Saving New York City UBT in the age of the hybrid worker - and how technology can help

Saving New York City UBT in the age of the hybrid worker - and how technology can help An eBook for Asset Management Firms 1

Table of Contents Introduction Understanding the true impact of remote and hybrid work on UBT

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Why technology?

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How Topia can help

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About Topia

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Introduction Businesses have experienced a fundamental shift in working practices in recent years - and Asset Management firms are no different. Firms that once had almost entirely office-based workforces in major cities have increasingly moved towards hybrid or remote working practices.

For New York-based asset management firms that are subject to the city’s Unincorporated Business Tax (UBT), these changes in employee work locations are hugely relevant. With the city tax based on where work is physically taking place, and with more and more employees working outside of the city at home, many firms have an opportunity to save on UBT.

Taking advantage of this tax saving opportunity is hugely valuable, but organizations will need to make sure they are able to defend themselves in case of an audit by:

• Providing reliable and high-accuracy record-keeping for their workforce location • Ensuring their business has advanced audit-ready reporting capabilities • Automating otherwise labor-intensive location record-keeping tasks

In this eBook, we will go into more detail on the tax implications of remote and hybrid work, talk about why firms need technology to accurately identify where work is being performed every day and give examples of the ways in which Topia’s platform is helping its customers hone in on opportunities to avoid tax overpayments and ensure they are audit-ready.

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Understanding the true impact of remote and hybrid work on UBT What is Unincorporated Business Tax (UBT)?

UBT is a 4% tax rate imposed on taxable gross receipts, or taxable income, of an unincorporated entity. UBT applies only to unincorporated businesses such as limited liability companies, partnerships, and sole proprietorships - so asset management and investment firms typically pay significant UBT to New York City. Unlike NY State business tax which uses 3-factor apportionment, NY City UBT uses single-factor apportionment i.e., where work is being physically performed. Additionally, unlike payroll withholding obligations, NYC’s Convenience Rule does not apply to NYC UBT, giving firms an opportunity to save on UBT based on work physically performed outside of New York City.

New York City’s Tax Facts NYC City Tax Rate: UBT:

Third-highest city tax in the United States

4%

Applicability: • Individual or unincorporated entities • Companies with total gross receipts greater than $95,000

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How does hybrid-remote work affect UBT? The increase in remote and hybrid work has led to employees spending more time in new locations that may be outside of New York City - even if that’s just working from their homes in Westchester, the Hamptons or Greenwich. Though investment teams are starting to return to the office, the trend in the near future suggests working from home for at least 1 to 2 days a week – creating an opportunity for significant UBT savings.

Consider the following scenario: A Hedge Fund management company with $1 billion under management generating $20 million in management fees, and a taxable income of $10 million for UBT purposes. Pre-pandemic all employees worked full-time from the NYC office, at 4% the UBT owed would amount to $400,000.

Fast forward to present times, employees are working in a hybrid work environment with a combined apportionment of 43% of services performed in NYC. When applied to the net income, 43% of the $10 million now equates to $4.3 million, the 4% UBT allotment is now $172,000, thereby saving $228,000 in UBT. With remote-hybrid work becoming the norm, more and more people are working either fully remote or balancing 3-4 days between the office and working from home. There’s a clear opportunity for firms to ensure they aren’t overpaying UBT if they can document how much of the work is being physically performed outside of New York City.

43%

Weighted Average of Partner and Analyst Computation

$228,000 in UBT savings

Generator Total Days Total NYC NYC % Partner #1 260

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23%

Partner #2 260

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23%

Average

23%

Generator Total Days Total NYC NYC % Analyst #1 240

60

25%

Analyst #2 240

60

25%

Analyst #3 240

240

100%

Analyst #4 240

240

100%

Average

63%

Combined Apportionment Weighted 50/50

43%

UBT Due 43% of $10m at 4% tax

$171,154

Hodgson Russ (2021)

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Why technology?

