Manhattan Rent Tax Law Gives Small Businesses A Break

UPPER WEST SIDE, NY — Mayor Bill de Blasio signed a law Friday that will save hundreds of Manhattan businesses thousands of dollars in taxes next year. About 2,700 shops are expected to save an average of $13,000 under the first changes to the borough's commercial rent tax in 16 years.

"It's a message small business deserves to hear — City Hall has your back," de Blasio said at a news conference at an Upper West Side restaurant.

Businesses in Manhattan between Murray Street and 96th Street currently pay an effective 3.9 percent tax on their annual rent if it exceeds a certain threshold. The rent tax first went into effect in the 1960s but was repealed everywhere else in the city years ago.

The law passed by the City Council last month raises the threshold to $500,000 from $250,000 for businesses with up to $5 million in annual income, meaning about 1,800 shops will no longer pay the tax once the law takes effect in June 2018.

Businesses with $5 million to $10 million in annual income or that pay $500,000 to $550,000 in rent each year will get tax discounts of varying amounts.

The law aims to lighten the financial burden on small, independently owned shops in Manhattan, where it's more expensive to keep a business open than elsewhere in the city. Studies have shown an exodus of small shops from the boroughs storefronts in recent years.

The tax "hit small business in a part of our city, of course, that has some of the highest rents, and it hit people in a way that made it really hard for them to keep their businesses going," de Blasio said.

The reforms will mean $36.8 million less in tax revenue for the city in the 2019 fiscal year.

The city has also reduced fines on small businesses by about 40 percent and is pushing for changes to state law that can help prevent storefronts from emptying out, de Blasio said.

Some critics have argued the city needs to pass commercial rent control laws to address the root problem of rising rents, which altering the rent tax does nothing to fix. But city officials have concerns about legal challenges to such a law.

(Lead image: A storefront for rent is seen in lower Manhattan in April 2017. Photo by Spencer Platt/Getty Images)