Senate and Assembly One-House Revenue Bills
The following provides an overview of how the Senate and Assembly have responded, to date, to the Executive Budget business tax reform proposal, with an emphasis on “Part A” of their revenue bills which includes the bulk of business tax reform language. The page/line references are for the respective one-house revenue bills – S.6359-C in the Senate and A.8559-C in the Assembly. Please go to our Tax Committee web page for access to these legislative proposals; our summary of the overall Executive Budget, and its tax reform components, is available here.
These issues are under active negotiation in Albany, and it is expected that a final budget agreement will be reached and passed by April 1. Feel free to contact me with any comments or questions, or for updates.
Vice President, Government Affairs
The Business Council of New York State, Inc.
T 518.465.7511 x 205
- 9A rate reduction - Executive budget reduces the rate from 7.1 to 6.5%, effective 1/1/16. This was accepted by the Senate, rejected by the Assembly.
- Combination rules – Executive budget would require combination of unitary business with 50% stock ownership. Senate generally accepts this, but also precludes a corporation that “would be taxable under article 9 or 33 if doing business in NYS” from being required or permitted to be combined with a 9A taxpayer (p.110/l.11), and for tax years 2014 to 2016, allows a taxpayer the election to use as their combined group all businesses included in their federal consolidated group (p.110, l.52); Assembly accepts budget proposal.
- NOLs – Executive budget proposes to convert pre-reform NOLs into net operating loss subtractions, of which 1/10th can be applied per year against post- reform tax liability, with a 20 year carry forward. Senate allows a taxpayer to either use one-half of such subtraction for no more than two consecutive years, or one-tenth of its NOL pool as proposed in the budget. (p.48, l.55); Assembly accepts budget language.
- Manufacturers real property tax-based credit - Executive budget proposes a
20% RPT credit for manufactures; excludes PILOT payments from eligibility, applies under both Article 9A and 22; This was accepted by the Senate, which also allowed applicability to certain PILOTs, but was rejected by the Assembly.
- Definition of manufacturer - Executive Budget defines “manufacturer” as a taxpayer or combined group with more than 50% of gross receipts from the sale of goods produced by manufacturing; defines “qualified New York manufacturer” as a taxpayer or combined group that is a manufacturer with either at least $10 million or 100% of its manufacturing property in NYS or a taxpayer with 2,500 manufacturing employees and $100 million in manufacturing property in-state. Both houses accepted $10 million threshold (current law is $1 million); Senate accepted and Assembly rejected the 2,500 manufacturing jobs/ $100 million in manufacturing property language.
- ITC eligibility - Executive Budget limits ITC eligibility to qualified manufacturers, agribusinesses and mining businesses (precluding ITC for non-manufacturers, including security broker/dealers, investment advisory services, and film production); eliminates the ITC for air and water pollution control equipment; and prohibits the ITC for property that had already served as the basis for the ITC or EZ-ITC. Both houses generally leave left ITC eligibility as is in current law, however the Senate repeals eligibility for security broker/dealers and investment advisory services.
- Upstate rate reduction – Executive Budget reduces the ENI rate to 0, effective
1/1/14, for manufacturers with no property or wages in the MCTD region. Assembly accepted this, and included Orange and Dutchess counties in “upstate”;
the Senate applies a 0% ENI rate to qualified manufacturers statewide, effective
SENATE “PART A” CHANGES – The Senate made the following changes to the Executive Budget's business tax proposals (the Administration's proposal is S.6359-B/A.8559-B, Part A. The following changes are found in S.6359-C.)
- modifies “exempt unitary corporate dividends” to preclude application of the
40% safe harbor expense election to businesses that would be taxable under article 9 or 33 if doing business in NYS (see p.10/l.31 of S.6359-C.)
- drops the Exec Budget provision (S.6559-B, page 17, line 26) that adds back to
ENI federal deduction for enforcement/settlement related costs (p.18/l.49).
- regarding subtraction modifications for qualified residential loan portfolios, it provides that “leased assets will be valued at the annual lease payment multiplied by eight” (p.32, l.8) and under the heading of “assets,” provides an expanded definition of cash to include certain cash equivalents but precluding amounts used for security lending collateral (p.32, l.29).
- regarding subtraction modifications for community banks and small thrifts, it provides that “leased assets will be valued at the annual lease payment multiplied by eight” (p.35, l.8); it also adds a new definition of small business and
residential mortgage loans (p.35, l.22).
