July 5, 2023

New Changes to the Metropolitan Commuter Transportation Mobility Tax

By Thomas Corrie, New York Metro Leader - State & Local Tax

New Changes to the Metropolitan Commuter Transportation Mobility Tax State & Local Tax

New Tax Hurdles and Exemptions Removed

The Metropolitan Commuter Transportation Mobility Tax (MCTMT) is a unique New York State tax obligation directed at select employers and self-employed professionals operating within the metropolitan commuter transportation district. This region comprises the five boroughs of New York City (Manhattan, Queens, Brooklyn (Kings County), Staten Island, and the Bronx (Richmond County)), plus seven additional counties: Nassau, Suffolk, Rockland, Putnam, Duchess, Orange, and Westchester. Primarily, the MCTMT applies to employers that are required to withhold state taxes and whose payroll expenses surpass $312,500 in any calendar quarter. “Payroll expense” is defined as the total wages and compensation subject to federal social security tax, notwithstanding the annual social security wage limit. In the case of self-employed individuals (including partners), the tax is due when their net earnings from the district exceed the $50,000 threshold.

New MCTMT Provisions

Newly signed legislation brings substantial revisions to the MCTMT provisions. Effective July 1, 2023, the highest MCTMT rate will surge from 0.34% to 0.60% for employers operating within the geographic boundaries of New York City. This peak rate is applicable to employers with payroll expenses over $437,500. For the remaining counties within the district, the maximum rate stays pegged at 0.34% for employers whose payroll expenses cross the same threshold.

Moreover, from January 1, 2024, the legislation hikes the top MCTMT rate from 0.47% to 0.60% on the net earnings of self-employed individuals conducting business within the geographic boundaries of New York City. The $50,000 earnings threshold remains unchanged.

In addition, the new provisions amend the definition of ‘net earnings from self-employment’ for MCTMT purposes. Effective immediately, the revised definition now includes self-employed individuals who participate in controlling (either directly or indirectly) or managing a partnership’s operations, regardless of their specific titles or how they are characterized in a partnership or business operating agreement. Consequently, net earnings from self-employed individuals previously excluded from the MCTMT (for instance, certain limited partners) are no longer exempt.

Points to Consider

The MCTMT is a tax often overlooked because of its limited geographic application and low rate. The fact that the tax now applies a new rate to only certain counties within the district could prove confusing for taxpayers. In particular, the mid-year rate change for New York City employers for the quarterly filing due October 31, 2023, with regard to the July 1 through September 30 period, could be a stumbling block. Furthermore, self-employed individuals who previously were exempt from the MCTMT must now comply with the tax.

If you have any questions concerning the recent law changes, please reach out to your local SALT Team member.