A BUDGET BILL submitted by the Governor
in accordance with Article VII of the Constitution
AN ACT to amend the tax law, the general city law and the public authorities law, in relation to providing transition rules for taxpayers removed from taxation under section 186 of the tax law by reason of this act, reducing the rate and measure of certain taxes under sections 186-a and 189 of the tax law; and in relation to sales and compensating use taxes on certain utility services imposed by article 28 of such law and pursuant to the authority of article 29 thereof and repealing sections 186, 186-b, 189, 189-a and subdivision 3 of section 192 of the tax law relating thereto; and providing for the repeal of certain provisions upon expiration thereof (A); to amend the public authorities law, the economic development law and the tax law, in relation to providing additional low cost power for upstate economic development purposes and providing a tax credit and providing for the repeal of certain provisions upon expiration thereof (B); to amend the tax law, in relation to providing credits under articles 9-A and 22 for research activities in upstate high technology enterprise zones (C); to amend the tax law, in relation to enhancing the qualified emerging technology company employment tax credit and capital tax credit under articles 9-A and 22 thereof for taxpayers which are qualified new technology companies (D); to amend the tax law, in relation to providing a credit under articles 9-A and 22 for interest paid on loans for acquisition of qualified property used in an upstate high technology enterprise zone (E); to amend the tax law, in relation to providing a credit under articles 9-A and 22 for taxes paid on energy sources consumed in upstate high technology enterprise zones (F); to amend the tax law, in relation to reducing the article 9-A corporation franchise tax rate on small business taxpayers and repealing the tax, except for the fixed dollar minimum, on New York S corporations (G); to amend the tax law, in relation to establishing a credit, in articles 9, 9-A, 22, 32 and 33 thereof, for increased urban employment outside of the metropolitan commuter transportation district (H); to amend chapter 407 of the laws of 1999 amending the tax law and other laws relating to tax reductions and other provisions to implement the 1999-2000 state fiscal plan, in relation to the effective dates of a provision thereof with respect to the alcoholic beverage tax on beer (I); to amend the tax law, in relation to exempting from sales and compensating use tax certain tangible personal property and services relating to services provided by operators of internet data centers (J); to amend the public housing law and the tax law, in relation to providing a credit against the articles 9-A, 22, 32 and 33 franchise and income taxes for construction or rehabilitation of low-income housing (K); to amend the tax law, in relation to allowing taxpayers which are biotechnology companies to claim a refund of their investment tax credits claimed under article 9-A thereof (L); to amend the tax law and the education law, in relation to creating a tax credit under the franchise and income taxes to enhance the supply of environmentally sound buildings (M); to amend the tax law and the transportation law, in relation to a tax credit for transportation improvement contributions (N); to amend the tax law, in relation to exempting certain property and services used in farm production and certain horse boarding from sales and compensating use taxes imposed by article 28 of such law and pursuant to the authority of article 29 thereof; and to repeal certain provisions of the tax law containing definitions made obsolete by other amendments in this act (O); to amend the tax law, in relation to eliminating the fixed dollar minimum tax under article 9-A of such law for certain homeowners associations (P); to amend the tax law, in relation to eliminating the minimum tax imposed under article 13-A of such law (Q); to amend the tax law, in relation to joint, multi-jurisdiction, or out-of-state lottery games and to repeal certain provisions of such law relating thereto (R); to amend the tax law and the vehicle and traffic law, in relation to modifying the distribution of funds from the motor fuel excise tax, the petroleum business tax and certain motor vehicle fees to the dedicated highway and bridge trust fund and the dedicated mass transportation trust fund; to amend the state finance law, the highway law and the vehicle and traffic law, in relation to the deposit of certain fees in the dedicated highway and bridge trust fund; and to repeal sections 89 and 89-a of the state finance law, establishing, respectively, the emergency highway reconditioning and preservation fund and the emergency highway construction and reconstruction fund (S)
This bill contains various provisions needed to implement the Revenue portion of the 2000-01 Executive Budget.
Part A. Utility deregulation. This bill reforms and reduces State and local taxation of the electricity and gas industry to promote competition in the energy marketplace and provide rate relief to energy consumers. This bill provides the platform for the complete elimination of State gross receipts taxes on energy. The remaining elements of the elimination plan will be provided in the thirty day amendment period.
Summary of Provisions: Sections one and two of this bill amend, respectively, sections 183 and 184 of the Tax Law to clarify that, after the repeal of section 186 of the Tax Law as proposed by section 3 of this bill, corporations formed for or principally engaged in the transportation, transmission or distribution of gas, electricity or steam will be liable for franchise taxation under Article 9-A of the Tax Law, rather than sections 183 and 184 of such law.
Section 3 of the bill repeals sections 186 and 186-b of the Tax Law. Section 186 imposes the franchise tax on water-works companies, gas companies, electric or steam heating, lighting and power companies, while section 186-b imposes the MTA tax surcharge on the tax imposed under section 186. Such repeal is effective January 1, 2000. The corporations no longer subject to tax under section 186 will generally become subject to tax under Article 9-A of the Tax Law, which imposes the franchise tax on general business corporations.
Section 4 of this bill amends the tax imposed by section 186-a of the Tax Law. Telecommunication providers are left unchanged. As to other taxpayers, the amendment provides that, if regulated by the Department of Public Service, the taxpayer shall compute its gross income as follows: (1) gross income derived from the transportation, transmission or distribution of gas or electricity, and (2) all other gross income, including gross income from the sale of the commodity of electricity or gas.
The new rates of tax under section 186-a are:
Gross Income From The Transportation, Transmission
or Distribution of Gas or Electricity:
Through December 31, 1999 3 ¼ percent
January 1, 2000 and thereafter 2 ½ percent
Other Gross Income:
January 1, 2000 - December 31, 2001 2.1 percent
January 1, 2002 - December 31, 2002 1.7 percent
January 1, 2003 - December 31, 2003 0.8 percent
January 1, 2004 - December 31, 2004 0.4 percent
January 1, 2005 and thereafter 0 percent
The gross operating income base under section 186-a will be phased out according to the same schedule as that above for the “other gross income” base.
Section 4 of the bill also makes clarifying amendments to paragraphs (b) and (c) of subdivision 2 of section 186-a. The clarification is necessary to prevent unintended tax avoidance. The definition of “person” under paragraph (b) is amended to make clear that, with respect to sales of gas or electric service or of gas or electricity, the exclusion from tax for municipalities (and state and municipal subdivisions) applies only to bona fide municipal electric generation and distribution systems or gas distribution systems. In addition, all gas or electricity must be sold at retail, and then solely to customers within the municipality. However, an exception is set forth for the sale of electricity or the transportation, transmission or distribution thereof to a municipality in the circumstance where a municipality is engaged in the retail sale of electricity and the sole source of supply (excluding temporary substitution power during outages or periods of reduced output) is the State or a public authority of the State. A clarification has been added to the charitable, educational, and religious organization exclusion to make it clear that such organizations must qualify under section 1116(a)(4) of the Tax Law, and then sales by such organizations are exempt to the extent that the sales are to its tenants.
Paragraph (c) of subdivision 2 of section 186-a is amended to state that receipts from the sale of transportation, transmission or distribution include receipts from all sales except sales to: (1) a rate-regulated utility; (2) a municipal utility; and (3) a public authority of the State. Another exception is provided with respect to sales to a municipality. The terms of the municipal utility exclusion and the municipal exclusion are the same as discussed previously in relation to exclusions from gross income.
Section 5 of this bill, to take effect January 1, 2005, amends section 186-a, as amended by section 4 of this bill. The amendment eliminates the section 186-a tax on the gross operating income base. Also, it eliminates from the gross income base of taxpayers described in paragraph (b) of subdivision 1 of section 186-a, all receipts other than those from the transportation, transmission or distribution of gas or electricity.
Section 6 of the bill amends the Metropolitan Commuter Transportation District surcharge imposed under Tax Law, section 186-c, so the district will be held harmless as to the rate reductions occurring under section 186-a with respect to certain taxpayers and receipts.
Section 7 of the bill phases out the rates of tax applicable to Tax Law, section 189. The phase-out follows that of the “other gross income” element in section 186-a set forth above in section 4.
Section 7-a of the bill repeals, as of January 1, 2005, sections 189 and 189-a of the Tax Law which impose the privilege tax on importation of gas services for consumption and the MCTD surcharge on that tax.
