Hochul Rejects NYC’s PTET Credit Cut — What Stays in Place For Now
What Just Happened
On April 14, 2026, Mayor Zohran Mamdani and Council Speaker Julie Menin asked Governor Hochul and the legislature to authorize a cut in the NYC Pass-Through Entity Tax credit from a full 100% rebate to 75%. The estimated revenue: just under $1 billion a year. The City’s pitch was that the cut would help close a $5.4 billion budget gap without changing core city tax rates.
On April 28, Hochul publicly killed it. She framed the proposal as “a personal tax increase” — because for an NYC business owner who already pays the City PTET at the entity level, a smaller credit means a higher net cost out the back door. The Governor pointed to $4 billion in state assistance already agreed to for NYC and to the new pied-à-terre tax proposal on luxury second homes as the city’s share of new revenue.
At the same City Hall press conference, Mamdani and Menin announced the NYC executive budget deadline is being pushed from May 1 to May 12 — an unusual move tied to the fact that Albany’s state budget is now nearly a month late, and the city can’t finalize its plan until it knows what aid is coming.
For NYC pass-through owners and partners: the City PTET credit on your IT-201 stays at 100% for 2026 absent a separate legislative change. If you’ve been modeling 75% out of caution since mid-April, you can move that line back. But: the proposal isn’t dead, just blocked at the Governor’s desk. It can come back in a future budget cycle.
Why This Matters For NYC Business Owners
The NYC PTET is one of the better deals in U.S. tax planning right now, and most pass-through owners are still underusing it. Here’s the basic mechanic: the partnership or S-corp pays NYC tax at the entity level, deducting it federally and circumventing the $40K SALT cap (under OBBB) on Schedule A. The owner then claims a state-level credit for that NYC entity-level tax against their personal NYC tax liability — currently dollar-for-dollar.
That last piece — the 100% credit — is what the City asked Albany to trim. In a pure 75%-credit world, the owner would still pay City PTET at the entity level (and still get the federal SALT-cap workaround), but their personal NYC liability would be reduced by only 75 cents on the dollar of entity tax paid. The remaining 25% becomes a city revenue grab. For a Manhattan partnership with $5M of NYC-source income, that math gets ugly fast — call it $40-$50K a year of net new cost to partners.
So Hochul’s “not happening”. Is, materially, real money for NYC pass-through partners. It is not just a procedural win.
Practical Implications By Client Situation
NYC partnership or S-corp that already elected NYC PTET for 2026
You’re fine. Your election runs through the year, your quarterly entity-level estimates are sized to the full PTET, and your partners’ / shareholders’. Personal credit on the IT-201 stays at 100%. Don’t change anything. But mark Hochul’s “not happening”. As a current-budget statement, not a permanent commitment.
NYC partnership or S-corp that hasn’t yet elected PTET for 2026
The election deadline already passed (March 17, 2026, by default). If you missed it, you missed it for the 2026 entity-level year — though there are perfection rules and a few corner-case extensions. We’d still sit down and look at the numbers. Missing 2026 doesn’t mean missing 2027, and the planning window for next year opens this fall.
You’re a non-resident partner of an NYC partnership
The City PTET only generates NYC personal tax liability for residents, so non-resident partners’. Benefit is mostly about the federal SALT-cap workaround. Hochul’s rejection doesn’t change that math. But: if a future Governor agrees to the cut, the calculus shifts. Non-resident partners still pay the entity-level tax (because they’re NYC-source), but their personal NYC tax liability is already low or zero — so a 75% credit reduces the value of the workaround for the resident partner only, not for them. Watch this if your partnership has both resident and non-resident partners.
HNW client with NYC interests across multiple pass-throughs
Look at exposure across all entities. A client with stakes in a NYC operating partnership, a NYC real estate partnership, and an NYC professional-services S-corp may have aggregate City PTET payments well into six figures. A 25% reduction in the credit on that base is meaningful even for clients who don’t blink at $50K of new tax per year. Document where the entity-level tax is being paid and how it’s flowing to your IT-201.
