Hedge fund managers who fled Manhattan to work from their second or third homes this year could end up saving millions of dollars -- and cost New York City dearly.

Investment firms that pay the city’s unincorporated business tax -- a 4% levy that brought in more than $2 billion last year -- may be able to slash their bills because, for the first time, most of their income is being earned outside Manhattan. The UBT is assessed on the bottom lines of businesses operating in New York City that aren’t organized as corporations.

“The UBT isn’t imposed on all of a business’s income,” said Timothy Noonan, a partner at the law firm Hodgson Russ. “It’s only imposed on the portion allocated to the city. For service businesses, the rule is simple: You look to where the services are being performed.”

Right now, plenty of those services are being carried out in tony enclaves where portfolio managers, traders and analysts own homes and often live, usually part-time. Think Greenwich, Connecticut, or Palm Beach, Florida.

For New York City, which is already facing a severe fiscal crisis --- revenue has plunged $9 billion since January -- that may mean yet another financial hit. The city’s Independent Budget Office forecasts revenue from the UBT will fall 17% this year to $1.7 billion, a decline that could accelerate if many of the city’s most profitable businesses use work-from-home policies to save on taxes.

A spokesperson for the New York City Department of Finance didn’t reply to requests to comment.

Businesses paying the UBT come from every sector of the city’s economy, from construction and manufacturing to advertising and performing arts. But the securities and commodities industry paid almost 30% of partnership UBT revenue in 2016, according to the latest city data. That’s second only to legal businesses at 32%, and well ahead of the real estate sector at 9.2%.

An analysis conducted with Monaeo -- a technology tool offered by Topia Inc. that helps companies track employee locations for tax purposes -- demonstrates how the industry could use UBT tax rules to their advantage.

Until March, almost all of the 85 employees at a hedge fund with $40 billion in assets spent the majority of their workdays in New York City. Then, they scattered. From mid-March to the end of June, 38% of the staff was still working primarily in the city, the analysis shows. Half of the workforce ended up in either New Jersey, Connecticut, or outside the city’s five boroughs. The remaining 12% were split among Florida, California and several other states.

Topia estimates the firm, which it didn’t name, could cut its UBT bill this year by $4 million to $8 million.

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