Tax Committee Update
February 7, 2011

Staff Contact: Ken Pokalsky

Tax Committee Meeting

We have scheduled a meeting of our Tax Committee for Tuesday, February 22, from 2:00 p.m. to 4:00 p.m.  Guest speaker will be Thomas Mattox, nominated by Governor Cuomo as Commissioner of the Department of Taxation and Finance.  In addition to Commissioner Mattox's remarks, the agenda will also include a presentation on, and discussion of, Executive Budget proposals; real property tax issues; and others.  The meeting will be at The Business Council's Insurance Trust Offices at 12 Corporate Woods Boulevard, Albany, NY.  Directions are available here.

Budget Overview

Our detailed overview of Governor Cuomo's Executive Budget proposal is available here.  Significant tax and revenue proposals are summarized below. I welcome your comments on these proposals.  Note that all budget bills are available on line here and here.  They are also available, with bill memos, in draft form on the Division of Budget web site here.  The following summaries include the relevant bill number and page number for each provision.  We urge members to provide feedback on these proposals.  Please contact me with any questions or comments at your earliest convenience.

State Revenues

The plan includes $455 million in new revenue measures – a relatively modest increase compared to the past two budgets which saw a combined $10 billion in tax hikes. The largest component, $200 million, is expected from improved tax administration and increased compliance and enforcement, rather than an increase in rates or extension in taxes.  It also includes $150 million in new state lottery-related revenues. 

The budget plan is based in part on increased tax revenues generated by a recovering economy.  It includes projections of 4.8 percent growth in state personal income, 1.3 percent growth in private sector employment, and a slight drop in the unemployment rate.  

As a result of increased economic activity, the budget is projecting total state tax revenues to increase by $4 billion or 6.6 percent in the new budget year.

The budget projects personal income tax revenues to increase by $2.7 billion or 8.4 percent during the new budget year, and total state tax revenues to increase by $4.0 billion or 6.6 percent.  Business tax receipts overall are projected to grow by $705 million or 9.2 percent, with the greatest growth coming from corporate franchise and bank taxpayers.

Tax Law

G-L-B Transition/Bank Tax – Extends both state and New York City transitional provisions regarding federal Gramm-Leach-Bliley Act until 12/31/2012; and makes permanent the 1985 restructuring of, and subsequent amendments to, the Article 32 Bank Tax (S.2811/A.4011, Part J). 

Tax Shelters – Makes permanent the state's 2005 tax shelter disclosure and enforcement provisions (adopted in Chapter 61, Laws of 2005, Part N), and is expected to preserve $5 million in state revenues this year.  (S.2811/A.4011, Part B). 

Cooperate Insurance Corporations – Eliminates the tax exemption for cooperative insurance companies in existence prior to 1937 to address their “unfair tax advantage” over other commercial carriers, which would raise $22 million in the new fiscal year (S.2811/A.4011, Part H). 

Excess Line Insurance Tax - Conforms excess line premium tax and tax on independently procured insurance with federal “Dodd-Frank” legislation; allows New York to participate in national compact to collect excess lines insurance tax.  These changes are not projected to raise addition revenues in FY 2012.  (S.2811/A.4011, Part I). 

Diesel Fuel – Updates provisions of the state's motor fuel, petroleum business and sales taxes to reflect federal “dyeing” rules, and to restore intended tax treatment of on-road and non-road diesel fuel (S.2811/A.4011, Part K). 

Tax Credits

Excelsior - Modifies the Excelsior Jobs program (S.2811/A.4011, Part G) by:

Empire Zones – Clarifies that taxpayers remain eligible for Empire Zone tax credits past the program's 6/30/10 expiration date unless they are decertified by ESDC.  (S.2811/A.4011, Part C).  7,500 businesses remain eligible for Empire Zone tax credits.

Investment Tax Credit - Extends the investment tax credit for certain financial services activities (without changes) under the corporate franchise, bank, insurance and personal income tax until October 1, 2015.  (S.2811/A.4011, Part E). 

Alternative Fuels – Extends motor fuel, petroleum business, fuel use and state and local sales tax exemptions for E85, compressed natural gas, hydrogen and biodiesel (B20) until 9/1/12 (S.2811/A.4011, Part L). 

Tax Compliance and Enforcement

IRS “LIFE” - While not a legislative change, the Executive Budget briefing book state that “The Department of Taxation and Finance will embark on an auditing program to more efficiently engage taxpayers by adopting techniques based on those used in the IRS Limited Issue Focused Examination program.” 

Tax Modernization - Includes a number of amendments to implement the “Tax Modernization Project,” (projected to generate $200 million per year in increased state revenues (S.2810/A.4010, Part Z), including:

Tax Shelter Reporting – Makes permanent tax shelter disclosure and penalty provisions adopted in 2005 (currently scheduled to expire 7/1/11) (S.2811/A.4011, Part B).