An angle nobody is talking about: if the City eventually does get its 75% credit cut, the rational response from many partnerships will be to not elect PTET in future years. The credit is what makes the entity-level tax palatable. Cut it, and partners may decide to take their SALT cap and live with it rather than effectively pre-paying NYC 25 cents on the dollar. So the City’s revenue projection assumes elections stay flat. That’s a heroic assumption. We’d expect election rates to drop materially.
Open Questions and What To Watch
The proposal isn’t dead. It’s parked. Hochul faces reelection this year. NYC’s budget gap doesn’t shrink on its own. The pied-à-terre tax — which Hochul did agree to — won’t close $5.4B by itself. So the City will be back, possibly in next year’s budget cycle, possibly in a special session.
The state-level questions to track: whether Albany passes a final FY 2026 budget at all (the seventh extender just dropped), whether the pied-à-terre tax actually gets enabling legislation drafted (no text exists as of April 23), and whether a future Albany decides to revive the PTET credit cut as part of an “NYC fiscal package”. Rather than a one-off. The city-level questions: whether NYC ends up cutting services or finding other revenue if Albany doesn’t deliver, and whether the May 12 NYC executive budget hits a real number this time.
For our planning, the working assumption is: 100% credit through the 2026 tax year. Re-evaluate in fall 2026 for 2027 elections.
How The Reed Corporation Works With Clients On NYC PTET
For our NYC business owners, partnership clients, and S-corp shareholders, the PTET decision is part of the annual tax strategy review — not a one-off filing. We model the federal benefit, the City benefit (currently full credit, possibly reduced in future years), the cash-flow impact of entity-level estimated payments, and the impact on owner / partner basis and capital accounts. That sits inside our broader tax advisory work and feeds directly into the corporate tax return and personal 1040 filings.
If your firm hasn’t walked you through PTET economics in the last 12 months — or if you elected once years ago and nobody’s revisited — that’s a real gap. We see this often with NYC professionals who took the election in 2022 and haven’t modeled it since. Related coverage: our piece on the original cut proposal and on the NYC S-corp PTET mechanics.
Common Questions
Does this affect the 2026 tax return I’m about to file?
If you mean the 2025 tax year return, no — you’re working with 2025 PTET rules and the 100% credit was already in effect. If you mean 2026 (filed in 2027), still no change — Hochul rejected the cut, so the credit stays at 100% for 2026 absent further legislative action.
What is the NYC PTET, in plain terms?
The City’s version of New York’s broader Pass-Through Entity Tax. The partnership or S-corp pays NYC personal income tax at the entity level (deductible federally, sidesteps the SALT cap), and the resident owners get a credit on their personal NYC return. Currently dollar-for-dollar.
Why does the City want to cut the credit?
Money. The City’s share of the SALT-cap workaround currently rounds to zero — the City collects the entity-level tax and gives it all back as credit. Cutting the credit to 75% would let the City keep the other 25%, generating about $1B per year in net new revenue.
Why did Hochul say no?
Two reasons. One: the State already gave NYC $4B in this budget cycle plus the pied-à-terre proposal. Two: politically, Hochul does not want to be the Governor who raised taxes on NYC pass-through owners during her reelection year. She framed the cut as “a personal tax increase,”. Which is honest tax-policy framing.
Could this come back?
Yes. NYC’s budget gap is structural, and the pied-à-terre tax alone won’t close it. Expect the credit-cut proposal back in a future budget cycle, possibly under a different governor, possibly as part of a larger package.
Should I change my 2026 PTET election?
No. The election is already in for the 2026 year, and the credit stays at 100%. Re-evaluate next fall for 2027.
Source
Primary reporting: Greg David, “Hochul Refuses NYC Tax Move in Budget Showdown,” THE CITY, April 28, 2026. Additional context from the NYC Council’s April 28 release on the joint Mayor / Speaker statement and the city’s revised executive budget deadline.