax Law section 674).

Ernst & Young LLP insights

The fate of the child care payroll tax is uncertain. So far, at least one New York City business group has expressed concern to the media pointing out that a payroll tax is already paid by New York City businesses to fund the Metropolitan Transit Authority.

It is yet uncertain if New York City Mayor Bill de Blasio supports the new payroll tax.


Contact Information
For additional information concerning this Alert, please contact:
Workforce Tax Services - Employment Tax Advisory Services
   • Kenneth Hausser (
   • Debera Salam (
   • Kristie Lowery (


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