A case study on using technology for local tax optimization and remote workforce management Organizations have realized that they need a robust technology solution in place to help them avoid overpaying taxes in this new era of hybrid and remote work. Here’s just one example from our customer base.

About the firm

Key challenges they faced:

Type: Investment Firm Number of employees: 100+ Headquarters: New York City

• Lack of visibility into where employees were working • UBT represents a significant tax obligation • Needed reliable employee location data to defend lowered tax position

Operating in New York City, this partnership structured investment firm is subject to UBT on all revenues earned in New York City. Upon the introduction of remote-hybrid working, this firm quickly realized that they could avoid overpaying taxes since most employees were no longer working in NYC.

With Topia, this NYC Asset Management firm has: • Clear visibility of employees’ working locations (e.g., in or outside NYC).

• Ability to accurately calculate the correct apportion of UBT based on how much time employees have spent working in NYC. • Discovered only 35% of employee working days were in NYC. • Saving ~$3M in local city taxes due to remote work.

• Audit-defensible location data provides peace of mind and lessens the risk of triggering other tax obligations or compliance risks.

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How Topia can help A growing number of investment firms are using Topia technology to ensure they are paying only what they owe, which has led to substantial savings on UBT. We are already seeing New York City is getting more aggressive in UBT audits, and the burden of proof is on the taxpayer to illustrate and prove the methodology and math applied to UBT calculations. Firms that have a clear understanding of where their employees are working and have the evidence to demonstrate this, stand to make huge savings on UBT and have audit defensible data at the ready at all times.

Calculate

Save

See how much time individual employees spend in New York City

Monitor

Calculate appropriate taxes based on days worked in NYC

Stop overpaying UBT and deliver significant savings

Topia is helping NYC-based Asset Managers to reduce their tax burden anywhere between $200k – $4m+ a year by actively monitoring their workforce footprint while maintaining employee privacy.

Take advantage of UBT savings by collecting location data to prove employees’ out-of-city time, 50% less time in the city may mean a 50% reduction in UBT owed.

With Topia, you have the potential to eliminate significant tax overpayments, while avoiding lengthy and costly audits by providing high-accuracy and audit-defensible data.

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With Topia you can Understand employee footprint With accurate visibility into your employee footprint you will have reliable data that can be used to avoid overpaying costly city-specific taxes.

Access audit-defensible data at your fingertips You can get instant reports that will allow you to assess your city tax exposure for greater credibility and effectiveness in the case of an audit.

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Get instant access to intuitive & easy-to-understand dashboards Topia’s modern, consumer-grade interface is accessible to all relevant teams with an easy-to-understand dashboard that doesn’t require advanced tax, finance and legal expertise.

Maintain employee privacy Topia’s bank-grade security and jurisdictional level data roll-up ensure employee privacy while enabling tax optimization and audit defense.

Join the leading Asset Management companies and ensure you pay only what you owe on UBT 8

About Topia Topia is the leader in Global Talent Mobility. We empower companies to deploy, manage and engage employees anywhere in the world.

The Topia platform enables organizations to deliver mobility as part of a broader talent strategy encompassing all types of employee movement – remote and distributed workforces, business travel, and more traditional relocations and assignments. This drives enhanced employee experiences and competitive advantage by ensuring the right people are in the right place at the right time while staying compliant no matter where they are. The Topia platform automates the entire global talent mobility process, including scenario-based planning, expat payroll, tax and immigration compliance, reporting and more. Topia powers global talent mobility programs for world-renowned brands such as Schneider Electric, Dell, Veolia, Equinor and AXA. Topia has raised over $100M from NewView Capital (formerly New Enterprise Associates), Notion Capital and others, and is a global company with offices throughout the Americas and EMEA.

Learn how Topia can help you understand where your employees are working and proactively see what you can be saving on UBT by requesting a demo from our specialist team.

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Contact www.topia.com info@topia.com

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