Tax Committee Update

February 18, 2010
Staff Contact: Ken Pokalsky

Budget Testimony

Business Council President Kenneth Adams testified at the February 1 joint legislative budget hearing on “economic development” issues.  Our testimony, available here, covers all of the Council's major concerns regarding the Executive Budget proposal, including revenue proposal.  The basic message was for the legislature to further restrain state spending, in order to address both this year's $7 billion plus budget gap, and an estimated $30 billion or more in structural gaps over the next three fiscal years.

Additional Tax and Tax Credit Proposals

In his “21 day amendments” to the Executive Budget, Governor Paterson is proposing several significant additional changes to business taxes and tax credits.  They are summarized below.  Your input on these issues would be appreciated.

MTA Mobility Tax. The Governor is proposing to increase the MTA payroll tax rate from 0.34 percent to 0.54 percent for employers within New York City, and to reduce the rate to 0.17 percent for elsewhere in the MTA service territory.  Under this proposal, New York City businesses would pay 88 percent of all the total tax, up from 70 percent and increase projected payroll tax revenues for 2010 by $200 million.  The proposal would also exempt self-employed individuals and partners with income below $100,000 from the payroll tax, up from the current threshold of $10,000, eliminating tax liability for an estimated 400,000 small businesses.  While we support the reduction in the suburban county tax rate, The Business Council is opposed to increasing the payroll tax on New York City residents.  The bill text is available hereOur press release on the MTA tax issue is here.

Brownfield Redevelopment Tax Credit. The 21 day amendments would impose limitations on brownfield program tangible property tax credits to all projects that were accepted into the program prior to June 23, 2008, but that had not received a “certificate of completion” for the remedial work prior to February 2, 2010.  Under current law, as amended in 2008, new limitations on the tangible property credit ($35 million or 3 times site preparation and cleanup costs, or $45 million and 6 times cleanup costs for manufacturing projects) only apply to projects accepted into the program on or after June 23, 2008.  This proposal is consistent with recent policy and program implementation efforts to significantly reduce access to brownfield tax credits.  The Business Council opposes this “de-grandfathering” of projects already in the brownfield program. The bill text is available here.

Empire Zone Investment Tax Credits. The Business Council supports a final proposed change that would clarify that access to Empire Zone investment tax credits for qualified empire zone enterprises would continue after Empire Zones formally expire on June 30, 2010.  Current law makes these ITCs contingent upon location within a zone, calling into question their validity after the zone expiration date.  The Administration concurred that this was an unintended consequence of the 2009 Empire Zone program reforms, and clarifies that these zone credits remain in effect post June 30.  The bill text is available here (see page 7 of this document, proposed changes to page 85, line 47 of S.6610/A.9710)

NY Finances Continue to Deteriorate

New data on the state's financial condition reinforces the need for significant financial restraint and budget reform: