Government Affairs Albany Update
March 5, 2010
- PPI Energy Tax Report
- Council Opposes Tax Hike on COLI Policies
- "Street-cutter" Prevailing Wage Bill Held
- Corporate Tax Reform Proposal
This week our Public Policy Institute released a report on state and local taxes, fees and assessments imposed on the electric power industry, which showed a total burden of $6.4 billion, a 26 percent add-on to electric power prices. In 2009, the power industry paid an estimated $6.367 billion in state and local taxes, assessments and fees. The figure is $853 million higher than the total the industry paid in 2008 – a 15 percent increase. Recent tax and fee increase have more than offset the 18 percent drop in wholesale electricity costs since 2000.
Among other things, the report called on the Governor and Legislature to reject a tripling of city and state utility gross receipts taxes proposed in the Executive Budget.
The Business Council is backing legislation that would amend and extend the state’s procurement lobbying statute to July 31, 2014; see S.6924-B (Kruger)/A.9949-A (Destito). The bill has passed the Assembly, and is on the Senate Finance Committee agenda.
In 2005, the Procurement Lobbying Law was enacted by the State Legislature with the goals of bringing reform, consistency and transparency to the government procurement lobbying process in New York State. Provisions of the law have been subsequently extended for various duration periods. The current provisions have a sunset expiration date of March 10, 2010.
The amendments proposed within this bill offer clarity on what types of communications are not subject to the restricted contact provisions within the law, and provide a clearer definition of when the restricted contact period begins. These amendments will ensure the integrity of the procurement lobbying law is maintained, without compromising the ability of governmental agencies and vendors to engage in legitimate business communications.
The Business Council is opposing a bill (S.6236-A/S.9439) which would impose a fifty-percent franchise tax on business-owned life insurance benefits. Many businesses purchase what is commonly known as corporate owned life insurance (COLI) on their most highly compensated employees for a variety of reasons. The purpose of COLI is to protect businesses from the loss of an owner or key employee whose talents are essential to the success of the company. The benefits from the life insurance policy assist the business to meet its future obligations including retirees' health care benefits, retirement plans and other costs. The bill amends the tax law and adds a new section 182-b that proposes a fifty-percent tax upon every company receiving benefits from life insurance policies it has obtained on its employees. Additionally, the bill requires that every company subject to tax under this section shall keep records of its business for a minimum of three years in such form as the commissioner may require. The Council's memo in opposition is available here.
Utility representatives and Council staff joined forces in opposing legislation that would have imposed public works “prevailing wages” on utility projects requiring a street opening permit (S.632-A (Fuschillo)/A.404-A). The bill was pulled off the Assembly Codes Committee last week. Our opposition memo on this bill is available here. As the first of several prevailing wage mandate bills likely to be considered this session, we saw this bill as an expensive and unnecessary extension of public works prevailing wage standards into private sector activity.
The Department of Taxation and Finance has issued draft legislation that would integrate the state’s current Corporate Franchise Tax (Tax Law Article 9-A) and Bank Tax (Article 32). The bill text is available here; the bill overview is available here.
The following is an outline of the most significant proposals in this bill:
- Adoption of a 6.5% rate. For most Article 9-A taxpayers, the current rate on an “entire net income” basis is 7.1%; manufacturers and small businesses already pay 6.5%.
- Elimination of the long-standing exemption under Article 9-A for subsidiary income. Interest income and income from debt that is subsidiary capital becomes taxable business income. Other “investment income” from subsidiaries would be exempt.
- Net operating losses incurred before 2011 are converted into tax credits with 20 year carry forward.
- Single sales factor apportionment is applied to all taxpayers (this is current law under Article 9-A, new for Article 32 taxpayers.)
- Customer-based sourcing is adopted for certain financial service income, digital products and services, also a benefit to most taxpayers with significant instate presence.
- The new requirements to be combined would be: a unitary business/water’s edge test; and a more than fifty percent stock ownership test. The New York combined group must include all domestic corporations, alien corporations deemed domestic corporations under the I.R.C (contiguous, stapled, and inverted corporations), and alien corporations with federal taxable income. The current Article 9-A “related business” test for combined reporting is eliminated. (Generally, unitary determinations are based on existence of central management, integrated function and economies of scale.)
- Eliminates the 1.5 percent alternative minimum tax; increases the fixed dollar minimum tax.
- Allows use of most tax credits to reduce taxes to the fixed dollar minimum.
- The current, temporary $10 million cap on the capital base tax alternative is made permanent, and applied to all taxpayers (the current $10 million cap applies to taxpayers except manufacturers; under current law, the cap is set to revert to $1 million for non-manufacturers while manufacturers would stay at $350,000.)
The Department is seeking formal input on this draft legislation by April 9th. We hope that you can participate in the upcoming Tax Committee meeting. If not, please feel free to contact us at your convenience to discuss this proposal and provide us with your reaction.