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Government Affairs Albany Update

April 1, 2005

Budget Update

Yesterday, we sent the Government Affairs Council information on major business issues that were included in the 2005-06 budget passed by the legislature this week. We will keep you apprised of any action the Governor takes on these issues. Following is information that supplements the mailing from yesterday:

Reduction in Article 9-A's Small Business Tax Rate
The Legislature passed (as Part E of S.3671) a reduction in the Article 9-A tax rate on the first $290,000 of New York taxable income from the current 6.85% to 6.5% effective for taxable years commencing after December 31, 2004.

Health Care Quality Demonstration Programs
There are two demonstration programs that were created as part of S.3668, the Medicaid and HCRA bill. Both demonstration programs are supported by The Business Council. The first is a Pay for Performance demonstration to promote patient safety and better quality of care. The specific language can be found at page 76. The second demonstration program is a Health Information Technology Program to promote the development of electronic health information exchange technologies. Please note that this is separate from the $1 billion hospital capital grant program. The language for the Health Information Technology Program can be found on page 78 of S. 3668.

Governor's Strategic Partnership for Update Renewal (SPUR)
The legislature rejected the Governor's proposed SPUR program.

Workers' Comp Board
The legislature rejected the Governor's proposal to merge the Workers' Comp Board with the Department of Labor.

Wicks Law
The legislature rejected the Governor's proposal to repeal the Wicks Law.

Post-Budget Issues
The legislature and Governor will continue to negotiate on a number of issues post-budget, including: 1) the $150 million Environmental Protection Fund; 2) the use of $1.1 billion in surplus funds for Temporary Assistance to Needy Families (TANF); 3) a $250 million capital fund for public and private colleges; 4) creation of a hospital/nursing home closing/downsizing commission.

10-Month Extension of Suspension of Sales and Use Tax $110 Clothing Exemption
Part J of S.3671 extended the temporary suspension of the State's Sales and Use Tax exemption on clothing priced under $110 for an additional ten months until April 1, 2006 and created two sales tax-free weeks - one ending Labor Day 2005 and one in late January 2006.

Cigarette and Motor Fuel Taxes on Sales to Non-Native Americans
Part K of S.3671 directed the Governor to implement, via court-approved regulations, the collection from off-reservation wholesalers who sell cigarettes and motor fuel to Native Americans for resale to non-Native Americans.

Reimposition of Higher Filing Fees on Limited Liability Companies
Part L of S.3671 reimposed higher filing fees on limited liability companies that had originally been enacted by the Legislature for two years ending December 31, 2004.

Higher Cap on Article 9-A Business Capital Alternative Tax
Part M of S.3671 raises the cap on Article 9-A' s alternative business capital based tax from $350,000 to $1,000,000 on non-manufacturing taxpayers.

Anti-Tax Shelter Provisions
Part N of S.3671 imposes new provisions and standards for taxpayer advisors who participate in illegal tax shelter practices.

Qualified Emerging Technology Company Facilities, Operations, and Training Credit
Part U of S. 3671 creates new incentives for research intensive New York companies operating on the cutting edge of commercial applications for high technology and life science products. The credits will aid high technology firms looking to grow out of a New York academic incubator who hope to remain in the State, or new or existing companies that are looking to relocate to or further expand in New York. Unlike the existing Investment Tax Credit (that is based on tangible property expenditures), this new program provides a credit for costs more closely associated with emerging technology companies (tuition, salaries); it is estimated that new high tech companies will save $10 million when the program is fully implemented.

Motor Vehicle Fees
Part V of S.3671 greatly increased motor vehicle fees (for example, motor vehicle title fee will be $50).

Mortgage Recording Tax Increase
Part X of S.3671 increased the mortgage recording tax by 30 cents (within the 12-county MCTD) and by 25 cents (within the 50 counties outside of the MCTD).

MCTD Sales and Use Tax
Part BB of S.3671 increased the existing MCTD 1/4 % Sales and Use Tax by one-eighth of one percent.

New York Joins Arizona and Georgia In Dual-House Passage of Single Sales Factor

On Thursday of this week the Senate and Assembly passed S.3671 (A.6845) - an omnibus revenue budget bill; Part A of S.3671 implements over a three-year period Single Sales Factor Apportionment (SSFA). New York, thus, joins Arizona (HB2139) and Georgia (HB 191) as states that have passed in both houses of their respective legislatures bills to adopt SSFA. If all three states complete enactment by gubernatorial approval or legislative veto override, then it will bring the number of states with SSFA to twelve.

New York's implementation schedule for the weighting of receipts is set as:

In addition, New York's implementation schedule for the weighting of Article 32 (Bank Tax) investment advisory-related receipts is set as:

Arizona's enactment of SSFA would fulfill a promise made to attract the location of a major Intel facility.

PSC/NYSERDA Announce Demand-Response Workshops
Staff Contact: Ken Pokalsky

The PSC and NYSERDA have scheduled a workshop in Rochester on Tuesday, April 5 to provide an opportunity for facility and property managers of private and public companies, schools, local governments, colleges and universities to learn how to reduce their energy use and earn incentives for doing so under certain circumstances.

Demand-response programs, under which customers reduce energy use at critical times, can help large-use energy customers control their electricity costs and help the state better manage its electricity needs. The workshop in Rochester will include information on electricity issues in New York, financial incentives for reducing energy use, and demand-response success stories from current participants. The workshop will also include information on funding to help large-use energy customers finance, purchase and install energy-efficient improvements.

The workshop will be held at the RIT Inn and Conference Center from 8:30 a.m. to 12:30 p.m., W. Henrietta Road, Exit 46 of the NYS Thruway, Route 390 N, Exit 12A, Rochester, New York. Anyone interested in attending or learning more about the event can call toll-free 1-877-661-9223.