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Government Affairs Albany Update

January 5, 2001

Draft 2001 Legislative Program

Enclosed is a copy of The Business Council's Draft 2001 Legislative Program (1). The Program represents the work of the Committees and Councils of The Business Council over the past six months.

100% Receipts Factor Apportionment Receives Gubernatorial Backing

Correction of New York's Corporation Franchise (Article 9-A) Tax apportionment formula via repeal of the hidden "locate in New York tax" currently contained therein received a boost from Governor Pataki. The Governor announced that his 2002 Executive Budget will include a five-year phase-out of the property and payroll apportionment factors for manufacturers commencing 1/1/1. Accordingly, 100% receipts factor apportionment (also called single sales factor apportionment) would be in place for manufacturers on 1/1/5. One hundred percent receipts factor apportionment has been designated as The Business Council tax priority issue for the 2001 Session by its Board of Directors. The Business Council version would be fully effective for all Article 9-A taxpayers for tax years starting on or after 1/1/1.

The Article 9-A apportionment formula is used to determine what portion of a multi-state firm's worldwide activity income is subject to New York's Corporation Franchise Tax. The current formula's inclusion of property and payroll factors hikes a firm's New York tax when investment and jobs are located in New York and, perversely, cuts a firm's New York tax when jobs and investment are moved outside New York.

The Executive Budget proposal would net $34 million annual savings (when fully effective) for all manufacturing Corporation Franchise Taxpayers.

Governor Pataki Proposes Repeal of the Minimum Income Tax

Governor Pataki announced that his 2002 Executive Budget (due 1/16/1) will include repeal of Article 9-A's Minimum Income Tax (currently 2.5%) in 1/2% segments over five years commencing 1/1/1.

The Minimum Income Tax repeal — called for in The Business Council's 2001 Legislative Program — would save Corporation Franchise Taxpayers $50 million annually when fully effective on 1/1/5. The Minimum Income Tax stymies new investments in New York by limiting the amount of tax credits (already earned by a firm) which can be used on a firm's tax return.