The New York City Council recently passed a measure (2026/133) that retroactively decreases the credit residents may claim against their New York City (City's) personal income tax for their share of the City unincorporated business tax (UBT) paid by a partnership in which they are a partner or business of which they are a proprietor.¹ The credit is a percentage of the amount determined under NYC Admin. Code Section 11-1706(c)(3) (hereafter, "determined amount"). The credit remains the same for those making less than $1 million but is decreased for those making $1 million or more retroactively to tax years beginning on or after January 1, 2026.

The credit amounts for tax years beginning before January 1, 2026, are as follows:

For tax years beginning on or after January 1, 2026, the credit amount is determined as follows:

Implications

Individuals eligible to claim the NYC UBT credit may want to consider reviewing the revised credit amounts and income brackets and adjusting their 2026 estimated tax payments, including whether catch up payments are needed or if safe harbor payments should be revisited. Additionally, there is currently no guidance from the NYC Department of Finance on whether penalty relief will be available for estimated tax underpayments attributable to the retroactive credit reduction.

The reduction in the NYC UBT credit may increase the importance of evaluating the NYC pass-through entity tax (PTET) election for partnerships with NYC resident partners. Partnerships may want to consider modeling the tax impact of the reduced UBT credit and the available NYC PTET credit when evaluating future tax elections and estimated tax payment obligations, and the cash tax advantage that the PTET election could provide. The NYC PTET election must be made by March 15 and is applicable to the calendar year of the election.