New York Advisory Opinion TSB-A-82(10)I: Does working as a consulting fund raiser qualify as the 'practice of a profession,' exempting the income from New York's Unincorporated Business Income Tax?

Plain-English summary

Gordon C. Dixon worked as a consulting fund raiser during 1978, 1979, and 1980. More than 80% of his income came from personal services, and capital wasn't a material factor in producing it - facts that mirror part of the statutory test for New York's professional exemption from the Unincorporated Business Income Tax. He asked whether his fund-raising consulting work qualified as the "practice of a profession" under Tax Law § 703(c), which would exempt his income from that tax.

The Department explained that Article 23's Unincorporated Business Income Tax applies broadly to unincorporated businesses carried on in New York, but § 703(c) carves out an exclusion for the practice of law, medicine, dentistry, architecture, or "any other profession" meeting the 80%-personal-services/capital-not-material test. The key fight here was over whether fund-raising consulting counts as an "other profession" at all - meeting that 80% test alone isn't enough.

The implementing regulation, 20 NYCRR § 203.11(b)(1)(i), defines "other profession" as an occupation drawing on specialized, prolonged-study knowledge to advise, guide, or teach others in serving their interests - but it explicitly states that consulting services, and services dealing with the conduct of a business itself (including promoting a business's sales or services), do NOT qualify as a profession, even if they involve applying specialized knowledge. And under the Koner v. Procaccino case, a profession must share "essential characteristics" with law, medicine, dentistry, or architecture - a further, independent hurdle beyond just the 80%-personal-services test.

Fund-raising consulting, the Department found, doesn't meet either standard: it's consulting work dealing with promoting an organization's fund-raising activities, not a profession sharing the essential characteristics of law, medicine, dentistry, or architecture. So Dixon's income remained fully subject to the Unincorporated Business Income Tax.

What this means for you

Consultants and advisors with high personal-service income

Meeting the 80%-personal-services/capital-not-material test alone doesn't get you the professional exemption from the Unincorporated Business Income Tax. The regulation specifically excludes consulting services from "other profession," regardless of how specialized your knowledge is or how much of your income comes from your own personal effort.

Fund raisers and similar specialized business-advisory occupations

Even genuinely specialized, knowledge-intensive advisory work doesn't automatically qualify as a "profession" for tax purposes - the work must share essential characteristics with recognized professions like law, medicine, dentistry, or architecture, a standard consulting and business-promotion services don't meet.

Accountants classifying unincorporated business income for the professional exemption

Apply a two-part check: the statutory 80%-personal-services/capital-not-material test AND the "essential characteristics of law, medicine, dentistry, or architecture" test from Koner v. Procaccino. Consulting-type work, even if 100% personal-service income, generally fails the second test and remains subject to the tax.

Common questions

Q: I'm a consultant and almost all of my income comes from my own personal services - do I qualify for New York's professional exemption from the Unincorporated Business Tax?
A: Not necessarily. Meeting the 80%-personal-services test is only part of the analysis - the regulation specifically excludes consulting services from qualifying as an "other profession," regardless of how much of your income is personal-service-derived.

Q: What does it mean for a profession to have the "essential characteristics" of law, medicine, dentistry, or architecture?
A: Under Matter of Koner v. Procaccino, the exempted "other profession" category is limited to occupations genuinely comparable to those four recognized professions - a further, independent requirement beyond the statutory income-source percentage test.

Q: Does it matter that fund-raising consulting requires specialized knowledge?
A: No. The regulation is explicit that applying specialized knowledge doesn't convert consulting or business-promotion services into a "profession" - that's precisely the distinction the Department drew in denying the exemption here.

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/income_ao_1982.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/income/a82_10i.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-82 (10) I
Income Tax
December 31, 1982

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. I821027B

On October 27, 1982, a Petition for Advisory Opinion was received from Gordon C. Dixon,
142 West End Avenue, New York, New York 10023.
The issue raised is whether the activities of Petitioner as a consulting fund raiser during 1978,
1979 and 1980 constituted the practice of a profession for purposes of the Unincorporated Business
Income Tax imposed under Article 23 of the Tax Law.
Petitioner during the years at issue was a consulting fund raiser. More than 80 per cent of
Petitioner's income was derived from personal services and capital was not a material factor in
producing such income.
Article 23 of the Tax Law imposes the State's Unincorporated Business Income Tax on the
unincorporated business income of "every unincorporated business wholly or partly carried on within
this state." Tax Law, §701(a). Section 703(c) of the Tax Law excludes from the category of
"unincorporated business" the following: "The practice of law, medicine, dentistry or architecture,
and the practice of any other profession in which capital is not a material income producing factor
and in which more than eighty per centum of the unincorporated business gross income for the
taxable year is derived from personal services actually rendered by the individual or the members
of the partnership or other entity , .... "
The Unincorporated Business Income Tax Regulations define the term "other profession" to
include ". . . any occupation or vocation in which a professed knowledge of some department of
science or learning, gained by a prolonged course of specialized instruction and study, is used by its
practical application to the affairs of others, either advising, guiding or teaching them, and. in serving
their interests or welfare in the practice of an art or science founded on it. The word profession
implies attainments in professional knowledge as distinguished from mere skill and the application
of knowledge to uses for others as a vocation. The performing of services dealing with the conduct
of business itself, including the promotion of sales or services of such business and consulting
services, does not constitute the practice of a profession even though the services involve the
application of a specialized knowledge." 20 NYCRR § 203.11 (b) (1) (i).

ROBERT W. BOUCHARD, ACTING COMMISSIONER
LOUIS M. JACOBSON, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR
TP-8 (8/82)

-2­
TSB-A-82 (10) I
Income Tax
December 31, 1982

It has been held that to qualify for such "professional exemption", in accordance with the
foregoing, the services performed must "encompass some of the essential characteristics" of the
professions of law, medicine, dentistry or architecture. Matter of Koner v. Proaccino, 45 A.D. 2d
551, aff'd 39 NY 2d 258.
Accordingly, Petitioner's activities during the years in question did not constitute the practice
of a profession within the meaning and intent of section 703(c) of the Tax Law, and the income
derived therefrom was subject to the unincorporated business income tax.

DATED: December 22, 1982

s/FRANK J. PUCCIA
Director
Technical Services Bureau