Franchise Tax in New York: Complete Guide 2026
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Franchise Tax in New York: Complete Guide 2026
Tax information is for educational purposes only and does not constitute tax advice. Consult a licensed tax professional for your specific situation.
New York imposes a corporate franchise tax under Article 9-A on corporations and certain other entities doing business, employing capital, owning or leasing property, or maintaining an office in the state. The tax is calculated under multiple bases, and the corporation pays whichever produces the highest amount (with a fixed-dollar minimum). For 2026, the business income base rate is ~7.25% for most corporations, with a temporary surcharge of ~0.75% for businesses with income over ~$5,000,000 (bringing the effective rate to ~8.00% for large corporations). New York City adds its own corporate tax on top of the state’s.
New York Franchise Tax Rates (2026)
State-Level Rates
| Tax Base | Rate |
|---|---|
| Business income base | ~7.25% |
| Temporary surcharge (income over ~$5M) | ~0.75% additional |
| Capital base | ~0.04% of business capital (capped at ~$5,000,000 in tax) |
| Fixed dollar minimum (based on receipts) | See table below |
Fixed Dollar Minimum
| New York Receipts | Minimum Tax |
|---|---|
| Under ~$100,000 | ~$25 |
| ~$100,000 — ~$250,000 | ~$75 |
| ~$250,001 — ~$500,000 | ~$175 |
| ~$500,001 — ~$1,000,000 | ~$500 |
| ~$1,000,001 — ~$5,000,000 | ~$1,500 |
| ~$5,000,001 — ~$25,000,000 | ~$3,500 |
| Over ~$25,000,000 | ~$5,000 |
New York City Corporate Tax
| Component | Rate |
|---|---|
| Business income base | ~8.85% |
| Capital base (alternative) | ~0.15% of allocated capital |
| Fixed dollar minimum | ~$25 — ~$200,000 (based on gross receipts) |
Corporations doing business in both New York State and New York City owe both taxes, creating a combined corporate rate that can exceed ~16.00% for large businesses.
How New York Franchise Tax Works
Multiple Bases
New York calculates the franchise tax under three bases and charges the highest:
- Business income base (~7.25%): Net income apportioned to New York using the state’s receipts-based apportionment formula. This is the most common basis.
- Capital base (~0.04%): Business and investment capital allocated and apportioned to New York. The capital base tax is capped at ~$5,000,000.
- Fixed dollar minimum: Based on the corporation’s New York receipts, ranging from ~$25 to ~$5,000.
For most profitable corporations, the business income base produces the highest tax. Unprofitable companies with significant capital may owe more under the capital base.
Temporary Surcharge
New York enacted a temporary surcharge of ~0.75% on the business income base for corporations with New York taxable income exceeding ~$5,000,000. This surcharge was scheduled to expire but has been extended through 2026. It brings the effective state rate for large corporations to ~8.00%.
Apportionment
New York uses a single-factor receipts-based apportionment formula. Only receipts from New York customers, clients, and markets determine the share of income subject to New York tax. This market-based approach means that a corporation’s sales into New York, rather than its payroll or property in the state, drive apportionment.
Who Must File
The following entities must file a New York franchise tax return (Form CT-3 or CT-3-S):
- Domestic corporations incorporated in New York
- Foreign corporations authorized to do business in New York
- Corporations that derive income from New York sources, even without formal authorization
- S-corporations (file Form CT-3-S but are generally subject to the fixed dollar minimum only)
Filing Deadlines
| Entity Type | Due Date |
|---|---|
| Calendar-year corporations | March 15 |
| Fiscal-year corporations | 15th day of the 3rd month after fiscal year-end |
| Extension available | ~6 months with Form CT-5 |
Comparison to Other States
| State | Corporate Tax Rate | Minimum Tax | Capital-Based Tax |
|---|---|---|---|
| New York | ~7.25% — ~8.00% | ~$25 — ~$5,000 | ~0.04% (capped) |
| New Jersey | ~9.00% — ~11.50% | ~$500 — ~$2,000 | None |
| Connecticut | ~7.50% | ~$250 | None |
| Pennsylvania | ~8.99% | None | None |
| Massachusetts | ~8.00% | ~$456 | None |
New York’s combined state and city rate for NYC-based corporations can exceed ~16.00%, making it one of the highest-taxed jurisdictions for businesses in the nation.
Tips for Minimizing New York Franchise Tax
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Review apportionment carefully. Since New York uses market-based receipts, increasing out-of-state sales can reduce the percentage of income subject to New York tax.
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Elect S-corporation status if eligible. S-corporations in New York generally pay only the fixed dollar minimum at the state level, though shareholders still owe personal income tax on pass-through income.
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Monitor the temporary surcharge. If your business income is near the ~$5,000,000 threshold, income planning can help avoid the additional ~0.75%.
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Claim available credits. New York offers numerous corporate credits including the Excelsior Jobs Program, R&D credit, and investment tax credit.
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Evaluate the capital base. If your corporation holds significant New York capital but has low income, the ~0.04% capital base may produce a lower tax than the income base.
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Plan for NYC corporate tax. If you have nexus in New York City, the additional ~8.85% rate makes entity structure and apportionment even more critical.
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File estimated payments. Corporations owing more than ~$1,000 must make quarterly estimated payments to avoid underpayment penalties.
Key Takeaways
- New York’s corporate franchise tax uses multiple bases: business income (~7.25%), capital (~0.04%), and fixed dollar minimum.
- A ~0.75% surcharge applies to businesses with income over ~$5,000,000, raising the effective rate to ~8.00%.
- New York City imposes an additional ~8.85% corporate tax, pushing combined rates above ~16.00%.
- Apportionment is receipts-based, favoring businesses with sales outside New York.
- S-corporations typically pay only the fixed dollar minimum at the state level.
- The capital base tax is capped at ~$5,000,000.
Next Steps
- Federal Income Tax Guide 2026 — Federal corporate tax alongside New York franchise tax.
- Self-Employment Tax Guide — How pass-through entities interact with New York taxes.
- State Income Tax Rates Comparison 2026 — Compare New York to other states.
- Tax Bracket Calculator — Estimate your combined business and personal tax.
- Find a CPA Near You — Get help navigating New York’s complex franchise tax system.