Governor Cuomo's tax reform/fairness commission report
November 15, 2013
Governor Cuomo's tax reform/fairness commission, empaneled in December 2012, issued its final report yesterday. The press release and summary is available here; it contains a link to the full report.
Our overview of this report is provided below.
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This commission, co-chaired by Peter Solomon and Carl McCall, was tasked with making revenue neutral reforms to income, business and sales taxes in order to increase tax “fairness” and to simplify the tax code. The Governor's second commission, named this past October, will be reporting in early December with recommendations on tax reductions.
Yesterday's report included a number of proposals advocated by The Business Council, including a revamping of the corporate franchise and bank tax. In many instances, the report made fairly broad recommendations, but did not provide details on how reforms would implemented.
Highlights include the following:
- reform the corporate franchise tax by adopting: unitary business standard for combination; replacing the subsidiary income exclusion with new taxable business income and excluded investment income provisions; eliminating the bank tax and subjecting banks to Article 9-A taxation; maintaining Article 9-A income apportionment rules and adopting new customer sourcing rules.
- it proposes several changes to business incentive credit programs, including reducing the annual cap on the film production credit by $50 million (to $370 million); precluding the acquisitions of existing businesses from eligibility for the investment tax credit; repeal the ITC for financial services broker/dealers; and modifying eligibility criteria for the brownfield cleanup and redevelopment credit. It also recommends additional periodic review of business tax credits.
- accelerate the phase-out of the Section 18-A assessment on utility energy sales (no specific phase-out schedule is proposed, the they “price” this reform at $200 million per year)
- adopt a 14 day standard for applying personal income tax liability to most non-resident employees
- increase the estate tax exclusion from $1 million to $3 million, and adopting a new state-level gift tax
- sales tax reforms include: eliminating the clothing sales tax exemption (currently applies to articles less than $110); extending the sales tax to additional categories of tangible goods and services, including: non-prescription goods, digital products, ESCO sales, and others. It also proposes to extend the sales tax to the sales tax of gasoline above $2 per gallon. Generally speaking, these sales tax extensions do not apply to business-to-business or business input sales.
- it makes several recommendations on the administration of local real property taxes, including: adoption of statewide assessment standards; requiring periodic reassessments; promotion of consolidated assessing units; and implementing state-level assessment of complex business properties.
- To promote increased progressivity of combined state and local tax burdens, it recommends an increased household and earned income credit, and adoption of an enhanced real property tax circuit breaker (i.e., a means-based income tax credit based on RPT payments.)