Section 8 of the bill repeals section 192.3 of the Tax Law, which contains the tax reporting requirements for the tax imposed under section 186.
Sections 9, 10, 12, 13 and 15 through 20 of the bill make technical conforming amendments to reflect the repeal or amendment of various provisions of the Tax Law by the bill. These sections of the bill amend, respectively, sections 197-a.1, 197-b.1(a) and 6, 209.4, 210.1-c(b), 210.12(j)(1), 1085(c)(3) and 1452(a)(9) of the Tax Law, sections 25-u and 25-x of the General City Law and section 1020-q.2 of the Public Authorities Law.
Section 11 of the bill adds sections 208.9(c-2) and (c-3) respectively, to the Tax Law to provide transition adjustments under the income-based franchise tax regime which will apply beginning in 2000. The (c-2) adjustments apply to “qualified public utilities”, meaning utilities which (1) were subject to ratemaking supervision by the State Department of Public Service on December 31, 1999, and (2) were subject to Article 9 tax under section 186 of the Tax Law for 1999. The (c-3) adjustments apply to “qualified power producers,” meaning utilities which: (1) were not subject to ratemaking supervision by the State Department of Public Service on December 31, 1999, and (2) were subject to Article 9 tax under section 186 of the Tax Law for 1999 on account of being principally engaged in the business of supplying electricity.
Section 14 of the bill amends section 210.3(a)(2)(B) of the Tax Law to create a special rule for allocation in the case of receipts from the service of transporting or transmitting gas through pipes. It is provided that in determining the portion of the taxpayer’s total receipts from such service which are attributable to New York (and thus includable in the numerator of the receipts factor used in computing the business allocation percentage), the total of such receipts is to be multiplied by a fraction. The numerator of the fraction is the taxpayer’s “transportation units” within New York, and the denominator is the taxpayer’s “transportation units” within and without the State.
Section 21 of the bill contains transitional provisions affecting taxpayers which will, by virtue of this bill, move from taxation under section 186 to Article 9-A (or Article 32, in unusual instances) for a taxable year beginning on January 1, 2000. Subdivision (a) of this section provides that such a taxpayer’s previous year’s tax, which must be paid to receive an automatic extension of time for filing a return, or the payment of which as estimated tax will be sufficient to avoid penalty, is to be the taxpayer’s tax under section 186 for 1999.
Subdivision (b) of section 21 of the bill provides that pre-2000 overpayments under section 186 which, under the current statute, would be credited forward against future Article 9 liabilities, will instead be credited forward against the taxpayer’s future Article 9-A (or Article 32) liabilities.
Subdivision (c) of section 21 of the bill requires taxpayers subject to section 186 of the Tax Law for 1999 to make a payment on March 15, 2000, equal in amount to 25 percent of their 1999 section 186 liability, if such liability is in excess of $1,000.
Subdivision (d) of section 21 of the bill provides that a taxpayer which became entitled to a credit under section 187, 187-a or 187-b of the Tax Law for a pre-2000 year, and which was unable to deduct the full amount of such credit against its Article 9 liabilities through its 1999 Article 9 year, may carry the excess forward and use it against its future Article 9-A (or Article 32) liabilities.
Subdivision (e) of section 21 of the bill provides that where a taxpayer is subject to Article 9 for 1999 and to Article 9-A for the next two years, and such taxpayer claims an Investment Tax Credit (ITC) or an Economic Development Zone Investment Tax Credit (ZITC) for the first year of such two year period and the Employment Incentive Credit or Economic Development Zone Employment Incentive Credit in the second year of such two year period, such taxpayer, in making the required look-back with respect to employment in the State or Economic Development Zone, as the case may be, to the year immediately preceding the ITC or ZITC year, is to look to its 1999 taxable year under Article 9.
Subdivision (f) of section 21 of the bill is a general savings clause, designed to make clear the continued applicability, where appropriate, of provisions of law repealed or amended by the bill.
Section 22 of the bill adds section 1101(b)(19) to the Tax Law to define gas and electric service for purposes of the State and local sales and compensating use taxes. Gas service means “gas and gas service” and electric service means “electricity and electric service,” as such terms have customarily been used and subject to tax under section 1105(b) of the Tax Law, which imposes sales tax on gas, electricity and such services, of whatever nature. New section 1101(b)(19) makes clear that the term “gas service” and “electric service,” respectively, include gas or electricity itself, as a commodity or as a part of an integrated service where the commodity is bundled with delivery and other components of a gas or electric service. Such terms would also include the transportation, transmission or distribution of the gas or electric service, either itself or similarly bundled with the commodity. Other components of an integrated service are also included, such as metering service, meter reading, billing or collection services, capacity and demand charges and the like, even if such other components are unbundled and furnished by a separate service provider, as well as ancillary services currently in the rate base, but which may be separately charged for in the future.
Section 23 of the bill amends the definition of “use” in section 1101(b)(7) of the Tax Law to clarify that “use” includes the right or power over gas, electric and other services subject to use tax.
Section 24 of the bill amends section 1105(b) of the Tax Law, which imposes the State sales tax on utility services, to delete the terms “gas” and “electricity,” since such terms are subsumed in the new definitions of gas and electric services in section 22 of the bill.
Section 25 of the bill amends section 1105-A(b) and (d) of the Tax Law, which exempts from sales and use taxes certain tangible personal property and services, to make necessary conforming and technical changes for purposes of the use tax, and to delete obsolete language.
Sections 26, 27, and 28 of the bill amend sections 1107(b)(3), 1108(b)(3) and 1109(c) of the Tax Law to make conforming changes to reflect the use tax on gas and electric and other services.
Section 29 of the bill amends section 1110(a) of the Tax Law, which imposes the State’s compensating use tax, to add new clause (G) imposing use tax on gas or electric service described in section 1105(b). This use tax would be imposed on the use of the same type of gas and electric services subject to sales tax; that is, gas and electric services of whatever nature, purchased other than for resale.
Section 30 of the bill adds subdivision (h) to section 1110 of the Tax Law to establish the base on which the use tax on gas and electric services is imposed. Use tax will be at 4 percent of the consideration given or contracted to be given for the gas or electric service, or for the use of such service, as well as for any tangible personal property transferred in conjunction with performing the service and any charges made by the seller for shipping or delivering such tangible personal property. Likewise included in the base subject to use tax are any charges by the vendor or other seller of the service, or by another person, whether or not separately stated, for: (1) shipping, delivering, transporting, transmitting or distributing the gas or electric service to the purchaser, and (2) any unbundled component of such service, as described in the definition of gas and electric services in new Tax Law section 1101(b)(19) added by section 22 of the bill.
Sections 31, 32, 34, and 35 of the bill make similar conforming and technical corrections to various sections in Article 28 of the Tax Law relating to State sales and use taxes, to reflect the new definition of gas and electric services and the use tax imposed on gas, electric and other services.
Section 33 adds a new subdivision (a) to section 1115 of the Tax Law to create an exemption for certain uses of gas and electricity by the persons transporting, transmitting or distributing the same and by persons storing gas in an underground facility.
Sections 36 and 37 of the bill amend section 1210 of the Tax Law, which, in general, authorizes counties and cities to impose sales and use taxes, to clarify that, if a county or city imposes sales taxes on utility services, such imposition also includes use tax on gas and electric services. Likewise, if a county or city elects to exempt residential energy sources and services from local sales tax, or to tax them at a reduced rate, such exemption or reduced rate will also apply to the county’s or city’s use tax on gas and electric services.
Section 38 of the bill amends section 1212(a) of the Tax Law, which authorizes school districts to impose sales tax on utility services, to provide that, if a school district imposes such sales tax, it will also impose the use tax on gas and electric services. The amendment also makes a conforming reference to the use tax on telephone answering services, to clarify that the school district’s use taxes include the use tax on such services.
Sections 39 through 42 of the bill make conforming and technical changes to various sections relating to the administration of local sales and use taxes in Article 29 of the Tax Law, to reflect the use tax on gas and electric services and conforming references to the use tax on telephone answering services.
Sections 22 through 28 and 31 through 42, relating to the definition of gas and electric services, State and local sales taxes on such services, and technical and conforming changes to such sales taxes, take effect on April 1, 2000. Such sections will apply to property and services sold on or after that date although made under a prior contract. Where the property or service is sold on a monthly, quarterly or other term basis, and the bills for the property or services are based on meter readings, the amount received for the bill will be subject to tax if the meter is read after April 1, 2000, but only if more than one-half of the number of days in the month or other term for which the bill is rendered occur after March 31, 2000.
