Why is the flow-through entity issue
unique in New York City?
• NYC has a unique UBT structure
• We have a local personal income tax
• We do not recognize S corporations
• A Partnership is a flow through entity
• Aggregate Theory v. Entity Theory
• Other interesting issues worth clarifying
Sole Proprietors & the
Unincorporated Business Tax
History of the UBT
• UBT enacted in 1966 to capture revenue from
businesses structured to sidestep corporate taxes.
• Tax unintentionally captured additional segment of
the workforce: independent workers.
Most UBT filers don’t owe tax
• Of 106,000 sole proprietor UBT filers, only 21% paid
tax (accounting for only 13% of total UBT revenues.)
• The City of NY incurred expenses to process 83,000
sole proprietor UBT returns (79% of those filed) w/ $0 in
• Due to complex nature of this tax and fears of non-
compliance, filers paid tax professionals to prepare their
• Independent workers account for 2/3 of NYC’s job base
growth since 1975.
• Need to nurture and sustain this vital part of the
• Middle class is struggling more than ever—time to
refocus UBT on its original target: high-income
• Exempt sole proprietors who earn less than
$150,000/yr from filing for UBT
• Exempt sole proprietors from filing & paying