My organization administers a union health and welfare benefit plan funded by employer contributions under collective bargaining agreements. Are the benefits we pay out subject to MCTMT, and do we have to pay it?

Plain-English summary

This opinion was later replaced. The Department issued a modified opinion, TSB-A-10(1.1)MCTMT (April 8, 2011), on the exact same petition — its text states plainly "This A.O. replaces the one issued on the 20th of July, 2010." Readers relying on this ruling should go to the modified version for the Department's current position.

As originally issued, a union health and welfare benefit plan administrator asked whether member benefits are subject to MCTMT and whether the administrator itself must pay the tax on those benefits. The Plan is funded by per-capita contributions from the City of New York and other quasi-public employers, negotiated as part of collective bargaining agreements, and the Plan had separately agreed to pay Social Security and Medicare tax on certain benefits (short-term disability payments and the value of legal services). New York City's Office of Payroll Administration argued that this Social Security/Medicare payment obligation meant the Plan also had to reimburse it for MCTMT on those same benefits.

The Department concluded (1) that because the Plan already treated these benefits as wages subject to federal Social Security tax under IRC § 3121, they were also "wages and compensation" subject to MCTMT, but (2) that the Plan administrator (not being the "employer" of the plan participants under the MCTMT's basic definition) had no legal obligation under the Tax Law to pay MCTMT on the benefits on its members' behalf.

What this means for you

This point is superseded — see the modified opinion

Anyone researching whether a union benefit-plan administrator must remit MCTMT on plan benefits should treat TSB-A-10(1.1)MCTMT, not this original opinion, as the Department's operative position. The wages conclusion held up in the modified opinion, but the "administrator has no obligation" conclusion did not survive — the Department reopened that question as fact-dependent.

Common questions

Q: Is this ruling still good law?
A: No, not as originally written. It was explicitly replaced by TSB-A-10(1.1)MCTMT roughly nine months later, on the identical petition and facts.

Q: What changed between the two versions?
A: Both versions agree the benefits are wages subject to MCTMT. But the original version concluded the plan administrator had no payment obligation; the modified version withdrew that conclusion, finding the question of who controls (and therefore is legally responsible for) the wage payments to be an unresolved factual dispute that an Advisory Opinion can't settle.

Q: Can I rely on this ruling for my own union benefit plan?
A: No — and especially not this original, superseded version. Consult the modified opinion and a New York tax professional.

Citations and references

Statutes:

• Tax Law § 800(b) (MCTMT "employer" definition)
• IRC § 3121 (wages and compensation subject to federal social security tax, referenced for MCTMT payroll expense)

Related opinions

• TSB-A-10(1.1)MCTMT — the modified opinion that explicitly replaced this one on the same petition, reaching the same wages conclusion but withdrawing the conclusion on the administrator's payment obligation.

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/mctmt_ao.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/mctmt/a10_1mctmt.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Counsel
Advisory Opinion Unit

TSB-A-10(1)MCTMT
Metropolitan Commuter
Transportation Mobility Tax
July 20, 2010

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. M091116A

On November 16, 2009, a Petition for Advisory Opinion was received from name redacted
(Petitioner).
The petition asks whether Petitioner’s member benefits are subject to the New York State
metropolitan commuter transportation mobility tax (MCTMT) and whether Petitioner is required to pay the
MCTMT on those benefits.
We conclude that, while the benefits are wages subject to the MCTMT, Petitioner has no legal
obligation under the Tax Law to pay MCTMT on plan benefits on behalf of its members.
Facts
Petitioner operates a union health and welfare benefit plan. The Plan provides health and welfare
benefits for its covered union members and retirees. The Plan’s benefits are funded through contributions
from the City of New York and various other quasi-public employers and authorities. The contributions are
negotiated by the union and employers as part of the total compensation/benefit package that the Plan’s
members/retirees receive pursuant to those collective bargaining agreements. Pursuant to such agreements,
the Plan receives a set annual per capita contribution from various employers to fund the health and welfare
benefits it provides. All of the negotiated contributions noted above are used by the Plan to provide agreed
upon health and welfare benefits for its members/retirees.
At the end of each year, the Plan provides the employer of the plan members, the City of New York,
through its Office of Payroll Administration (OPA), all information it needs to issue the required W-2’s for
its employees who have received payments from the Plan. Petitioner has agreed in the past to pay Social
Security and Medicare taxes due on the short term disability payments and on the value of legal services for
its active and retired members. The OPA has asserted that Petitioner’s payment of short-term disability and
legal services plan benefits to its participants requires Petitioner to reimburse the OPA for MCTMT on the
portion of benefits considered wages.
Analysis
Chapter 25 of the Laws of 2009 added Article 23 to the Tax Law which establishes the metropolitan
commuter transportation mobility tax (MCTMT). The MCTMT is imposed on certain employers and selfemployed individuals engaging in business within the Metropolitan Commuter Transportation District. The
Metropolitan Commuter Transportation District (MCTD) is defined under section 1262 of the Public
Authorities Law. It includes New York City (the counties of New York (Manhattan), Bronx, Kings
(Brooklyn), Queens, and Richmond (Staten Island)), and the counties of Rockland, Nassau, Suffolk, Orange,
Putnam, Dutchess, and Westchester.
The MCTMT is imposed on the payroll expense of employers who engage in business within the
MCTD.

-2-

TSB-A-10(1)MCTMT
Metropolitan Commuter
Transportation Mobility Tax
July 20, 2010

Payroll expense means wages and compensation as defined in section 3121 of the Internal Revenue
Code. Section 3121 defines wages and compensation subject to federal social security taxes. The fact that
the Plan reimburses OPA for the Social Security taxes due on the short-term disability payments and the
value of legal services for its members demonstrates that these amounts constitute wages and compensation
subject to the MCTMT.
An employer for purposes of the MCTMT means any employer required by section 671 of the Tax
Law to deduct and withhold New York State income tax from wages paid to employees that has a payroll
expense in excess of $2,500 in any calendar quarter. However, the following employers are not subject to the
MCTMT: an agency or instrumentality of the United States, the United Nations, or an interstate agency or
public corporation created under an agreement or compact with another state or Canada. We conclude that,
since Petitioner is not the employer of its plan participants, it has no legal obligation under the Tax Law to
pay MCTMT on plan benefits on behalf of its plan members.

DATED: July 20, 2010

NOTE:

/S/
Jonathan Pessen
Director of Advisory Opinions
Office of Counsel
An Advisory Opinion is issued at the request of a person or entity. It is limited to the
facts set forth therein and is binding on the Department only with respect to the
person or entity to whom it is issued and only if the person or entity fully and
accurately describes all relevant facts. An Advisory Opinion is based on the law,
regulations, and Department policies in effect as of the date the Opinion is issued or
for the specific time period at issue in the Opinion.