Section 43 mitigates the impact on the local property tax base that will result from the interaction of the Real Property Tax Law and the changes the bill makes to the Tax Law. It provides for gradual elimination, over a 10-year period, of real property taxes on certain machinery and equipment that would otherwise become immediately exempt as a result of moving corporations that generate electricity from Article 9 of the Tax Law to Article 9-A. The equipment in question is movable machinery and equipment other than “boilers, ventilating apparatus, elevators, plumbing, heating, lighting and power generating apparatus, shafting other that counter-shafting and equipment for the distribution of heat, light, power, gases and liquids,” which are taxable pursuant to section 102(12)(f) of the Real Property Tax Law, as construed by the Court of Appeals in the case of City of Lackawanna v. SBEA, 16 NY2d 222 (1965). Such moveable machinery and equipment, if owned by a 9-A corporation, is currently exempt from real property taxes. However, the same property, if owned by an Article 9 corporation, would be considered taxable real property. The gradual phase-out thus mitigates the impact on localities, while at the same time accomplishing equitable taxation between corporations that generate electricity and corporations engaged in manufacturing.
Section 44 provides a credit to section 189 taxpayers. The credit operates to equalize the tax rate under section 189 with that under section 186-a commencing October 1, 1998, through December 31, 1999.
Section 45 provides that, notwithstanding the general repeal of section 186, particular independent power producers which are currently taxable under Tax Law section 186 (but not Tax Law section 186-a) will have the option of remaining subject to Article 9 until any existing output contracts are scheduled to expire. At that point, these taxpayers would become subject to Tax Law Article 9-A.
Existing Law: There are State and local sales taxes on gas and electricity and gas and electric services of whatever nature, but no compensating use tax. When a resident of New York, whether an individual or a business, purchases gas or electricity outside the State, there is no sales or use tax even if the energy is consumed in the State. Residential consumers are currently exempt from State sales tax and many are exempt from, or subject to reduced rates of, local sales taxes. These residential exemptions and reduced rates would also apply to use tax under the bill.
Section 1110(a)(E) imposes the State’s 4 percent compensating use tax on telephone answering services. Article 29 of the Tax Law generally incorporates the State’s taxes, including the use tax on telephone answering services, into local sales and use taxes which counties, cities and school districts are authorized to impose. When the use tax on telephone answering services was imposed, certain technical and conforming references to such tax were not made to certain provisions of Article 29 rectified in this bill.
Prior Legislative History: Similar legislation was introduced by the Governor in the 1999-2000 Executive Budget.
Statement in Support: The Public Service Commission (PSC) has restructured the energy utilities to encourage competitive markets to achieve the advantages of the efficiency, economy, and innovation of the marketplace. The existing State and local tax system was designed to function within the context of an industry structure that no longer exists. If the current tax system remains in place, it will produce unintended results including tax increases and decreases and tax induced competitive disadvantages for New York based energy providers.
In the competitive market, energy consumers will have the opportunity to purchase a variety of energy and energy related services from energy service companies (ESCO’s) that are not price regulated by the PSC. The local PSC price regulated gas/electric utility will remain responsible for getting the energy to the consumer.
The clarification of the sales tax and the imposition of the compensating use tax assure the stability of State and local revenue in the restructured environment while providing for the equality of competition among market participants. Clarification is required because energy services will no longer be available exclusively from vertically integrated local utilities. The clarification assures, in instances where energy is currently taxable, that the service of getting the energy to the consumer will remain taxable whether the energy itself is purchased from the local regulated utility or an ESCO.
Prior to electric market restructuring by the PSC, and similar earlier federal efforts to create more competitive interstate markets for natural gas, the provision of electricity or gas was an integrated monopoly service provided by the local utility. The local PSC regulated utility purchased gas and/or generated electricity and provided the service of delivering it to the customer as a bundled service.
When energy services were sold exclusively by integrated local utilities, a compensating use tax for energy was not included in the structure of the sales tax. A use tax was not necessary because energy could not be purchased outside the State. In the restructured environment, gas or electricity may be purchased outside the State and used within the State. Without a compensating use tax, in-State providers of energy are disadvantaged for transactions that are taxable. A compensating use tax is imposed as a complement to the sales tax; the use tax works in lieu of the sales tax to achieve the same results as a sales tax for sales that occur outside where the use occurs within the State.
The franchise tax under section 186 of Article 9 on gas or electric corporations, measured primarily on gross receipts, is eliminated. As a result of the elimination, these corporations will become subject to the franchise tax on business corporations, Article 9-A, measured primarily on net income. Gas (including propane) pipeline corporations, currently subject to franchise taxation under sections 183 and 184, measured primarily on gross receipts, are transferred to Article 9-A. The result of these changes is to provide a competitive tax environment for all components of the energy services industry including regulated utilities, their unregulated affiliates and independent non-regulated companies. Currently, the gross receipts nature of the tax discourages competition because the sale of energy among companies results in the imposition of the tax at each sale.
The bill would lower energy costs by eliminating the portion of the excise tax, Article 9, section 186-a (and section 189), on the energy commodity of electric or gas currently imposed on those furnishing utility services for ultimate consumption. This component of the excise tax would be phased-out to moderate the reduction in State revenue that would result from an immediate elimination.
Gas or electric utilities would continue to pay an excise tax, imposed by section 186-a, based on the portion of their revenues associated with their regulated transmission and distribution activities. Currently this tax is imposed upon utility services for ultimate consumption; the tax would be restructured to ensure that it would only be imposed upon price regulated utilities. The restructure would give the industry the ability to provide customers a variety of service and billing alternatives without the potential for multiple taxation or other administrative difficulties. The restructure maintains the existing base of taxation for transmission and distribution without alteration. The rate reduction to 2.5 percent which took effect on January 1, 2000, would remain in effect. In the 30-day amendment period a plan will be provided for the elimination of the 2.5 percent tax on the transmission and distribution of electric and gas services.
The section 189 privilege tax on the imposition of gas services for consumption (gas import tax) is restructured as to rate and then repealed. The gas import tax was imposed when it became possible for large natural gas customers to bypass their local utilities and purchase gas outside the state and make arrangements to transport the gas to their local utility. The local utility would then complete the delivery of the gas to the final destination resulting in the avoidance of section 186 and section 186-a. The repeal of the section 186, and the elimination of the section 186-a tax on the commodity, make this tax unnecessary.
The bill protects the local property tax base by providing for gradual elimination, over a 10-year period, of certain machinery and equipment that would otherwise be removed from the definition of real property as a result of the interaction of the Real Property Tax Law and the changes in the Tax Law provisions of the bill. Thus, the bill provides short-term protection for localities, as well as equitable taxation between corporations that generate electricity and corporations engaged in manufacturing.
Part B. Power for jobs expansion. This bill will advance economic development by making low cost power available to businesses and small businesses located in upstate New York.
Summary of Provisions: Sections one through four of this bill amend section 1005 of the Public Authorities Law and sections 183 and 187 of the Economic Development Law (EDL) by adding references and conforming amendments to the Upstate Economic Revitalization Power Program.
Section five adds a new section 189-a of the Economic Development Law to establish the Upstate Economic Revitalization Power Program for the purpose of job retention and/or job creation. It makes available 200 megawatts of low cost power to businesses located in upstate New York (excludes the counties of New York, Bronx, Kings, Queens, Richmond, Dutchess, Nassau, Orange, Putnam, Rockland, Suffolk, and Westchester) in each of the years 2001 and 2002.
Section six amends section 186-a of the Tax Law to create a new credit against taxes imposed by section 186-a of the Tax Law. The credit is available to local electric distribution companies purchasing and delivering power under this new program equivalent to 50 percent of net lost revenues, phased in over the years 2001 through 2004.
Existing Law: EDL § 189 establishes the Power for Jobs Program. The Power for Jobs Program is a comparable program providing 450 megawatts of low cost power statewide. Tax Law § 186-a(9) allows a tax credit equal to 100 percent of net revenues lost by the local electric distribution company that purchases and delivers power under the Power for Jobs Program.
Prior Legislative History: The Power for Jobs program was authorized by Chapter 316 of the Laws of 1997, which made available 400 megawatts of lower cost power for use by businesses and not-for-profit companies. Chapter 386 of the Laws of 1998 amended the program to accelerate the power from the third year to the first year of the program and provide for an additional 50 megawatts of power in the third year.
