The Business Council strongly opposes this legislation that would amend Article 9-A of the state Tax Law – the state’s corporate franchise tax – to include a new, separate, additional five percent tax on corporation’s “gross income” that is “derived from” the “data [which] individuals of this state share with such.” The bill further provides that the proceeds from this tax would be redistributed to “each taxpayer of the state,” with the redistribution process overseen by a newly formulated “New York Data Fund Board.”
This legislation has massive problems and deficiencies that would make it near impossible to administer or comply with.
First and foremost, it introduces a “gross income” tax component into an article of the Tax Law that does not otherwise apply to gross income or gross receipts. The state’s corporate franchise tax requires payment of either a percentage of a corporation’s “business income base,” or a fixed dollar minimum, based on the corporation’s structure (C- or S-corp) and its level of receipts.
It is unclear how this new tax on “gross income” would be calculated, as that term is undefined in the bill or existing Article 9-A. Article 9-A only applies the concept of “gross receipts” to determinations of whether a corporation qualifies as a “manufacturer.” Article 9-A does contain reference to the IRC definition of “gross income,” but the bill is unclear whether the federal definition would be incorporated here.
The bill contains no provisions on how this “gross income” would be properly apportioned to New York State. Article 9-A, in §210-A, provides detailed criteria for determining how specific categories of receipts are to be apportioned to, and taxed by New York State.
The bill contains no provisions on how a corporation would determine what share of its “gross income” was derived from customer data. As example, many businesses provide customers with targeted information or discounts based on their past engagements and/or sales. Would this type of advertising result in income derived from data and be taxed under this bill? Or would this bill only apply to data that a corporation “collects, sells and shares,” as cited in the bill memo? The proposal provides no guidance.
The bill contains no provisions on how a corporation would determine whether data-derived income was related to “individuals of this state,” or even who would count as “individuals of the state.” Does it apply only to persons domiciled in the state, or to persons who conduct a transaction with the taxpayer corporation while in the state? Either way, this bill would require the taxpayer corporation to maintain an updated database of this customer location information.
All of the issues raise above would also impose additional regulation, guidance, processing and audit burdens on the state Department of Taxation and Finance.
Taken together, these concerns illustrate both the incompleteness, and the tax policy shortcomings, of this legislative proposal.
For these reasons, The Business Council strongly opposes adoption of S.6102 (Carlucci) / A.9112 (Pheffer Amato).