Government Affairs Albany UpdateFebruary 2, 2007
There will be a special meeting of the GAC on Tuesday, February 13th at 10:00 a.m. dedicated to a discussion of the most significant business issues proposed in the 2007-08 Executive Budget. We will review the major revenue proposals put forth by Governor Spitzer.
We will also be providing an overview of the Governor's major health care, medicaid and education restructuring proposals. No registration is required.
The following provides overviews of Executive Budget proposals in several key issue areas. A complete budget review will be included in next week's GAC mailing.
$215M Combined Reporting
- Would require forced unitary combined reporting for Article 9-A (general corporations), Article 33 (insurance corporations), and the Administrative Code of the City of New York (general and insurance corporations doing business in New York City). That is, this change would force a New York taxpayer to include in its New York tax return the net income of a related corporation NOT doing business in New York simply because there are substantial intercorporate transactions between the corporations.
- Would uncouple NY tax law from IRC 199 -- The American Jobs Creation Act of 2004 which created a 3 to 9 percent deduction for the production costs (Qualifying Production Activities Income (QPAI)) of manufacturing, food processing, software development, filmmaking, electricity/natural gas production, and construction activities.
$40M Bank Tax
- Would force banks to add back expenses related to subsidiary capital and eliminate the twenty percent reduction in the wage factor portion of the apportiomnent formula.
$15M Bank Tax
- Would restrict banks' bad debt write-off to those that have actually been written only in the current taxable year.
$22M Bank Subsidiaries
- Switches certain bank subsidiaries that are Article 9-A corporations from Article 9-A taxation to Article 32 (Bank) taxation and provides that an investment subsidiary of a bank shall be included in the definition of a banking corporation.
- Repeals the subsidiary dividend deduction received by a parent company from a Real Estate Investment Trust (REIT).
$100M Subchapter S
- Would mandate that a New York C corporation that is a Federal subchapter S corporation be converted to State subchapter S status if more than 25% of the corporation's Federal gross income is derived from investment income.
$15M Subchapter S
- Would grant sole authority to the Commissioner of Taxation & Finance disregard a personal service corporation or subchapter S corporation if the Commissioner her/himself infers that the personal service corporation or subchapter S corporation was used to lessen New York Personal Income Tax
$17M Listed Transactions
- Makes permanent the 2005-enacted reporting and disclosure of listed transactions that might be improper tax avoidance practices.
$23M Cooperative Insurance Company Exemption
- Circumscribes use of the cooperative insurance company exemption to only those cooperatives which have direct written premiums of 25 million or fewer dollars.
ENVIRONMENTAL BUDGET INITIATIVES, Ken Pokalsky
- DEC will begin discussions with manufacturers on the development of a statewide electronics recycling program. Unlike recent legislative proposals in New York, the Administration has said that this effort will not necessarily be restricted to televisions and computer equipment.
- The budget will fund a new “pollution prevention institute.” The budget narrative states that the institute “will help businesses become more competitive by reducing the use of toxic chemicals,” but the budget proposal contains few details on its structure or activities. The Administration has said they may establish this institute as a freestanding entity, to be created through an RFP process.
- The DEC will establish a new twelve person “climate change” office, which will be charged with implementation of the Regional Greenhouse Gas initiative, and to “identify carbon reduction programs beyond the power plant sector.”
- The proposal would increase Title V air permit fees to $67 per ton (from $45), with no change in the 6,000 ton per pollutant cap. It would also set a $1,250 minimum fee for Title V permits. Combined, these changes would increase Title V program revenues by $6.4 million per year. Note that in last year's budget, the legislature “backfilled” the Title V account with $1 million in general fund resources rather than impose a fee increase.
- It re-establishes a 15 TPY threshold for the $6,000 hazardous wastewater surcharge. A “technical error” in finalizing the original 2003 legislation resulted in a threshold of 15,000 TPY. This proposed change would affect 145 facilities, and raise about $700,000 per year.
- SPDES (wastewater) permit fee for private/commercial/institutional permits are increased from $100 to $300 for small facilities, and from $200 to $600 for large facilities ($1.2 million total increase); SPDES general permit fee for industrial stormwater permits are increased from $50 to $300 ($400,000 in increased revenues);SPDES general permit fees for CAFOs are increased from $50 to $150 for medium and to $500 for large facilities ($100,000); a new $500 fee is imposed for permits to erect, reconstruct or repair a dam ($750,000); and the fee for well drilling permits is increased from $10 to $100 ($43,000). These revenues will support the DEC environmental regulatory account.
- It would extend the state's bottle deposit law to cover non-carbonated beverages, and capture unclaimed deposits for support of the Environmental Protection fund. This change would be effective 1/1/08, generating $25 million in revenues in the final quarter of Fiscal 2008. Fully implemented, it is projected that this measure would generated $100 million per year in new EPF resources.
- Environmental Protection Fund would increase to $250 million, from $225 million, with the increased spending to be supported from revenues from the expanded and modified bottle bill. The EPF spending proposal includes a $20 million increase (to $140 million) for open space protection. New spending categories include $2 million for a “pollution prevention institute,” and $2 million to promote “smart growth” initiatives.