Statement in Support: The cost of power has a significant effect on economic progress, employment levels, and decisions to expand or locate business enterprises. This new program would make low cost power available to upstate New York. It would thus improve economic opportunities, enhance the State’s competitive position, and encourage job development and retention. Further, the bill would provide a credit against the section 186-a tax for one-half of the net revenue lost by local electric distribution companies as a result of participating in the program.
Part C. New Technology Credits. The purpose of this bill is to create a tax credit designed to encourage research and development activities in Upstate High Technology Enterprise Zones.
Summary of Provisions: Section 1 of the bill adds new section 16 to the Tax Law which provides for a Qualified New Technology Company (QNTC) credit for research activities in Upstate High Technology Enterprise Zones, to be allowable against tax under Articles 9-A (general business corporations) and 22 (personal income tax) of the Tax Law. The credit is refundable.
Subdivision (a) of Tax Law section 16 provides for the allowance and computation of the credit. The credit is equal to 20 percent of the taxpayer’s in-house research expenses paid or incurred during the taxable year with respect to services performed and supplies used in an Upstate High Technology Enterprise Zone.
Subdivision (b) of Tax Law section 16 sets forth definitions of relevant terms. Paragraph (1) defines “qualified new technology company,” paragraph (2) defines “upstate high technology enterprise zone,” and paragraph (3) defines “in-house research expenses.”
Subdivision (c) of section 16 contains cross-references to the applicable credit provisions within each of the affected Articles of the Tax Law.
Sections 2 through 4 of the bill add provisions to Articles 9-A and 22 of the Tax Law to allow taxpayers under each of those articles to claim the credit provided for under section 16 of the Tax Law. Section 2 adds a new section 210.28 in Article 9-A. Section 4 of the bill amends section 606(i) of the Tax Law, in Article 22, to render the credit under the personal income tax available to S corporation shareholders. Section 4 adds a new section 606(v) to Article 22.
Existing Law: The Tax Law presently contains no comparable credit.
Prior Legislative History: None
Statement in Support: The credit created by this bill constitutes an integral part of the Governor’s program for the economic rejuvenation of up-state New York. This new initiative would create high technology enterprise zones to promote high technology development in upstate areas, pursuant to an evaluation of economic criteria, including but not limited to the relative employment performance of the county when compared to the State. The specific incentives would include a credit for research and development activities in high tech businesses in these zones.
Part D. Emerging technology credit. This bill enhances the qualified emerging technology company (QETC) employment tax credit and capital tax credit in Articles 9-A and 22 of the Tax Law for taxpayers which are qualified new technology companies (QNTC) with activities in upstate high technology enterprise zones.
Summary of Provisions: Bill section 1 amends Tax Law section 210.12-E of Article 9-A (the QETC employment credit) to provide a credit to a QNTC if such company has a specified amount of increased employment in upstate high technology enterprise zones during the taxable year. The required minimum employment increase is set at different levels for small and large QNTCs (differentiated based on the level of gross sales). The amount of the employment credit for a QNTC is $2,000 per each additional employee, and is refundable. Section 4 of the bill makes parallel changes to section 606(q)of the Tax Law (personal income tax).
Section 2 of the bill amends Tax Law section 210.12-F of Article 9-A (the QETC capital tax credit) to double the rates of, and limitations on, the credit in the case of investments in a small QNTC with a location in an upstate high technology enterprise zone. The credit is refundable to taxpayers with respect to such investments. Section 5 of the bill makes parallel changes to Section 606(r) of the Tax Law (personal income tax).
Section 3 of the bill makes conforming changes to section 606(i) of the Tax Law, relating to the application of personal income tax credits to S corporation shareholders.
Existing Law: QETC employment credit. The present QETC employment credit is equal to (1) the average number of individuals employed full-time by the taxpayer in New York State for the current taxable year minus (2) the taxpayer’s base year employment, multiplied by $1,000.
QETC capital credit. The present QETC capital credit is computed on each qualified investment made during the taxable year in a certified QETC and is equal to the sum of: (1) 10 percent of qualified investments in certified QETCs, if the taxpayer certifies to the Commissioner of Taxation and Finance that the qualified investment will not be sold, transferred, traded or disposed of within 4 years from the close of the tax year in which the credit is first claimed; and (2) 20 percent of qualified investments in certified QETCs if the taxpayer certifies to the Commissioner that the qualified investment will not be sold, transferred, traded, or disposed of within 9 years from the close of the tax year in which the credit is first claimed.
QETC. A QETC is a company located in New York State that has total annual product sales of $10 million or less where (1) its primary products or services are classified as emerging technologies; or (2) it has research and development activities in New York State and its ratio of research and development funds to net sales equals or exceeds the average ratio for all surveyed companies classified as determined by the National Science Foundation.
Prior Legislative History: This a new proposal to expand the existing qualified emerging tax credit as discussed in the existing law section.
Statement in Support: The credits created by this bill constitute part of the Governor’s program for the economic rejuvenation of the up-state portion New York. This new initiative would create high technology enterprise zones to promote high technology development in upstate areas, pursuant to an evaluation of economic criteria, including but not limited to the relative employment performance of the county when compared to the State. The specific incentives would include an incentive to increase employment and investments in high tech businesses in these zones. The credit does not apply where there is a mere relocation of employees to zones areas.
Part E. Interest free loans. This bill creates a tax credit for interest paid on loans for the acquisition of qualified property used in an Upstate High Technology Enterprise Zone.
Summary of Provisions: Section 1 of the bill adds new section 15 to the Tax Law. Section 15 provides for a QNTC credit for acquisition interest for Upstate High Technology Enterprise Zone property, to be allowable against tax under Articles 9-A (general business corporations) and 22 (personal income tax) of the Tax Law. The credit is refundable.
Subdivision (a) of Tax Law section 15 provides for the allowance and computation of the credit. The credit is equal to the amount of allowable interest paid or incurred during the taxable year with respect to qualified property.
Subdivision (b) of Tax Law section 15 sets forth definitions of relevant terms. Paragraph (1) defines “qualified new technology company,” and “upstate high technology enterprise zone,” paragraph (2) defines “allowable interest,” paragraph (3) defines “qualified property,” and paragraph (4) defines “allowable period.”
Subdivision (c) of section 15 contains cross-references to the applicable credit provisions within each of the affected Articles of the Tax Law.
Sections 2 through 4 of the bill add provisions to Articles 9-A, and 22, of the Tax Law, respectively, to allow taxpayers under each of those articles to claim the credit provided for under section 15 of the Tax Law. Section 2 adds a new section 210.27 in Article 9-A. Section 3 of the bill amends section 606(i) of the Tax Law, in Article 22, to render the credit under the personal income tax available to S corporation shareholders. Section 4 adds a new section 606(u) to Article 22.
Existing Law: The Tax Law presently contains no comparable credit.
Prior Legislative History: None
Statement in Support: The credit created by this bill constitutes part of the Governor’s program for the economic rejuvenation of the up-state portion of this State. This new initiative would create high technology enterprise zones to promote high technology development in upstate areas, pursuant to an evaluation of economic criteria, including but not limited to the relative employment performance of the county when compared to the State. The specific incentive would create a tax credit for interest paid on loans for the acquisition of qualified property used in an Upstate High Technology Enterprise Zone.
Part F. Energy tax credits. The purpose of this bill is to create a tax credit for taxes paid on energy sources consumed in Upstate High Technology Enterprise Zones.
Summary of Provisions: Section one of the bill amends the title of Article 1 of the Tax Law to reference “credits”, inasmuch as the bulk of the material relating to the qualified new technology company (“QNTC”) credit for taxes paid on energy sources consumed in Upstate High Technology Enterprise Zones will be contained in new section 14 of the Tax Law, contained in Article 1. Only the minimal language needed to tailor the credit to each of the affected Tax Law Articles is included in each of the Articles.
Section 2 of the bill adds new section 14 to the Tax Law, in Article 1 thereof. Section 14 provides for a QNTC credit for energy taxes paid with respect to Upstate High Technology Enterprise Zones, to be allowable against tax under Articles 9-A (general business corporations) and 22 (personal income tax) of the Tax Law. The credit is refundable.
Subdivision (a) of Tax Law section 14 provides for the allowance and computation of the credit. The credit is equal to the sum of the taxes imposed under Sections 186-a and 189 of the Tax Law which, during the taxable year were either paid by the taxpayer, collected from the taxpayer or passed through to the taxpayer, but only with regard to utility services or gas services consumed by the taxpayer in an Upstate High Technology Enterprise Zone.
