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New bill could exempt 1,300 small businesses from commercial rent tax

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Manhattan mom-and-pops paying up to $750,000 in annual rent could be exempt from the levy

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A new City Council bill aims to ease the burden of a pesky commercial rent tax on mom-and-pop shops.

Council member Keith Powers introduced a bill last week that would exempt small businesses paying up to $750,000 in annual rent from the levy—which amounts to about 4 percent of annual rent applied to shops of a certain size operating between Murray and 96th streets in Manhattan.

“I think that most people would agree that the commercial rent tax doesn’t make sense. It continues to make a lot of money for the city budget but it doesn’t serve a lot purpose,” Powers told Curbed.

The measure aims to help struggling small businesses stay afloat as rents and vacancies rise across the borough. Powers’ office estimates some 1,300 companies would feel relief if the legislation passes.

“It’s important to show that we can be in the business of helping small businesses and look for ways to take those extra costs away,” said Powers.

The bill is a continuation of similar legislation approved in 2017, which was proposed by council member Dan Garodnick, that altered the tax threshold from applying to tenants who pay more than $250,000 per a year to tenants who make $5 million or less in annual income or who pay less than $500,000 in rent. The bill enable some 2,700 businesses to dodge the tax, which is often compared to paying an extra month of rent.

Powers argues that the tax should be eventually eliminated altogether, but recognizes that would cut off a major source of revenue for the city and instead says the tax should be gradually peeled back to aid ailing businesses. It is especially crucial with retail hubs popping up in Brooklyn, Queens and other parts of the city where the tax does not apply.

“Businesses are actually competing with other businesses without the tax—we have to address the inequity,” Powers said.

It is unclear if Council Speaker Corey Johnson or the de Blasio administration support the bill that would further erode a tax that provides hundreds of millions of dollars to the city’s general fund annually. Though Powers says that he is receptive to “fine tuning” the bill.