- provides a new subtraction modification test for captive REITs held by either a small thrift or qualified community bank (p.35, l.34).
- deletes the Executive Budget's new definition of “manufacturing” and “qualified New York manufacturer.” (p.36, l.25 – these definitions start at p.35, l.9 of S.6559-B)
- maintains the Article 9-A MTA surcharge rate at 17% (p.40, l38) (rather than
24.5% in the Exec Budget) (Note, however, that the bill retains the Exec Budget proposal to apply the MTA surcharge on pre-credit liability.)
- adds new language to the 9-A MTA surcharge to provide that if total surcharge imposed in 2015 is more than 3.6% higher than it was for 2014, then in years starting with 2016 the surcharge rate would be adjusted downward to reflect this level of increased revenues (p.41, l.17).
- in effect, maintains the existing three factor test for determining tax liability attributed to business activity within the MCTD (p.42, l.31 thru 48), also establishes property valuation for owned and leased property, and adopts the executive budget's sourcing methodology.
- rejected the Executive Budget's amendments to the definition of “qualified New York manufacturer” for Article 9-A ENI (now business income) tax base rate purposes (p.47, l. 1++); however, includes here the provision allowing a taxpayer to be treated as a QNYM if it has at least 2,500 manufacturing employees and $100 million in manufacturing property in NYS (p.47, l. 46).
- changes the proposed zero ENI rate for “upstate” manufacturers to apply to manufacturers statewide, based on Senate version of manufacturing definition (p48, l.11), but appears to make the applicability date 1/1/15 instead of 1/1/14.
- modified but did not change the meaning of the reference for “base year BAP”
- in the NOL conversion subtraction provision, allows a taxpayer to use one-half of such subtraction for no more than two consecutive years, or one-tenth of its NOL pool. (p.48, l.55).
- in the definition of “manufacturer” for capital base tax purposes, deleted the
Executive Budget's Part R definitions (p.50, l.41).
- in the fixed dollar minimum section, left out provisions related to Executive
Budget Part R (p.53, l.14).
- in the fixed dollar minimum section, deleted the Executive Budget's addition tax brackets for taxpayers with receipts over $50 million (which applied after 1/1/18) (p.54, l.19).
- excludes Executive Budget's proposed repeal that would apply DT&F guidance/policy documents regarding definition of a qualified NY manufacturer (p.57, l.45)
- in the ITC provisions, leaves out Executive Budget Part R definitions (p.70, l.43), but accepts the Executive Budget proposal to repeal ITC eligibility for security broker/dealers and investment advisory services.
- in the RPT-based tax credit for manufacturers, it rejects the Executive Budget Part R definitions of manufacturer and manufacturing (p.107, l.32), and refers instead to the modified definition in Section 210.1(a)(vi).
- in the RPT-based tax credit for manufacturers, it modifies the Executive Budget's definition of PILOT payments, and allows the RPT credit to apply to PILOTs that were part of an agreement to settle a tax certiorari proceeding (p.108, l. 18).
- deletes the Executive Budget provision that precludes filing an initial tax credit claim in an amended report (p.109, l.23).
- in describing when combination is required, it changes the Executive Budget's reference to “a combinable captive insurance company” to “an overcapitalized captive insurance company” (p 109, l. 56).
- in defining corporations required or permitted to be included in a combined report, it precludes a corporation that “would be taxable under article 9 or 33 if doing business in NYS.” (p.110/l.11).
- for tax years 2014 to 2016, allows a taxpayer the election to use as their combined group all businesses included in their federal consolidated group (p.110, l.52).
- in defining the tax base of combined reports, it precludes income, deduction, gain , or loss recognition or credit recapture events in instances where the composition of the group changed due to new combination rules (p.111, l. 12).
- deletes several Executive Budget definitional changes regarding “combinable”
versus “over-capitalized” captive insurance companies (p.118, l. 52-54).
- changes the reference for tax benefits for businesses located in tax-free NY areas to include Section 210-B subdivision 43 (not 44, as in Executive Budget) (p.131, l.18).
- Note, they include sections 91 thru 98 as “intentionally omitted”; this appears to merely bring the numbering of the remainder of Part A in line with S.6559-B; there doesn't appear to be any statutory impact here. (p.159, l.10).
ADDITIONAL SENATE BUSINESS-RELATED TAX REFORMS – These proposals, and others, were included in the Senate one-house revenue bill, above and beyond the tax reforms proposed in the Executive Budget. The Senate's overall budget review, including its revenue bill changes, is available here.