Subdivision (b) of Tax Law section 16 defines the terms “qualified new technology company,” and “upstate high technology enterprise zone.”
Subdivision (c) of section 14 requires a person who collects from or passes through to the taxpayer such energy taxes, to provide the taxpayer with relevant information so that the taxpayer may correctly compute the credit.
Subdivision (d) of section 14 contains cross-references to the applicable credit provisions within each of the affected Articles of the Tax Law.
Sections 3 through 5 of the bill add provisions to Articles 9-A, and 22, of the Tax Law, respectively, to allow taxpayers under each of those articles to claim the credit provided for under section 15 of the Tax Law. Section 3 adds a new section 210.26 in Article 9-A. Section 4 of the bill amends section 606(i) of the Tax Law, in Article 22, to render the credit under the personal income tax available to S corporation shareholders. Section 5 adds a new section 606(t) to Article 22.
Existing Law: The Tax Law presently contains no comparable credit.
Prior Legislative History: None
Statement in Support: The credit created by this bill constitutes part of the Governor’s program for the economic rejuvenation of up-state New York. This new initiative would create high technology enterprise zones to provide businesses in these zones with a tax credit for gross receipts taxes paid on energy sources consumed in Upstate High Technology Enterprise Zones.
Part G. Business tax rate reductions. This bill reduces the Article 9-A corporation franchise tax rate on small business taxpayers to 6.85 percent, and repeals the tax, except for the fixed dollar minimum, on New York S corporations.
Summary of Provisions: Section 1 of the bill reduces the franchise tax rate on entire net income from 7.5 percent to 6.85 percent for small business taxpayers, effective for taxable years beginning after June 30, 2003. Small business taxpayers are taxpayers which have entire net income of no more than $290,000 for the taxable year and which are capitalized with no more than $1,000,000 in stock and contributions to capital.
Section 2 of the bill cuts in half the Article 9-A differential rate on entire net income for New York S corporations, effective for taxable years beginning after June 30, 2001 and before July 1, 2002. For taxable years beginning after June 30, 2002, the tax on entire net income is repealed and the S corporation entity will be subject only to the fixed dollar minimum tax.
Existing Law: Small business taxpayers. Chapter 56 of the Laws of 1998 reduced the tax rate on entire net income for small business taxpayers from 8 percent to 7.5 percent, effective for taxable years beginning after June 30, 1999. At the same time, the rate on regular taxpayers was reduced from 9 percent over a three-year period to 7.5 percent for taxable years beginning after June 30, 2001.
New York S corporations. New York S corporations are federal S corporations which have elected S corporation treatment for New York purposes. New York S corporation treatment includes a tax on the corporation income at the shareholder level under the personal income tax, and a reduced franchise tax at the corporation level. The franchise tax on these corporations is imposed only on the entire net income base or the fixed dollar minimum base (the capital base and minimum taxable income bases do not apply.) Effective for taxable years beginning after June 30, 1999, the differential rate on entire net income for New York S corporations is 0.05 percent for small business taxpayers. For New York S corporations which are not small business taxpayers, the differential rate is 0.975 percent, reducing to 0.65 percent for taxable years beginning after June 30, 2001.
Prior Legislative History: None.
Statement in Support: When the rate reductions enacted by Chapter 56 of the laws of 1998 are fully effective for all taxpayers (taxable years beginning after June 30, 2001), the entire net income rate for all taxpayers will be 7.5 percent. This bill restores a small business rate advantage by reducing the small business rate to 6.85 percent. This 6.85 percent rate is the same rate as applies under the personal income tax. Additionally, the New York S corporation tax on entire net income is repealed. S corporation income is taxed as flow-through income at the personal income level at a top rate of 6.85 percent.
Part H. Urban jobs credit. This bill establishes tax credits for increased urban employment in the cities of New York outside of the Metropolitan Commuter Transportation District (MCTD).
Summary of Provisions: Section 1 adds a new section 17 to the Tax Law to establish the tax credit described above, to be allowable against tax under five Articles of the Tax Law. These are Articles 9 (franchise taxes on transportation and transmission companies, agricultural cooperatives and utilities), 9-A (general business corporations), 22 (personal income tax), 32 (banking corporations) and 33 (insurance corporations). Sections 2 through 7 of the bill add new provisions in each Article to permit the application of the credit in each case and to provide for carryforwards of excess credit for up to ten years. These new provisions are cross-referenced in subdivision (g) of new section 17.
Under new section 17, the credit allowed for a taxable year consists of the sum of two components, termed the “job growth credit component” and the “job maintenance credit component.”
The job growth credit component is available only where the taxpayer has increased employment in an upstate city since the prior taxable year by at least 25 jobs over the total statewide employment of the taxpayer. The job growth credit component is equal to the product of (1) the increase in the number of employees which is in excess of 25 in the upstate city and (2) either $500 or $250 ( termed “credit factors”). The $500 credit factor is applicable where the average hourly rate of compensation is in excess of $8.
Where a job growth credit component is allowed for such an increase in employment, and the level of employment in both the State and the cities of the State outside of the metropolitan commuter transportation district is maintained during the following taxable year, the job maintenance credit component, equal to the amount of the prior year’s job growth credit component, is allowed for the second year, in addition to any job growth credit component earned for a further increase in employment in the second year. The interplay of the job growth credit component and the job maintenance credit component is demonstrated in the following example:
Assume a corporation formed in 1999 where the entire operations of the company are located in a city outside of the MCTD with statewide employment figures of 0 in 1999, 150 in 2000, 180 in 2001 and 220 in 2002. Its average hourly rate of compensation is in excess of $8, so the $500 credit factor is applicable. The job growth credit component for 2000 would be $500 X 125 (the employment increase in excess of 25) = $62,500. In 2001, the taxpayer would be entitled to a job maintenance credit component of $62,500 by reason of having maintained an employment level of at least 150. In addition, the taxpayer will be entitled to a new job growth credit component for 2001 to reflect the employment increase, by more than 25, over the figure for 2000. This job growth credit component for 2001 would be equal to $500 X 5 (the increase, in excess of 25, from the 2000 figure of 150 to the 2001 figure of 180) = $2,500. In 2002, the taxpayer would be allowed a job maintenance credit component of $2,500 by reason of having maintained the 180 person employment level. The taxpayer would also be allowed a new job growth credit component for 2002 to reflect the increase, in excess of 25, over the 2001 employment figure. This credit component would be equal to $500 X 15 (the increase in excess of 25) = $7,500.
Under the anti-abuse provision set out in subdivision (f) of new section 17, where the composition of the taxpayer in some way represents an amalgamation of more than one company, testing for job increases would entail looking at both companies. For example, if on January 1, 2003 Bee Corporation is consolidated with Bat Corporation, to form Bee and Bat International (BBI), and BBI claims a job growth credit component for taxable year 2003, in determining whether the requisite job increase has occurred, the employment figures for BBI in 2003 will be compared with the sum of the employment figures for Bee Corporation in 2002 and those of Bat corporation in 2002.
Existing Law: The Tax Law presently contains no credits for increased employment specifically targeted to cities. However, the Tax Law does contain credits for employment in Economic Development Zones and Zone Equivalent Areas, which are frequently located in urban areas. The credits available under this bill will be in addition to the credits available in those zones.
Prior Legislative History: A similar bill was submitted with the 1999-2000 Executive Budget.
Statement in Support: The credit created by this bill constitutes part of the Governor’s program for the economic rejuvenation of cities in the up-state portion of this State. It would create an incentive to increase employment in such cities, both by expansion and by the establishment of new facilities. The credit does not apply where there is a mere relocation of employees to urban areas.
Part I. Small brewers' tax exemption. This bill changes the effective date of the increase in the brewer’s exemption to be January 1, 2000, rather than the original effective date of March 1, 2001.
Summary of Provisions: Bill section 1 amends section 3 of Part X of Chapter 407 of the Laws of 1999. Section 3 of Part X provides a March 1, 2001, effective date for the increase in the brewer’s exemption from 100,000 barrels to 200,000 barrels per year. This bill would change the effective date to January 1, 2000. Bill section 2 provides a severability clause.
Existing Law: Subdivision 6 of section 424 of the Tax Law provides an exemption from the tax on beer for the first 100,000 barrels of beer brewed and used or sold in New York each calendar year by a brewer whose principal executive office is located in this State. Part X of Chapter 407 of the Laws of 1999 increased the exemption to 200,000 barrels, effective March 1, 2001.
