The small business modification for a non-farm business is not computed at the entity level. Based on Tax Law § 612(c)(39)(C), the individual member, partner, or shareholder must aggregate its net business income from all ownership entities for a non-farm business.
If a limited liability company, partnership, or New York S corporation meets the gross business income and employee tests at the entity level, it must issue a statement to its members, partners, or shareholders that it has met the qualifications to be considered a non-farm small business for purposes of the small business modification.
The individual member, partner, or shareholder will aggregate its net business income from all ownership entities and determine if they qualify to make a modification as a non-farm small business. The modification will be entered on the individual’s Form IT-225.
The IT-225 instructions include information needed by the individual members, partners, or shareholders to compute their individual non-farm small business modification. A limited liability company or partnership cannot compute a non-farm small business modification at the entity level.
Only a farm small business modification may be computed at the entity level.
Since the non-farm small business modification is not computed at the entity level, it is not part of the computation for PTE taxable income.