September 17 is the deadline for filing 2017 federal partnership returns that are on extension, as many are, and so the time for filing is now upon us. Asset managers may be reporting significant amounts of non-qualified deferred compensation on those returns, along with other items of income, loss or deduction that will require careful thought. They may not be thinking about the New York State (“State”) and New York City (“City”) tax consequences for deferred compensation—but that would be a mistake. The State and City tax departments each recently published statements that concern non-qualified deferred compensation. In both cases, the tax departments have advised that all of it must be recognized as business income—eligible to be taxed as such. This Legal Update reviews the State and City approaches to taxing non-qualified deferred compensation and suggests considerations that should be in mind when filing 2017 State and City tax returns.
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