STAFF CONTACT :
The Business Council strongly supports the Senate Majority business and small business tax reform package, which fully implemented will reduce state-imposed business costs by $1.3 billion per year.
Specifically, S.1456 (Bruno, et al.) amends the Tax Law to enact as follows:
- Elimination of taxes on business income for manufacturers by thirds over a three-year period with taxable years beginning April 1, 2007 -- regardless of whether a manufacturer files as a corporation under Article 9-A, a partnership, or limited liability company under the Personal Income Tax;
- Reduction of the Corporation Franchise Tax rate from 7.5% to 7.25% in 2007, to 7% in 2008, and to 6.85% in 2009 and thereafter;
- Elimination of the Minimum Taxable Income base for manufacturers for taxable years beginning on or after 1/1/7 and for farmers for taxable years beginning on or after 1/1/8;
- Elimination of the Fixed Dollar Minimum Tax Alternative for manufacturers in 2007 and thereafter;
- Conversion of the Investment Tax Credit to a refundable credit for farmers for taxable years beginning on or after 1/1/7;
- Defines “manufacturer” as a taxpayer whose activity during the taxable year classifies it under sectors 11, 31 through 33, or 51 of the North American Industry Classification System or who is principally engaged in an activity that is covered under paragraph (b) of subdivision one of section three thousand one hundred two-e of the Public Authorities Law;
- Creation of a refundable tax credit of two cents per Kilowatt Hour for businesses with 20 or fewer full-time equivalent employees;
- Creation of a STAR property tax rebate program for businesses with 20 or fewer full-time equivalent employees in the amount of taxes paid on the first thirty thousand of market value of their business property;
- Treatment of a business connected through the State's academic and business incubators for research and development as a “new business” for Empire Zone credits when creating manufacturing employment;
- Elimination of the Fixed Dollar Minimum Tax Alternative for subchapter S corporations;
- Exemption of petroleum fuel sold for nonresidential heating purposes from the Petroleum Business Tax;
- Exemption from Sales and Use Tax of equipment costing $500 or more by companies located in academic incubator facilities; and
- Expansion of the farming school tax credit program to farmland leased for five continuous years for taxable years beginning on or after 1/1/7.
The Business Council's membership strongly supports enactment of S.1456. Business owners consistently rank taxes among the major competitive problems facing New York. The sponsors of S.1456 are right: We must cut business taxes this year to strengthen our economy and create a climate for new jobs.
S.1456 addresses the above-average business tax burden, documented in The Business Council's Benchmark New York report, by eliminating the income tax and the corporate franchise tax on the State's manufacturers, resulting in $550 million in savings.
Too many of New York's young people are voting with their feet and leaving our State because they do not believe that upstate communities will provide sufficient employment prospects and desired careers or provide a good living for their current and future families.
Relief targeted for the manufacturing sector of our economy is critically necessary. Encouraging investment in new plants and equipment is the most effective strategy for job retention and growth. Current Tax Law provides a significant Investment Tax Credit on the one hand; on other hand, the Tax Law restricts the ITC's use following a manufacturer's investment. Specifically, lifting this economically damaging prohibition with the repeal of the Minimum Taxable Income-based alternative tax and the three-year phase out of the net income tax rate on manufacturers is just what the doctor ordered–and surveys have shown as needed–for our economy.
Moreover, S.1456's relief targeted for small businesses will assist that sector to build New York's economy and to ensure that individuals with good ideas and a good work ethic are afforded every opportunity to succeed in New York. Specifically, the Sales and Use Tax exemption for equipment purchases costing over $500 for entrepreneurial businesses located in New York's high-tech/bio-tech incubator facilities will help offset start-up costs for businesses in the developmental stage of their product or service. Subsequently, when these firms are ready to move into the production stage of their product or service, S.1456's proposed treatment of the firms as “new businesses” (a requirement for Empire Zone credit eligibility) will be an incentive to locate those production jobs in New York rather than elsewhere. Additionally, S.1456 takes a step forward in assisting small businesses cope with the bane of all businesses, namely extremely high local real property taxation by establishing a small business STAR program for firms employing 20 or fewer full-time equivalent employees in which businesses will receive a rebate check on the school taxes paid on the first $30,000 of market value of their business real property.
Furthermore, S.1456 provides targeted relief for another significant engine of the upstate economy – the agricultural sector. New York farmers are so heavily leveraged that they are barred by either/both low net income and the Tax Law's Minimum Taxable Income-based alternative from using on their tax return the Investment Tax Credits that they have earned. S.1456 would eliminate the Minimum Taxable Income alternative for farmers and convert their earned ITC into refundable credit status
Accordingly, The Business Council of New York State, Inc. respectfully urges the Legislature to pass S.1456.