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Tax Committee Update
March 18, 2011

Staff Contact: Ken Pokalsky

LEGISLATIVE TAX/REVENUE PROPOSALS

The State Senate and Assembly have introduced their respective counterproposals to Governor Cuomo's Executive Budget. The following provides an overview of the legislature's reaction to major gubernatorial proposals on tax and revenue issues. It also identifies key new proposals introduced by the legislature.

On the Senate side, the most significant proposals would make deferred tax credits earned in 2010, 2011 and 2012 refundable in 2013 and move up by two years the sunset of $700 million in assessments on utility energy and gas services.

On the Assembly side, the most significant proposal is a one year 8.97% surcharge on personal income taxpayers with tax liabilities over $1 million – their modification to the so-called “millionaires” tax – which would raise $700 million in FY 2012 and $2.6 billion in FY 2013.

Tax Credits

Executive Budget - Enhances and extends the Excelsior Jobs program tax credits.

Executive Budget - 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. (See S.2811/A.4011, Part C). 7,500 businesses remain eligible for Empire Zone tax credits.

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

Executive Budget - 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. (See S.2811/A.4011, Part L).

Tax Compliance and Enforcement

Executive Budget - Includes a number of amendments to implement the “Tax Modernization Project,” (see S.2810/A.4010, Part Z), including: authority for electronic filing of documents and electronic RPT tax payments; requires localities to maintain electronic assessment inventories and assessment roles; and creates a central DT&F database of all local assessment records and web-based software for assessment management to be made available to all local assessing units; allows DT&F to enter into agreements with taxpayers to use electronic communications for any documents now required to be mailed; extends e-filing mandate to all personal income tax payers using software to prepare returns; increases related penalties; extends the date for filing fee returns for LLS to the 60th day after then end of the tax year.

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

Other Issues

Executive Budget - 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. (S.2811/A.4011, Part I).

Executive Budget - 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).

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).

New Tax Proposals – Complete bill text of major business tax issues proposed in the one house Senate and Assembly budget bills is available here.

Senate

Assembly

BUDGET UPDATE

Both the State Senate and Assembly have introduced amended versions of the Governor's $132.9 billion Executive Budget proposal, and have adopted one house budget “resolutions” that set the stage for final negotiations on the Fiscal 2011-12 state budget. Our detailed review of major legislative changes is available here. An overview of major changes includes the following:

Senate

The Senate's proposed budget included $132.5 billion in total spending, about $400 million, or 0.5% less than the Executive Budget. The Senate Republicans accept the Governor's recommended caps on future Medicaid and education spending, which is in line with previous Senate Republican calls for passage of a State spending cap.

The Senate budget makes $280 million in school aid restorations, and by their calculation, adopts $2.755 billion of the $2.9 billion in reductions and reforms recommended of the Governor's Medicaid Redesign Team. It also would give counties the authority to opt out of optional Medicaid services. The Senate has not accepted the Governor's Excelsior program reforms, and continues to work on alternative economic development proposals.

The Senate also proposes several significant tax and fee reforms, including: permitting deferred business tax credits earned from 2010 to 2012 to be treated as refundable overpayments in 2013; accelerating the sunset of $700 million per year in “Section 18-a” energy assessments by two years; and proposing a package of tax credits targeting communities affected by correctional facility closures.

The Senate's press release on their budget package is available here.

The Senate's detailed summary of its proposed budget changes is available here.

Assembly

The Assembly's proposed budget includes $133.0 billion in total spending, virtually the same level as proposed in the Executive Budget.

It restores $467 million in education aid for the 2011-12 school year, including $200 million for general support to public schools. It accepts most of the Executive Medicaid Redesign Team recommendations for Hospitals, Nursing Home, Home Care and Pharmacy, but rejects the medical malpractice reforms as proposed by the Team.

The most significant change proposed to the Governor's budget is the Assembly's proposal for a one year extension and modification of the upper income personal income tax surcharge, affecting taxpayers with taxable income over $1 million for the 2012 tax year. This is expected to raise $700 in Fiscal 2012 and $2.6 billion in Fiscal 2013.

It generally accepts the Governor's proposed amendments to the Excelsior Jobs program, and the Executive Budget's capital funding to be directed by the proposed regional economic development councils.

The Assembly's press release on the budget package is available here.

The Assembly's detailed summary of its proposed budget changes is available here.