- The Department's overall operations budget will increase by $6.6 million (or less than 2 percent) to $492 million. Its overall capital projects budget will increase by $42 million (6.7 percent) to $673 million.
ECONOMIC DEVELOPMENT, Ken Pokalsky
Key economic development initiatives in the Executive Budget proposal incllude the following:
- $300 million for development or expansion of an international computer chip research and development center.
- $300 million for a newly established “Investment and Job Creation” fund, to be established in separate legislation. The budget narrative states that this fund will target major projects that either have significant regional impact or provide economic benefits to distressed areas. Project applications will be solicited on a periodic basis, and selected based on to-be adopted regulatory criteria (job creation or retention, partnerships with local entities, encourage private investment.) All projects will be approved by a newly established Capital Approval Board.
- the Empire State Economic Development Fund is funded at $40 million, and increase from $32 million last year.
- There is no new ESDC appropriation for the Jobs Now program, but a number of re-appropriations from prior budgets. This program had been funded at $32 million per year.
- $50 million, through the state Office for Technology, to support the Universal Broadband Access initiative, to assure highspeed broadband access statewide.
- Create a new Stem Cell and Innovation Fund Corporation, to be funded through a $1.5 billion bond act to be submitted for approval in November 2008. It would make grants and loans for stem cell biology, life sciences and other emerging technologies, and by investing in basic, applied and translational research and development efforts. The corporation would be governed by a board appointed by the Governor and legislator, and by botha Life Science andan Emerging Technology advisory council.
- Make permanent the general loan authority of the Urban Development Corporation. Originally enacted in 1994, this program has received one-year extenders for the past seven years.
- Corporation Tax Combined Filing: Amends §1515(f) of the Tax Law, relating to the Article 33 Insurance Franchise Tax. This proposal would require corporations that conduct substantial intercorporate transactions with an affiliated company that is not a New York taxpayer to file a combined corporate franchise tax return, including the net income of the non-New York taxpayer. Estimated impact to business is $215 million.
- Cooperative Insurance Companies: Amends §1512(a)(7) of the Tax Law by limiting the exemption from the franchise tax on insurance corporations for certain town or county cooperative insurance corporations. It provides that the exemption will apply only to corporations which properly reported direct written premiums to the Superintendent of Insurance of $25 million or less for the taxable year. This will apply to taxable years beginning on or after January 1, 2007.
ENERGY, Ken Pokalsky
Economic Development Power Programs
- The Executive Budget did not include language regarding the extension of the Power for Jobs or Economic Development Power programs.
Regional Greenhouse Gas Initiative (RGGI)
- A new “Climate Change Office” will be established at the Department of Environmental Conservation, and will have a staff of 12 people. This office will implement the RGGI program, including 100 percent auction of carbon dioxide allowances, and collaborate with other states and identify carbon reduction programs beyond the power plant sector.
- The budget proposal continues, and in some cases increases, a number of assessments against utilities to fund, or help fund a number of state agencies. These include:
|Department of Public Service||$76,303,000 (utilities and cable)|
|Department of Environmental Conservation||$ 6,686,000|
|Office of Homeland Security||$ 6,243,000|
|Consumer Protection Board||$ 4,013,000|
|Disaster Preparedness Commission||$ 3,650,000|
|Low Level Radioactive Waste||$ 3,733,500|
|Economic Development||$ 840,000|
|Agriculture and Markets||$ 356,500|
|Parks, Recreation & Historic Preservation||$ 89,000|
* NYSERDA funding noted here does not include the System Benefits Charge ($175 million in 2007) or the Renewable Portfolio Standard ($43.1 million in 2007). Also note that these additional charges are paid by other customers in addition to businesses.
Nuclear Power Plant Assessment
- There is an amendment to the Executive Law, adding a new section 29-f to create an assessment on operators of nuclear electric generating facilities to reimburse the state for the cost of deploying the organized militia (New York National Guard) to provide security at these facilities. The assessment is $13 million annually, and will be paid quarterly.
Department of Public Service
- The Department's priorities, as outlined in the budget proposal, include: adoption of a new power plant siting law; encouraging long-term power contracts; continue implementation of the Renewable Portfolio Standard; and continue efforts to increase the security and safety of critical utility infrastuctures and cyber facilities and systems.
CONTRACT PROCUREMENT, Ken Pokalsky
- The Executive Budget proposes to extend the Procurement Stewardship Act for one year, through June 30, 2008, with no change.
- The budget narrative states that the Office of General Services will expand the use of aggregate purchasing for computers and related technology components.
LOBBY COMMISSION, Ken Pokalsky
- Reflecting the agreed to Ethics/Lobbying reform legislastion,
the budget narrative states that they will be eliminating the "Lobbying
Act Enforcement Fund,” which receives revenues from civil
penalties imposed under the Lobby Act, and deposit enforcement
revenues in the General Fund. The Enforcement Fund has been
used to finance Commission activity; last year, this penalty
fund provided $668,000 for support of the Commission budget.
Under the Executive Budget, the Commission will receive all
its appropriations from the General Fund.