Government Affairs Albany UpdateFebruary 9, 2007
- REMINDER... Special GAC Budget Meeting - Next Tuesday the 13th
- Executive Budget: Business Council Priority Tax Concerns
- Budget Information on the Web
Just a reminder about the 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 Business Council is urging our members to review the proposed business tax changes included in Governor Spitzer's Executive Budget proposal, and provide us with your input at your earliest convenience. These tax proposals will be one of the focus points of our budget testimony to the joint legislative hearing on February 28, so your input is crucial.
The Budget Division estimates that tax provisions included in the Executive Budget will increase corporate tax collections by more than $600 million annually. The Business Council's key concerns include:
- Combined reporting ($215 million): Combined reporting means that related companies would be required to file a combined tax return if there is significant inter-company financial transactions. One effect can be to subject non-New York related business income to New York's business tax. State law already gives the Department of Taxation and Finance full power to require combined reporting, and places the burden on taxpayers to demonstrate that substantial intercompany transactions do not artificially reduce tax liability. The proposal would drain New York employers of significant revenues that they could otherwise use for business investments, employee compensation or return on shareholder equity. Among the likely economic impacts: New York would become less attractive as a headquarters location, and as an investment venue for individuals and companies outside the state. See Part O of S.2110/A.4310.
- Uncoupling of "qualified production" incentive ($35 million): The American Jobs Creation Act of 2004 created a 3 to 9 percent deduction for production costs of manufacturing, software development, electricity and natural gas production, and certain other activities – all of which New York has encouraged by adhering to federal law. Eliminating the deduction would raise the price of conducting such business operations in New York, creating a competitive disadvantage relative to 31 states that remain coupled to the federal provision, or have no corporate income tax. See Part V of of S.2110/A.4310.
- Bank tax increases ($77 million). These proposals would adversely adjust the wage factor of the apportionment formula, limit expense deductions, restrict bad debt write-offs, and change the tax status of an investment subsidiary. See Parts I, J and L of S.2110/A.4310.
- Real estate investment trusts ($104 million). Dividends from a REIT subsidiary would no longer be exempt from taxation. Banks with substantial employment in New York City, Buffalo and elsewhere would pay millions more in tax. Community banks throughout the state would also face significant tax increases. See Part H of of S.2110/A.4310.
- Health-insurance tax ($75 million). The "covered lives assessment" would jump by more than 10 percent, driving up the cost of coverage. See Part A of S.2108/A.4308
Please contact us if you would like additional information on these budget items.
Information on the Web
The text of all budget bills related to Governor Spitzer's Executive Budget are introduced and available on line. The bill numbers are as follows:
S.2100/A.4300 - Public protection and general government
S.2101/A.4301 - Legislature and Judiciary
S.2102/A.4302 - State Debt Service
S.2103/A.4303 - Education, labor, and family assistance
S.2104/A.4304 - Health and mental hygiene
S.2105/A.4305 - Transportation, economic development and environmental conservation
Article VII bills
S.2106/A.4306 - Public protection and general government
S.2107/A.4307 - Education, labor, and family assistance
S.2108/A.4308 - Health and mental hygiene
S.2109/A.4309 - Transportation, economic development and environmental conservation
S.2110/A.4310 - Revenue provisions