Prior Legislative History: This is a new bill.
Statement in Support: Chapter 407 of the Laws of 1999 enacted an increase in the brewer’s exemption which becomes effective in 2001. This provision was enacted to assist small brewers located in this State and to preserve the jobs of their employees. Because smaller brewers located in New York are in need of more immediate assistance, this bill would put this tax relief measure enacted by Chapter 407 into effect on January 1, 2000.
Part J. Web hosting facilities. The purpose of this bill is to facilitate and encourage the location, maintenance, and growth of information technology businesses in New York that are engaged in the operation of Internet data centers, by providing certain tax incentives relating to sales tax.
Summary of Provisions: This bill would add two new provisions to the exemption section of the Sales and Compensating Use Tax Law (section 1115) relating to: (1) certain purchases of machinery, equipment, and other tangible personal property by operators of internet data centers; and (2) certain services rendered to or provided in relation to such property. A new paragraph 37 would be added to section 1115(a) of the Tax Law to exempt machinery, equipment, and certain specified tangible personal property purchased by the operator of an internet data center where such property is to be placed or installed in an Internet data center and is directly related to the provision of website services for sale by the operator of the center.
The tangible personal property exempt under this provision will include computer system hardware, such as servers or routers; pre-written computer software, storage racks and cages for computer equipment; property relating to building systems designed for an Internet data center such as interior fiber optic and copper cables; property necessary to maintain the proper temperature environment such as air filtration, air conditioning equipment, and vapor barriers; property related to fire control, power generators, protective barriers; property which, when installed, will constitute raised flooring; and property related to providing security to the center.
An Internet data center, under the bill, consists of a data center specifically designed and constructed to provide a high security environment for the location of servers and similar equipment on which Internet websites reside. Under the bill, website services provided by operators of Internet data centers are: uninterrupted Internet access to its customers' web pages (24 hours a day, 7 days a week, 365 days a year), and continuous internet traffic management for its customers' web pages.
The property described in this bill, when purchased by contractors for incorporation into the real property of the Internet data center, will also be exempt.
A new subdivision (y) would be added to section 1115 of the Tax Law to exempt repair and maintenance services rendered to the property exempt under new paragraph (37) described above whether such property retains its character as tangible personal property (services described under 1105(c)(3)) or becomes a capital improvement to the Internet data center (services described under 1105(c)(5)). Also protective services rendered in relation to this property, otherwise taxable under 1105(c)(8), would be exempt.
Existing Law: The purchase of the tangible personal property or services described above are currently subject to tax.
Prior Legislative History: This is a new bill.
Statement in Support: Information technology businesses, such as those which provide Internet data center services described in the bill, are a rapidly growing segment of the information age economy. It is important for New York to attract these businesses to locate in this State and to nurture their growth.
Part K. Low income housing credit. This bill provides a credit against the franchise and income taxes under articles 9-A (general business corporations), 22 (personal income tax), 32 (banks) and 33 (insurance companies) to encourage the construction and rehabilitation of low-income housing in New York State.
Summary of Provisions: Section one of the bill adds new Article 2-A to the Public Housing Law to provide the “New York State Low Income Housing Tax Credit Program”. The credit program coordinates with and builds upon the federal low-income housing credit which is provided in § 42 of the Internal Revenue Code. As with the federal credit, the State credit will be administered by the Division of Housing and Community Renewal (DHCR).
The credit is allowed for the construction of rent-restricted housing in New York which qualifies for the federal credit, or which qualifies in all respects except for the tenant income test. For the federal credit, at least 20% of the residential units of a project must be occupied by tenants whose income is 50% or less of area median gross income. The State credit, however, will apply to projects where tenant income is 90% or less.
The credit is determined by an “applicable percentage” based on prevailing interest rates and project construction cost, and is designed to yield a credit amount over 10 years which approximates 70% of the present value of the cost of the project’s low-income units. However, the credit cannot exceed the amount deemed by the Commissioner to be necessary for project feasibility. The total credit available for allocation by the Commissioner under the program is $2 million.
The credit amount allocated to a project by the Commissioner is allowed each year for 10 years, but the project must continue to qualify as low-income housing for a 15-year compliance period to avoid partial recapture of the credit. Since the $2 million in credit allocation by the Commissioner can be claimed each year for 10 years, the total credit allowed over the 10-year life of the program is $20 million.
Section 2 of the bill adds a new section 18 to the Tax Law, to allow taxpayers under Articles 9-A, 22, 32 and 33 the credit amounts allocated by the Commissioner of DHCR under the program, and also provides rules for partial recapture of the credit when units of a project do not remain low-income units throughout the compliance period. Sections 4 through 7 of the bill provide credit application and carryover rules specific to each of the Articles.
Existing Law: None.
Prior Legislative History: This was submitted with the 30-Day Amendments accompanying the 1990-2000 Executive Budget.
Statement in Support: The State Low Income Housing Tax Credit Program will be administered in tandem with the federal low-income housing credit. This configuration will allow the use of the State administrative structure which is in place for servicing the federal credit, and will allow the federal credit to be leveraged to produce more low-income housing in New York. The federal credit available to projects in each state is limited by a per capita cap of $1.25, yielding federal credit to New York projects of about $22,700,000 in 1998. The demand for credit by New York projects exceeds this cap, meaning that more low-income housing can be produced in this State. The State program will encourage this production by allowing the federal credit allocation to be spread to more projects, with State money filling the gaps. In addition, the State credit will allow for construction of moderate income housing not covered by the federal credit (where tenant income is more than 50% but not more than 90% of area median income.)
Part L. Biotechnology credits. This bill allows biotechnology companies to claim a refund of their investment tax credits.
Summary of Provisions: Bill section 1 amends subdivision 12 of section 210 of the Tax Law to allow biotechnology companies which do not qualify as new businesses to claim a refund of the their investment tax credits. The bill defines a biotechnology company as one which satisfies three requirements. First, it must be primarily engaged in applying technologies to produce or modify products, to improve plants or animals, to develop microorganisms for specific uses, to identify targets for pharmaceutical development, to transform biological systems into useful processes and products or to develop microorganisms for specific uses. Second, over 50 percent of the voting stock of the biotechnology company is not owned or controlled, directly or indirectly, by a single corporation, a single partnership or a single limited liability company. Third, the average number of employees of the company within the State during the taxable year for which the refund is claimed, excluding general executive officers, is 100 or fewer.
Existing Law: A taxpayer entitled to claim an investment tax credit under Article 9-A may use that credit to reduce its tax to the lesser of the minimum taxable income bases or the fixed dollar minimum. The taxpayer may carry forward any excess for 15 years. A taxpayer which qualifies as a new business may elect, in lieu of such carryover, to treat the amount of such carryover as an overpayment of tax to be credited or refunded
Prior Legislative History: None.
Statement in Support: Small biotechnology companies in New York State often have a need for financial capital to fund ongoing or new research. When these companies were new businesses, the refundable investment tax credit provided them with a needed source of cash. This bill will expand the benefits of a refundable investment tax credit to biotechnology companies which do not qualify as new businesses. This will allow existing biotechnology companies to convert their investment tax credit into a source for financing continued growth.
Part M. Green buildings tax credit. This bill creates a tax credit designed to enhance the supply of environmentally sound buildings.
Summary of Provisions: Section 1 of the bill contains a declaration of policy and statement of purposes.
Section 2 of the bill adds a new section 19 to the Tax Law, which provides a new green building credit, to be allowable against tax under five articles of the Tax Law. These are Articles 9 (franchise taxes on transportation and transmission companies, agricultural cooperatives and energy companies), 9-A (general business corporations), 22 (personal income tax), 32 (banking corporations) and 33 (insurance corporations). The credit would be subject to carry forward, and would apply to costs paid or incurred on or after June 1, 1999, for property placed in service in taxable years beginning on or after January 1, 2001.
Subdivision (a) of section 19 of the Tax Law provides for the allowance and computation of the credit. The credit consists of the sum of six credit components, and in each case is based on the applicable costs paid or incurred. The credit amount is spread over five years. Thus, for example, a 7 percent credit amount would yield annual credits of 1.4 percent, subject to the phased fiscal schedule contained in section 13(c)(1).
