2005
Budget Summary (March 31, 2005)
The State legislature completed action
on a series of budget bills in the afternoon of March 31st, achieving
the state's first on-time budget since 1984. Below is a quick summary
of the status of some of the most significant issues for Business
Council members
Single Sales Factor
Single sales factor apportionment will be phased-in for all Article 9-A (corporate
franchise tax) taxpayers currently subject to double-sales weighting (this
excludes transportation industries); weighting of in-state sales will go from
50% to 60% for 2006; to 80% for 2007; and to 100% in 2008. For the Bank Tax
(Article 32), single sales factor apportionment will apply to all receipts
of a banking corporation that is substantially engaged in providing investment
advisory-related services. This reform will result in a $250 million reduction
in tax liability for beneficiaries, and a net reduction in state revenues of
$135 million, once fully implemented in 2008.
Medicaid Cap
The legislature approved a cap on the local share of medicaid costs beginning
in 2006. Under this plan, the state would be responsible for any growth in
the plan exceeding 3.5% in 2006; 3.25% in 2007 and 3% in the following years.
A "Preferred Drug Program" for medicaid was adopted along with
a statewide disease state management program.
HCRA
The legislature extended the Health Care Reform Act to June
30, 2007 and put HCRA revenues and expenditures on-budget. The legislature
made minor modifications to the bad debt and charity care assessment
by increasing it from 8.85% to 8.95%. They also concurred with the
Governor's budget proposal to increase the amount raised for graduate
medical education by $50 million. A $1 billion health-care capital
grant program was created to provide funding for information technology
purchases.
Health Facilities Commission
The legislature and the Governor agreed-to a new "Commission
on Health Care Facilities in the Twenty-First Century" to "undertake
a rational, independent review of health care capacity and resources
in the state and to ensure that the regional and local supply of
general hospital and nursing home facilities is best configured to
appropriately respond to community needs for quality, affordable
and accessible care, with meaningful efficiencies in delivery and
financing that promote infrastructure stability." There will
be a series of boards: 1) a commission of eighteen statewide members
appointed by the Governor and legislative leaders; 2) six regional
members of the commission for six regions of the state, appointed
by the Governor and legislative leaders; and 3) regional advisory
committees for the six regions, the number of members to be decided
by the Commission. "On or before December 1, 2006, the Commission
shall transmit to the Governor and legislature a report containing
its recommendations."
Empire Zones
The Empire Zone program was extended through 2015, and zones will be extended
to eleven counties currently without zones, and to the Chinatown section
of Manhattan. Generally, businesses certified as QEZEs prior to 4/1/05 will
retain their current benefits. Businesses certified after that date will
be subject to new designation criteria, and new criteria for calculating
the real property tax benefit, and their benefits will extend for 10, rather
than 15 years. All existing Empire Zones are required to be reconfigured,
resulting in a limited number of contiguous areas. The law contains new and
expanded accountability/reporting requirements for local zone boards and
QEZEs. New categories of zone benefits were established for agricultural
cooperatives and "regionally significant projects."
Power for Jobs
The legislature adopted a one year extender of the Power for Jobs program,
through 12/31/06. Post-budget negotiations are possible on several issues
related to the PfJ program, including longer-term program extension; source
of financial support; potential amendment to benefit criteria for current
PfJ program participants; opportunities for additional zone participants;
and others.
REITs
The legislature rejected the Governor's proposal to disallow the 60 percent
exclusion of dividends received from a Real Estate Investment Trust subsidiary.
This would have increased Article 32 (Bank) Taxes by $50,000,000 in FY2006.
Surcharges
Rejecting pressure from public-employee unions and others, the legislature
is allowing the 2003 increases in statewide income and sales taxes to phase
down and expire on schedule this year and in 2006. They did approve a 1/8
of 1 percent (.125%) sales-tax increase to support the Metropolitan Transportation
Authority will apply within the metropolitan commuter district, including
Long Island, New York City, and Westchester, Dutchess, Orange, Rockland and
Putnam counties.
Transportation
Budget provides for a $17.9 billion, five year transportation capital plan
for highway and bridge improvements and a $17.9 billion, five year MTA capital
plan. Part of this funding would be conditioned upon passage of a $2.9 billion
general obligation bond act to be presented to the voters in November 2005.
The legislature accepted several of the Governor's revenue proposals, including
increased DMV fees, to support transportation spending.
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.
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).
Additional Mortgage Recording Tax Increase
Part X of S.3671 increased the Additional Mortgage Recording Tax by five cents
(to 30 cents/$100) within the twelve-county Metropolitan Commuter Transportation
District.
