As we kick off the start of 2026, one of the biggest news in New York City is the official election of Zohran Mamdani’s term as Mayor of New York City, which officially began at midnight on January 1, 2026. Mayor Zohran Mamdani has renewed attention on New York City’s tax structure and, more specifically, how City Hall approaches the cost of doing business in Manhattan. While a majority of the public discussion focused on housing, transit, income inequity and so forth, New York City taxes remain a major part of the conversation.
Although the primary focus of Mayor Mamdani’s is relating to New York City Income taxes, one tax that frequently resurfaces in these discussions is the New York City Commercial Rent Tax (CRT). For many businesses, Commercial Rent Tax is not just another filing obligation, with minimal tax obligation. It is actually quite opposite – the New York City Commercial Rent Tax is a material operating cost that should directly influence operating cost, lease negotiations, office location and so forth. With a new mayoral administration, business owners are understandably asking whether meaningful change could be on the horizon.
Understanding the Commercial Rent Tax
The Commercial Rent Tax is a unique New York City levy imposed on tenants. It is important to note that the tax is levied specifically on New York City tenants, and not New York City landlords. The tenants that are responsible for paying the Commercial Rent Tax are those that rent commercial space in Manhattan south of 96th Street, subject to certain exemptions. If a business’s annualized base rent exceeds $250,000, it may be subject to CRT, regardless of profitability. This means that a New York City company can be subject to increased and substantial additional operating costs.
The statutory tax rate is 6% of base rent, but the law provides for a 35% base rent reduction, which lowers the effective rate to approximately 3.9%. In addition, a sliding credit reduces or eliminates liability for businesses whose rent falls closer to the threshold. While these provisions soften the impact for some tenants, New York City Commercial Rent Tax can still represent a substantial annual expense, particularly for professional services firms, technology companies, retailers, and other space-intensive operations.
What Is Included in ‘Base Rent’ for Purposes of Commercial Rent Tax
One of the most common areas of confusion and on-going New York City Commercial Rent Tax audit disputes is what under the Commercial Rent Tax is what constitutes “base rent.” In general, base rent includes not only the stated rent in a lease, but also many additional amounts that a tenant is required to pay as a condition of occupying the space.
Base rent typically includes:
- Fixed rent paid under a lease or sublease
- Escalation payments tied to Consumer Price Index (CPI) or other index
- Additional rent, including operating expense reimbursements
- Real estate tax escalations passed through to the tenant. This is common in triple-net-leases.
- Amounts paid for the Co-right to use or occupy space, even if paid to a third party
Conversely, certain amounts may be excluded if they are separately stated and do represent consideration for occupancy, though these determinations are highly fact-specific and frequently examined on New York City Commercial Rent Tax audit.
Examples of what is arguably excluded from the base rent are:
- Separately metered electric or natural gas. This, of course, can be a significant saving for high-energy consumption businesses.
- Rent for properties located in the World Trade Center Zone. There is a specific exemption for businesses operating in this designated zone.
- Repair and Maintenance payments. This is not considered base rent and can typically be excluded.
- Remodeling of leasehold estate.
Example of New York City Commercial Rent Tax
Consider a leasehold estate in Midtown Manhattan. The company pays:
- $280,000 per year in fixed rent
- $40,000 per year in real estate tax escalations
- $25,000 per year in operating expense reimbursements
Although the stated rent alone is $280,000, the company’s base rent for CRT purposes is $345,000. Because the annualized base rent exceeds the $250,000 threshold, the tenant is subject to CRT on the full base rent amount, subject to the statutory reduction and applicable credits.
In the above example, with a base rent of $345,000, the company exceeds $250,000 in annualized base rent, which means that it is subject to the Commercial Rent Tax. From there, the company would receive a 35% base rent reduction, which means that the net base after reduction would be $224,250. Applying the 6% statutory tax rate, the obligation would therefore be $13,455 in Commercial Rent Tax due.
A common misconception of the Commercial Rent Tax is that the base rent only includes fixed rent. Tenants may believe they are below the threshold based on headline rent, only to discover during a New York City audit that additional rent provisions push a business into CRT liability.
Administration and Enforcement of Commercial Rent Tax
Commercial Rent Tax is administered entirely by the New York City Department of Finance. The Department oversees registration, return filings, payment processing, audits, and enforcement related to New York City taxes, only. It also issues guidance and interpretation on how the law applies in specific situations.
In practice, many CRT disputes arise not from the existence of the tax itself, but from how the Department interprets key concepts such as base rent, rent concessions, shared office arrangements, subleases, and pass-through charges. Therefore, if you have received an audit notice regarding the New York City Commercial Rent Tax, it is important to seek an experienced New York tax attorney immediately.
Who Has Legal Authority over the Commercial Rent Tax
Although Commercial Rent Tax is a local tax, it exists only because the New York State Legislature authorizes New York City to impose certain local taxes. Using the authority, the New York City Council enacted the Commercial Rent Tax, which is codified in the NYC Administrative Code.
As a result, repeal or major restructuring requires legislative action rather than executive action, which a mayor does not have authority to do.
Mayor Mamdani Influence over the Commercial Rent Tax
While Mayor Mamdani cannot repeal CRT unilaterally and through executive action, the mayor’s office exercises indirect but meaningful influence through budget proposals, administrative leadership, and policy advocacy.
Historically, changes to CRT such as expanding credits or relief provisions have been introduced through the Mayor’s Executive Budget. In addition, the mayor appoints senior leadership at NYC DOF, shaping audit posture and enforcement philosophy.
However, we do not envision the CRT going away – it is a major revenue source for New York City and typically targets businesses that are paying over approximately $21,000 in base rent. If any influence is to be made, it is possible that the base rent figure would be reduced, or the tax rate would be increased.
Seek Professional Help if you have a Commercial Rent Tax Audit or Questions
While Mayor Mamdani does not have the power to eliminate the Commercial Rent Tax on his own, CRT audits are common. Many high-paying New York City tenants are not aware of the obligation. However, through budget priorities, administrative leadership, and political influence, the mayor’s administration can significantly affect how the tax is applied and enforced. For Manhattan businesses, understanding both the law and the policy of the Commercial Rent Tax remains essential and a pivotal consideration for high-paying New York City commercial rent.
With decades of specialized expertise, Sales Tax Helper LLC helps businesses overcome their New York City Commercial Rent Tax challenges effectively and affordably.
Reach out through our online contact form to learn more about our services.