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Executive Budget Revenue Proposals

Staff Contact: Ken Pokalsky
January 18, 2017

Governor Cuomo has issued his Executive Budget legislation for FY 2018. The proposed revenue legislation is available here; the bill memo is available here. The chart below highlights tax proposals likely to be of greatest interest to Business Council members.

The most significant proposal is a three year extension, through 2020, of the top personal income tax rate of 8.82%, applicable to income over $2 million, current set to expire 12/31/17.  The Governor has cited its extension as necessary to preserve up to $4 billion in annual state revenues, and to support a variety of other budget initiatives including school aid increases, free SUNY/CUNY tuition, additional “middle class” PIT cuts, and others.

The proposed budget also: revives a number of sales tax reform proposals from prior years, including requiring sales tax collection by “marketplace providers,” and the closing of various sales tax exemption “loopholes;” extending the film production credit and creating a new refundable life sciences research and development credit; repealing the Article 9-A subchapter S election; modifying the ITC for energy and media companies; extending the real property transfer tax to certain entity transactions; and others.

As always, I welcome input from all Tax Committee members on these proposals, as well as on other tax issues of interest to you that were not addressed in the Executive Budget.

 

Income Taxes

“Millionaires Tax”

  • Extends the top PIT rate of 8.82% thru 2020 tax year
  • Restructures the PIT brackets and adopts rate reductions for income between $27,900 and $323,000

Federal Sub-S Conformity

  • Eliminates Article 9-A Sub-S election; requires federal sub-S corporations to be treated as S corporations for New York State tax purposes. Part Y

Non-Resident Asset Sales

  • Treats as NY source income the gains from the sale of an interest in a partnership by nonresident partners when the underlying transaction reflects a sale of partnership assets subject to Internal Revenue Code (IRC) §1060.

 

Sales Tax

Marketplace Providers

  • Requires “marketplace providers” to collect sales tax on sales of tangible personal property it facilitates; marketplace provider defined as providing the sales forum and collects receipts on behalf of a seller. Part BB.

Sales Between Related Entities

  • Imposes sales tax on (1) sales to single member LLCs or subsidiaries for resale to a member or owner; (2) sales to a partnership for resale to one or more partners; and (3) sales to a trustee for resale to a trust beneficiary.
  • Eliminates the sales tax exemption for out of state purchases by non-resident entities (other than individuals) of articles used in NYS, unless the non-resident had been doing business outside NYS for at least 6 months.
    Part CC.

Energy T&D Services

  • Clarifies that the sales tax applies to the transporting and delivery of natural gas and electricity when transportation or distribution is delivered by the provider of the commodity. Part DD.

 

Tax Credits

Life Science Credits

  • Includes life science businesses in existing Excelsior Jobs credit program.
  • Creates new refundable R&D credit for life sciences; credit is 15% of IRC R&D investments (20% for small business); capped at $500,000 per taxpayer and $10 million in aggregate per year.  Part K.

Investment Tax Credit

  • Modifies the Article 9A and 22 investment tax credit to exclude property used in the production and distribution of electricity, gas, steam or water; and to exclude costs incurred out of state related to creation or reproduction of films or audio or visual recordings. Part P.

StartUp NY Program

  • Renamed “Excelsior Business Program”
  • Eligibility limited to “new business,” defined as: not having generated net income prior to application; not publicly traded; no more than 25 employees; others.
  • Participants shall be eligible for credit based on wages of new employees; remaining credits – ITC, R&D and RPT – are at discretion of ESDC.

Disregarded Entities

  • rovides that that single member LLC treated as disregarded entities for federal tax purposes is disregarded for determining eligibility of NYS tax credits. Part Q.

Workforce Training Credits

  • Modifies the 2015 workforce training job credit; expands the credit to include life science companies.

Film Production Credit

  • Extends the film credit, the upstate bonus credit and the post production credit for 3 years, thru 2022. Part M.

Youth Jobs Credit

  • Extends the youth jobs credit at current levels through tax year 2022.  Part N.

Alternative Fuels/EV credit

  • Extends the alternative fuels property and EV recharging property tax credits through 2022. Part O.

 

Other Provisions

Real Property Transfer Tax

  • Extends the real property transfer tax and the additional RPTT on sales over $1 million to transfers of LLCs, partnerships, S corps and non-publicly traded C corps when their NYS real property equals or exceeds 50% of the entities assets. Parts JJ and KK.

Partial Payment of RPT

  • Authorizes all taxing entities to accept partial payment of real property taxes, unless local legislature opts out (current law requires local authorization of partial payments.) Part F.

Oil/Gas Production Charges

  • Extends the state production charge on oil and gas wells through 3/31/21.

Pre-Paid Wireless Surcharge

  • Imposes a public safety communications surcharge on providers of pre-paid wireless services. Part EE.

Tobacco Products

  • Extends the state tobacco tax to nicotine-containing vapor products (also generally extends state tobacco regulations to vapor products.)  Part FF.
  • Authorizes “jeopardy assessments” for tobacco tax liabilities. Part HH.
  • Adopts a $0.45 tax per cigar. Part II.