On October 16, 2025, the New York City (NYC or City) Department of Finance (DOF) released proposed regulations under the Business Corporation Tax (BCT) focused on definitions and nexus standards. Future subchapters will be issued separately under subsequent proposals.

Once finalized, the regulations will be codified as Title 19 RCNY Chapter 11A, consisting of nine subchapters that roughly parallel New York State (NYS or State) corporate franchise tax regulations codified as 20 NYCRR Chapter I, Subchapter A (the Article 9-A Regulations).

Next steps

The DOF will hold a public hearing on the proposed regulations on November 20, 2025. By law, under the NYC Charter, the DOF generally must provide a minimum 30-day public comment period and hold a public hearing no earlier than 30 days from publication of the proposed rule. No deadline applies for adoption of a final rule. Based on feedback received, the DOF may revise the proposal before final adoption.

Additional subchapters are expected to be released through subsequent rulemakings, and all subchapters may eventually be re-proposed as a single package. Once all nine subchapters are adopted, the complete BCT regulations will become effective.

Key areas of nonconformity with NYS

Although the DOF's stated goal is to maintain conformity with the NYS's Article 9-A Regulations, several City-specific differences remain. These stem from historical distinctions under the former General Corporation Tax (GCT) and Banking Corporation Tax (BTX) frameworks. Entities that were formerly subject to the GCT/BTX (e.g., S corporations) continue to be subject to the former regimes.

Definitions (Section 11A-01 — 02)

The City retains references to the Unincorporated Business Tax (UBT), providing that entities electing UBT would remain under that regime until revoked. The proposed regulations also would clarify that corporations in liquidation may still be subject to UBT under Section 11-502(a), even if not liable for BCT or GCT.

Economic nexus (Sections 11A — 03, 11A — 09)

Similar to the Article 9-A Regulations, a corporation would be deemed to have nexus with the City if it derives receipts from activities in NYC equal to or in excess of $1 million. For unitary groups, the threshold for each member is $10,000 of City receipts. The City would maintain the exceptions for certain interest income and net gains from government securities, interest income from federal funds and interest paid directly by the federal reserve bank on reserves maintained with federal reserves. The proposed regulations would index the $1 million for inflation each year. This provision would be effective for tax years beginning on or after January 1, 2022, the date the City adopted the economic nexus provisions.

Partnership interests (Section 11A — 04)

The proposed regulations would subject a corporate general partner in a partnership with NYC nexus to BCT, and also deem a corporate limited partner that only holds a limited partnership interest as "doing business" in NYC if the partnership itself meets doing business standards (except in the case of a publicly traded partnership or portfolio investment partnership). This approach would result in a broader nexus standard than NYS law, because it would not include a limited partner exception similar to the Article 9-A Regulations. In addition, the City definition of "portfolio investment partnership," unlike the Article 9-A Regulations, would not include income and gains from commodities or related transactions.

Public Law 86-272¹ (Section 11A — 11)

The City would determine P.L. 86-272 protection based on activities within the entire State, not just within NYC. For example, a Delaware corporation selling luxury clothing has a showroom in Scarsdale, NY and solicits orders in NYC, with orders approved in Chicago, IL. Even though the corporation's NYC activity is limited to solicitation, it would not be exempt from BCT because its statewide activities exceed solicitation. For a foreign corporation to be exempt from tax under P.L. 86-272, the proposed regulations would specify that the in-state activities of the foreign corporation's employees or representatives, or activities engaged in over the Internet by the foreign corporation, "must be limited to the solicitation of orders for the sale of tangible personal property." The proposed regulations list activities that would go beyond solicitation of orders.

Utility corporations and corporations conducting an insurance business (Section 11A-12)

The proposed regulations appear to require utility corporations and insurance corporations to file BCT returns and pay the tax on capital; this requirement, however, would conflict with the structure of the statute and original intent. Most likely, the intent of this section is to provide that stock of each kind of corporation is included in the capital base of their shareholders that file BCT returns. Nevertheless, a correction or clarification will be needed.

Effective Date (Section 2)

The proposed regulations would take effect on the same date that all nine subchapters of Chapter 11A take effect. The current proposed regulations do not state whether the final regulations will be retroactive to the effective date of the BCT, which applies to tax years beginning on or after January 1, 2015.

Implications

As the DOF continues through the drafting and proposal process, it may find new areas in which it wants to diverge from the NYS Article 9-A Regulations. Therefore, its prior guidance (e.g., NYC Department of Finance Business Corporation Tax Regulations, Updated Sept. 12, 2024) may not identify all the differences between the NYS Article 9-A Regulations and the City-specific regulations. Nexus is a key area where NYC and NYS may differ. The language around the application of the tax on capital to utility and insurance corporations also shows that comments will be needed to request corrections and clarifications.