Where a credit is allowed to an owner who sells a building, or to a tenant who terminates his or her tenancy, within the five year period of allowance of such credit, the successor owner or successor tenant would be allowed the credit for the remainder of such five year period, assuming the property in question continues to meet the applicable environmental standards. See new section 19(a)(1)(B) and (C).
The bill provides for a maximum cost to the State of $25 million for the entire credit program. See, in this regard, subdivision (c) of section 19. Thus, in order to become eligible for the credit the taxpayer must first obtain from the Department of Environmental Conservation an initial credit component certificate. This certificate would set forth the maximum amount of credit component allowable to the taxpayer, and their use would spread out the applicability of these credit components over a number of years, as set forth in the chart contained in section 19(c)(1). No more than $25 million worth of such certificates would be issued from 2000 through 2004. In addition, for each taxable year with respect to which a credit is claimed, a taxpayer would have to obtain an eligibility certificate, issued by a licensed architect or engineer, to the effect that the building or space is in fact green, that the fuel cell or photovoltaic modules constitute qualifying alternate energy sources or that the new air conditioning equipment uses an EPA-approved non-ozone depleting refrigerant. Provision is made for penalizing an architect or engineer who engages in professional misconduct with respect to issuance of such a certificate. See, in this regard, section 10 of the bill.
Subdivision (b) of section 19 contains definitions of terms used in the bill. Paragraph (1) defines “allowable costs,” and paragraph (2) defines “base building,” both discussed above. Paragraph (2-a) defined “credit allowance year”.
Paragraph (3) defines “commissioning,” as the testing and fine-tuning of heating, air-conditioning and other building systems.
Paragraph (4) defines “DEC” and “DOH” as referring to the Department of Environmental Conservation and the Department of Health, respectively.
Paragraph (5) defines “economic development area,” discussed above.
Paragraph (6) defines “eligible building.” All of the activities yielding the credit must be performed in an eligible building. The term “eligible building” is defined in terms of location in New York (other than on a tidal or freshwater wetland), size, classification under the New York State Uniform Fire Prevention and Building Code (so as to include buildings such as commercial office buildings, retail buildings, and buildings used for public assembly or public accommodation purposes) and multiple dwellings and certain multi-family buildings that are part of a single or phased construction project.
Paragraph (7) defines “Energy Code” as the New York State Energy Conservation Construction Code.
Paragraph (8) defines “fuel cell.”
Paragraph (9) defines “green base building” as a base building (discussed above) which meets certain criteria for energy efficiency, indoor air quality, zoning, recycling, plumbing, water conservation, building materials, finishes, and furnishings.
Paragraph (10) defines “green building” as a building consisting of a green base building and green tenant space.
Paragraph (11) defines “green tenant space” as tenant space (discussed above) which meets certain criteria for energy efficiency, indoor air quality, code requirements, recycling, plumbing, water conservation, and building materials, finishes, and furnishings.
Paragraph (12) defines “incremental cost of building-integrated photovoltaic modules.”
Paragraph (13) defines “NYSERDA” as the New York State Energy Research and Development Authority.
Paragraph (14) defines “qualifying alternate energy sources.” A fuel cell or a photovoltaic module must constitute such an energy source in order to qualify for the applicable credit component.
Paragraph (15) defines “tenant improvements.”
Paragraph (16) defines “tenant space,” discussed above.
Subdivision (d) of section 19 contains four mandates related to the new credit. Paragraph (1) requires the taxpayer claiming the credit to maintain various records pertaining to compliance with the environmental standards which are the pre-requisites for the credit. Paragraph (2) requires the reporting of such information to the Department of Environmental Conservation. Paragraph (3) authorizes the promulgation of regulations necessary to the implementation of the new credit, and provides that such regulations are to construe the provisions of law added by the bill in such a manner as to “encourage the development of green buildings, green base buildings and green tenant space and to maintain high but commercially reasonable standards for obtaining” the credit. Paragraph (4) calls for the preparation of a joint report by the Commissioner of Taxation and Finance and the Commissioner of Environmental Conservation, in consultation with NYSERDA. Such report would be submitted to the Governor and specified legislative leaders, and would be due April 1, 2008. The report would contain information regarding the use of the credit, and would make recommendations with respect to the establishment of a permanent green building tax credit program and with respect to methods for enhancing such a program.
Subdivision (e) mandates the promulgation of guidelines and regulations necessary to the determination of qualification for the credit. Paragraph (1) requires DEC, in consultation with NYSERDA to prepare, within six months of enactment, base building guidelines relating to energy use and for the performance of appliances and heating, cooling, and water heating equipment. Paragraph (2) requires DEC, in consultation with DOH and NYSERDA, to prepare base building guidelines relating to the flow and quality of air within 6 months of enactment. Paragraph (3) requires DEC, in consultation with NYSERDA, to promulgate base building standards for materials, water conservation and drainage within 1 year of enactment. Paragraph (4) requires DEC, in consultation with NYSERDA to prepare energy guidelines for tenant space within 6 months of enactment. Paragraph (5) requires DEC to promulgate regulations relating to tenant space indoor air quality, building materials, finishes and furnishings within 1 year of enactment. Subdivision (f) contains cross-references to the applicable credit provisions within each of the affected articles of the Tax Law. Sections 3, 4, 6, 7 and 8 of the bill add provisions to Articles 9, 9-A, 22, 32, and 33 of the Tax Law, respectively, to provide with respect to each of such articles that the green building credit is to be allowed against each, and to provide for the proper administration thereof.
Section 9 of the bill adds a new subdivision (12) to section 6509 of the Education Law to provide for the disciplining of architects and engineers who engage in professional misconduct in issuing certifications relating to the green building credit.
Existing Law: The Tax Law presently contains no credit such as the one which would be added by this bill.
Prior Legislative History: This 1999 Governor’s program bill was introduced in the Senate (S5549-B).
Statement in Support: The new tax credit for constructing or rehabilitating green, or sustainably designed, buildings will provide a financial incentive to developers who might not otherwise produce environmentally sensitive facilities. The legislation offers building owners income and franchise tax credits for the incremental costs of making a new or existing building green. Tenants are also provided an incentive to make their space green. A green building tax credit will promote the use of new building technologies and materials which will result in buildings with a higher energy performance, reduced environmental impacts throughout their life cycle, and lower operating costs. Encouraging the development of sustainably designed structures through market transformation of the building industry will lead to environmental benefits to New York State and improved indoor air quality for New York workers. Environmental benefits to New York State from green buildings include reduced water pollution, increased recycling and decreased waste. New York residents and workers would enjoy a healthier working environment in green buildings because of reduced exposure to emissions from building materials, finishes, and furnishings.
The tax credit also promotes the use of photovoltaic modules and fuel cells, which are clean alternative energy sources, as well as non-ozone depleting air conditioning systems.
The market transformation encouraged by these tax credits will create demand for technologies and materials used to make buildings and tenants' space green. This, in turn, will promote the development and expansion of green industries and the creation and retention of jobs in New York.
Part N. Transportation access. This bill provides a tax credit under Articles 9, 9-A, 22, 32 and 33 of the Tax Law to taxpayers who make a significant contribution to the State for the construction of certain transportation improvement projects and increase employment by more than 1,000 jobs in New York State.
Summary of Provisions: Section 1 of the bill adds new section 20 to the Tax Law. Section 20 provides for the new tax credit, to be allowable against tax under five Articles of the Tax Law for contributions for certain transportation improvement projects. These are Articles 9 (franchise taxes on transportation and transmission companies, agricultural cooperatives and utilities), 9-A (general business corporations), 22 (personal income tax), 32 (banking corporations) and 33 (insurance corporations).
New section 20 of the Tax Law provides a refundable credit to taxpayers who make contributions to the State, on and after January 1, 2000, in taxable years beginning on or after January 1, 2000, for transportation infrastructure and related facilities or systems, including, but not limited to, highways, roadways, bridges, ramps and lanes; railroad, airport, and mass transit facilities; ferry or marine facilities; and associated rights-of-way and connections to existing or planned transportation infrastructure or facilities.
To qualify for the credit, the taxpayer’s contribution to the project must be at least $10 million. In addition, the contribution must be certified by the State Commissioner of Transportation and the Commissioner of Economic Development, jointly, based in part on a finding that the project would promote the development of economic opportunities in the State by creating more than 1000 new jobs. Section 20 provides for a recapture, with interest, of all credit taken if the taxpayer does not meet the 1,000 employee goal within three full taxable years.
