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Legislative Memo

Ken Pokalsky
Vice President
T 518.465.7511
www.bcnys.org

BILL:

S.6409-A/A.9009-A, Part R (Executive Budget)

Support

SUBJECT:

Small Business Income Tax Rate Reduction

 

DATE:

March 7, 2015

 

The Business Council supports the small business income tax rate reduction proposed in the Executive Budget. This bill will provide small business tax relief under both the corporate franchise tax and the personal income tax.

As proposed, these two components would provide about $300 million in annual tax relief to small business.

We support this approach, and agree with its basic structure. However, we recommend increasing the income cap under both proposals, to at least $500,000.

Specifically, the Executive Budget proposal would:

This year’s focus on small business tax reform is a logical next step in New York’s business tax reform efforts.  In 2014, the legislature adopted a significant restructuring of the corporate franchise tax, updating that statute and folding the bank tax into the CFT. In 2015, the legislature approved legislation bringing the New York City general corporation tax into general conformance with the state reforms. Together, these actions modernized the state’s principle business taxes, reduced compliance and auditing challenges for business and state/city tax agencies alike, and produced a $600 million tax reduction, once the reforms were fully applicable in the 2016 tax year.

However, these amendments and the resulting tax savings mostly affected public traded corporations.

In contrast, most small business are set up as pass-through entities such as LLCs, partnerships or subchapter S corporations that pay the bulk of their business income tax under the personal income tax, not the corporate franchise tax. The Executive Budget will provide income tax relief to these businesses.

We belief this proposal deserves the support of the Senate and Assembly, and recommend that the Executive Budget bill be amended to apply to a broader universe of small business taxpayers.