- proposes an angel investment tax credit of 35% of investments in start-up technology businesses (Part KK, p.317, l.1).
- creates a 30 percent credit under Article 22 for the rehabilitation of distressed commercial properties (Part UU, p.332, l.47).
- creates a 20 percent asbestos remediation credit under Articles 9, 9-A and 22, for up to $1 million per taxpayer over a three year period (Part WW, p.332, p.47).
- exempts the sale of private aircraft from sales tax (Part XX, p.351, p.42).
- creates a tax credit of up to $50 per year per participating employee for businesses which provide qualified transportation fringe benefits to their employees (Part RRR, p.389, l.22).
- provides an additional tax credit under Articles 9-A and 22 to businesses located in New York State “innovation hot-spots” and/or business incubators, and for
third party investments in such businesses (Part XXX, p.404, l.1).
ASSEMBLY “PART A” CHANGES– The Assembly made the following changes to the Executive Budget's business tax proposals (the Administration's proposal is S.6359-B/A.8559-B, Part A. The following changes are found in A.8559-C.)
- in ENI definition, deletes the exclusion for real property taxes paid to the extent they were used as the basis for the Executive Budget's proposed manufacturer's RPT-based credit; also deletes the Executive Budget provision (see S.6559-B, page 17, line 26) that adds back to ENI federal deduction for enforcement/settlement related costs (p.16, l. 55).
- deletes revised definitions of manufacturing and qualified New York manufacturer (p.34, l. 4).
- deletes the proposed reduction of the Article 9-A ENI rate of 7.1 to 6.5%; for tax years beginning in on or after 1/1/07, the rate remains at 7.1% (p.42, l.38).
- deletes Executive Budget Part R definition changes relative to the current 6.5% ENI rate for manufacturers; leaves this provision as is in current law (i.e., 6.5% ENI rate for manufacturers effective 1/1/07) (p.44, l.13).
- expedites current law phase-down of ENI rate for qualified New York manufacturers, to apply the 4.9% rate (i.e., 25% rate reduction) for tax years beginning on or after 1/1/15 (current law effective date is 1/1/18) (p.45, l.16).
- changes section of law, but implements the Executive Budget proposal for a zero ENI rate for “upstate” New York manufacturers, effective 1/1/14; deletes most of the Executive Budget's revised definition of manufacturer, and modifies the budget's definition of “upstate manufacturer” to mean no tangible/real property or wages in NYC or the counties of Nassau, Putnam, Rockland, Suffolk or Westchester (i.e., moves Orange and Dutchess counties from MCTD to “upstate.”) (p.45, l.30).
- modified but did not change the meaning of the reference for “base year BAP”
- under Article 9-A capital base tax calculation, maintains current law definition of
“manufacturer,” rejecting Executive Budget Part R changes (p.47, l.55).
- expedites current law's 25% reduction in the capital base rate for qualified New
York manufacturers, to be effective for tax years beginning 1/1/15, instead of
1/1/18 (p.48, l.36).
- deletes Executive Budget's proposed repeal that would apply DT&F guidance/policy documents regarding definition of a qualified NY manufacturer (p.55, l.12).
- deletes Executive Budget Part R amendments to definition of manufacturer and manufacturing, leaving ITC eligibility criteria as in existing law (p.67, l.40); it does modify the ITC to delete reference to the alternative minimum tax (p.72, l.20)
- leaves out (probably inadvertently) the current law Employment Incentive
Credit credit calculation table and related provisions (p.78, l.52).
- rejects Executive Budget's restructuring of criteria under the existing Empire
Zone investment tax credit, leaving this as in current law (p.78, l.53).
- retains the minimum wage reimbursement credit in Part A of the bill, proposed Section 210-B.40 (p.107, l.11), and in its Article 22 tax credit provisions (p.149, p.45) however proposes its repeal in Part JJ of the bill, effective back to the credit's original effective date (3/28/13) under EE of chapter 59 of the laws of 2013 (p.310, l.7).
- in the restructured tax credit provisions of Article 9-A (Part 210-B), they leave out (inadvertently?) provisions for the current law tax free New York area credit and the alternative base credit; it leaves out reference in 210-B to the proposed.
TFNY telecommunications excise tax credit (proposed in Part T of this bill, as well as in the Executive Budget); and deletes the Executive Budget's proposed real property tax credit for manufacturers (p.108, l. 29).