Government Affairs Albany UpdateApril 16, 2004
Legislation addressing the issue of "offshoring" of jobs continues to be introduced in New York.
The most significant new proposal is coming from Senator Ken Lavalle. Next week, Senator Lavalle will be introducing legislation that will restrict the state pension fund from investing in businesses that have "offshored" jobs. According to his office, the bill defines "offshoring" as the movement of jobs out of the U.S., rather than out of New York State as originally planned. We believe this legislation would apply to many of our member companies doing business overseas, and would also have a significant adverse impact on the pension fund's investment portfolio.
Senator Libous and Assemblyman Crouch have introduced legislation (S.6807/A.9786) that would require the state to consider "quantifiable fiscal benefits" to the state in determining the "lowest responsible bidder" on state contracts. This provision would apply to state contracts for "public works and public purchases," and allows for the consideration of factors including, but not limited to: where sub-contractors used by contractors to fulfill a state contract are located; how many jobs related to the contract would be located or created within the state; and estimated tax revenues and related economic activity that would be generated by the awarding of such contracts. The bill's "policy declaration" also says that such "quantifiable fiscal benefits" should be subtracted from actual bid amounts in determining lowest responsible bid. The bill directs the State Comptroller to develop this criteria in consultations with state agencies.
Finally, the Brodsky/Spano offshoring bill (S.6040/A.9567) has been amended again. This legislation would bar businesses that move jobs out of New York State from receiving state assistance, and would require the repayment of state assistance already received. The most significant change appearing in the B print is a provision stating that the benefit recapture provisions would not apply to state assistance received prior to the effective date of this legislation. Also, we are pleased to report that Assembly Majority Leader Paul Tokasz, who was listed as a co-sponsor of the initial bill, is no longer co-sponsoring this legislation.
To date, none of the various offshoring bills introduced in New York State have moved in either house.
Senator Spano has introduced departmental bill S.6500 at the request of the Department of Taxation & Finance. The legislation has a purported purpose of requiring disclosure of information relating to federally registered tax shelters and transactions and establishes "super" penalties for nondisclosure and the underpayment of taxes due to the participation in such transactions.
Yet, the actual language placing regulatory obligations on New York taxpayers goes beyond that of Federal law. In addition to requiring every New York person to file with New York tax authorities the disclosure statements required by the Federal government under section 6011 of the Internal Revenue Code regarding reportable transactions, each person must also "provide such other information related to such disclosure as prescribed by the commissioner." "In addition, every taxpayer or person who participates in a New York reportable transaction for a taxable year must disclose such participation on its return or report required to be filed under this chapter for the taxable year in a form prescribed by the commissioner and provide such other information related to such transaction as prescribed by the commissioner. A New York reportable transaction is a transaction that is the same as or substantially similar to one of the types of transactions that the commissioner has determined to have the potential to be a tax avoidance transaction and is identified as a New York reportable transaction by notice, regulation, or other form of published guidance." S.6500 goes on to exempt the commissioner's and Department's publication actions from the SAPA by stating "The provisions of article two of the state administrative procedure act shall not apply to the determination of a New York reportable transaction by the commissioner or the publication of such determination."
Another provision of S.6500 imposes additional record keeping requirements on persons beyond those required under section 6011 of the IRC of "all other records or documents related to the disclosure, registration and list maintenance requirements of this section (6011) for six years and must make such information available for inspection by the commissioner in connection with any examination."
S.6500 reduces the threshold for a substantial understatement of taxes from ten percent to five percent in cases where the deficiency is due to the participation in any newly reportable transaction and increases the additional penalty for understatement from ten percent to twenty percent for corporations and individuals.
In addition, S.6500 imposes a new penalty of $10,000 per occurrence for the failure of a taxpayer to disclose any transaction, file any tax shelter registration, or maintain any investor list as newly required by S.6500.
S.6500 makes all new requirements, diminished thresholds, increased penalties, and new penalties effective retroactive to taxable years beginning on or after January 1, 2004.
Analysis, opinions, and comments are being solicited from TBC's Committee on Taxation; all members are welcome to join in with their views.