While much attention lately has been on New York City’s budget and the potential imposition of a pied-à-terre tax, a recent decision of the New York City Tax Appeals Tribunal (the "Tribunal") shines a light on another troublesome, longstanding City tax—the Commercial Rent Tax (“CRT”). Matter of the Petition of The Phantom Company, LP et al., TAT(H) 20-15, 20-16, 20-17 (CR) et al. (N.Y.C. Tax App. Trib. April 22, 2026). The decision serves as an important reminder of the limitations to the scope of the CRT—a bizarre tax imposed on an expense rather than on income.
The Facts: The Phantom Company, LP and other entities associated with Broadway productions (including Kinky Boots and Mamma Mia) (collectively, the “Broadway entities”) entered into contracts with outdoor advertising companies (collectively, the “Billboard entities”). The contracts provided that the Broadway entities would provide advertising content to the Billboard entities. Upon content approval by the Billboard entities, the advertising would be displayed on billboards throughout the City. Importantly, the Broadway entities did not directly place the advertising themselves, nor did they have access (physically or virtually) to the billboards.
The New York City Department of Finance (the “Department”) audited the Broadway entities and determined that each was liable for CRT on the use of the billboards.
The Law: The CRT is a tax on an expense. It is imposed on every tenant of a taxable premises. N.Y.C. Admin. Code § 11-702. A tenant includes a person paying or required to pay rent, and rent is consideration paid for the use or occupancy of a premises. N.Y.C. Admin. Code § 11-701(3), (6). Taxable premises are defined as any premises in Manhattan below the center line of 96th Street that are occupied or used for the purpose of carrying on or exercising a trade, business, profession, or commercial activity. Id. at (5). Advertising signs on the tops of buildings or structures (i.e., billboards) are included within the definition of taxable premises. 19 R.C.N.Y. § 7-01.
The Decision: The Tribunal found that the issue before it distilled to whether the contracts that the Broadway entities entered into with the Billboard entities were for advertising services or whether the contracts granted the Broadway entities use of taxable premises.
Focusing on the facts at hand, the Tribunal found it difficult to see how the Broadway entities could be the users of the billboards because to use property, one must have access to the property. Here, the contracts did not grant the Broadway entities access, either physically or virtually, to the billboards. The Billboard entities placed the advertisements on the billboards, and if there were any issues or problems with the displays, the Broadway entities’ only recourse was through the Billboard entities.
Instead, the Tribunal concluded that a more accurate description of the situation was that the Billboard entities “were the users of those billboards and they used those billboards to provide advertising services” to the Broadway entities. Finding no basis in legislative history, City policy, or the case law relied upon by the Department to support the Department’s position that the CRT applies to a tenant with no access to the space or premises of which they are allegedly a tenant, the Tribunal concluded that the payments at issue were not subject to the CRT.
The Takeaway: This case serves as a reminder that there are important limitations to the scope of the CRT. Notably, the CRT should not apply where there is no access to the taxable premises. In addition, this case serves as a reminder that courts must adhere to the plain language of the law, including the definitions adopted by the legislature. While a taxing authority may want to broaden the scope of a tax, the plain letter of the law should always prevail!
This update is one in a series of updates written for the May 2026 edition of The BR State + Local Tax Spotlight.
© 2026 Blank Rome LLP. All rights reserved. Please contact Blank Rome for permission to reprint. Notice: The purpose of this update is to identify select developments that may be of interest to readers. The information contained herein is abridged and summarized from various sources, the accuracy and completeness of which cannot be assured. This update should not be construed as legal advice or opinion, and is not a substitute for the advice of counsel.