The amount of the credit is 6% of the taxpayer’s excess New York payroll over the taxpayer’s average base period payroll. The base period is the period consisting of the taxable year in which the contribution is made and the immediately preceding two taxable years. If the amount of credit exceeds the taxpayer’s tax liability, the excess will be refunded. The credit can be claimed in the year following the contribution year and each year thereafter in which the taxpayer’s New York payroll exceeds the average base period payroll, until the aggregate credits claimed by the taxpayer equal the amount of the taxpayer’s contribution.
Sections 2 through 7 of the bill add provisions to Articles 9, 9-A, 22, 32, and 33 of the Tax Law, respectively, to allow taxpayers under each of those articles to claim the credit provided for under section 20 of the Tax Law. Section 2 adds a new section 187-e to Article 9. Section 3 adds a new subdivision 32 to section 210, in Article 9-A. Section 4 of the bill amends section 606(i) of the Tax Law, in Article 22, to render the credit under the personal income tax available to S corporation shareholders. Section 5 adds a new subsection (z) to section 606, in Article 22. Section 6 adds a new subsection (n) to section 1456, in Article 32. Section 7 adds a new subsection (p) to section 1511, in Article 33.
Section 8 of the bill adds a new subdivision 34 to section 14 of the Transportation Law to authorize the State Commissioner of Transportation to issue the certifications required under new section 20 of the Tax Law.
Existing Law: No such credit exists under current law. However, the amount of the contribution made by the taxpayer is deductible for federal and State tax purposes, either currently as a charitable contribution or on an amortization schedule.
Prior Legislative History: None.
Statement in Support: The new tax credit would provide a financial incentive for private employers to contribute to transportation infrastructure or facilities that promote the creation of employment opportunities in the State. The proposed legislation offers these employers income and franchise tax credits for their contribution towards the costs of new or improved transportation infrastructure or facilities. This transportation infrastructure tax credit would promote the implementation of capital improvements to the transportation infrastructure associated with job-creating expansions in the private sector. New York workers would enjoy additional employment opportunities and an enhanced transportation system serving their work locations.
Part O. Sales tax on farm products. This bill broadens sales and compensating use tax exemptions to include property and services used predominantly in either farm production or commercial horse boarding operations, or in both, whether or not incorporated in a building or structure.
Summary of Provisions: Bill section 1 amends section 1101(b) of the Tax Law to add a definition of “commercial horse boarding operation,” and to delete the definitions of “farm building materials” and “non-qualifying farm building materials.” The deleted definitions are rendered obsolete by other provisions of the bill which remove the limitation on various farm production exemptions for “non-qualifying farm building materials” (which, generally, are farm building materials used directly in electrical, electronic, plumbing, heating, ventilating, air conditioning and certain fluid or solid material delivery or transport systems and machinery and equipment which, when installed, constitute additions or capital improvements). The definition of “farm building materials” is deleted since it is only used in the definition of “non-qualifying farm building materials.” Thus, the farm production exemptions would be allowed for all tangible personal property and the enumerated services relating to such property, whether or not the property is incorporated into a building or structure.
In addition, sections 2 through 9 of the bill amend the Tax Law to insert “commercial horse boarding operation” to provide various sales and compensating use tax exemptions for such operations which parallel the exemptions provided for farm production. Bill sections 2 through 6 and 9 also remove the requirement that tangible personal property, and some services relating to tangible personal property, be used “directly” in the production phase of farming or in a commercial horse boarding operation, or in both, so that such property and services need only be used “predominantly” (more than 50 percent) in either or both farming production and a commercial horse boarding operation in order to qualify for the applicable exemption. Bill sections 7 and 8 delete the “directly and exclusively” limitation from the utility service exemption and the exemption from the pre-paid sales tax for certain diesel motor fuel, so that these exemptions are allowed if the utility service or diesel motor fuel is used or consumed either in farm production or a commercial horse boarding operation, or in both.
Specifically, section 2 of the bill amends section 1105(c)(3)(vi) with respect to the exemptions for farm production and commercial horse boarding operations from the tax on installing, maintaining, servicing or repairing tangible personal property. Section 3 of the bill amends section 1105(c)(5) relating to the farm production and horse boarding exemptions from the tax on maintaining, servicing or repairing real property, property or land. Bill section 4 amends section 1108(b)(1) to provide that the new farm production and horse boarding exemptions are to apply to the temporary municipal assistance sales and use taxes for cities with a population under one million (the so-called “little MAC taxes,” none of which are currently imposed).
Section 5 of the bill amends section 1115(a)(6)(A), the exemption for tangible personal property used or consumed predominantly in the production for sale of tangible personal property by farming (referred to throughout this memorandum as “farm production”) and in commercial horse boarding operations, or in both. In addition, section 1115(a)(6)(B) is also amended with respect to the farm production and horse boarding exemptions for motor vehicles. Bill section 6 amends sections 1115(a)(15) and (16) with respect to the exemptions for sales of tangible personal property sold to a contractor, subcontractor or repairman when used to erect, add to, alter, improve, maintain, service or repair a structure or building or real property, property or land used predominantly in farm production or commercial horse boarding, or in both.
Section 7 of the bill amends section 1115(c) which is the utility service exemption. Section 8 of the bill amends those portions of section 1115(j) which allow an “up-front” exemption from the pre-paid sales tax on motor fuel for not more than 4500 gallons of diesel motor fuel used or consumed in a 30 day period in farm production or commercial horse boarding operations, or both. Section 9 of the bill amends section 1210(a)(1) to deal with the farm production and horse boarding exemptions allowed under the local sales and use taxes imposed pursuant to the authority of Article 29 of the Tax Law.
Bill section 10 provides that the bill will take effect on March 1, 2001, and includes the usual sales tax transition clause. This is the same effective date as Part Y of Chapter 407 of the Laws of 1999 (see “Existing Law” below).
Existing Law: Currently, under section 1115(a)(6), tangible personal property which is used directly and predominantly in the production phase of farming, except for tangible personal property incorporated in a building or structure, is exempt. An exemption is allowed for tangible personal property used as an integral component part of a silo and for the posts and wires used for grape trellises. Exemptions are also allowed from the section 1105(c)(3) tax for services performed with respect to such tangible personal property. Utility services used or consumed directly and exclusively in farm production are currently exempt as well. Similar exemptions apply to the local sales and use taxes imposed pursuant to the authority of Article 29 of the Tax Law.
Effective March 1, 2001, section 1115(a)(6) of the Tax Law is amended by Chapter 407 of the Laws of 1999 to provide an exemption from the sales and compensating use taxes for tangible personal property that will be used directly and predominantly in the production phase of farming. The property which will qualify for the March 1, 2001, exemption is limited to that which is considered “non-qualifying” under section 1101(b)(21) of the Tax Law. (The limited class of property is broader than current law, but not as extensive as would be allowed under this bill.) Exemptions also will be allowed, effective March 1, 2001, from the section 1105(c)(3) tax for services performed with respect to the same limited class of tangible personal property and from the section 1105(c)(5) tax on maintaining, servicing or repairing real property, property or land used or consumed directly and predominantly in farm production, but only to the extent that the services rendered are in respect of or are constructed from the limited class of tangible personal property. The contractor exemptions in section 1115(a)(15) and (16) also will be allowed, effective March 1, 2001, but only for this limited class of farm production property.
Prior Legislative History: This is a new bill.
Statement in Support: Although property used or consumed in the production, for sale, of tangible personal property by farming, as the term “farming” is defined in section 1101(b)(19) of the Tax Law, is exempt from sales and use taxes when used directly and predominantly in such farm production, the Tax Law remains confusing and administratively complicated. Farmers and retailers alike experience difficulty in understanding when property is or is not exempt.
The Department of Tax and Finance has attempted to clarify the confusion through the issuance of various advisory publications. Often these publications list property that is taxable and nontaxable depending upon its use or application on a farm. Often these taxable and nontaxable lists include the same item, such as a shovel or a barn fork, and the taxable status is based on the item’s use. This procedure for applying the sales tax law requires the farmer and the vendor to know what is on or off the taxable list and agree that the application warrants the item’s nontaxable status. It is not practical for farmers and vendors to understand and apply the sales tax law in such a manner.
This bill effectively clarifies and simplifies the Tax Law as regards tangible personal property, purchased for use or consumption, predominately either in farming or commercial horse boarding operations, or in both. It is appropriate that commercial horse boarding operations enjoy the same tax breaks that farm production enjoys.
Part P. Homeowners Associations. This bill eliminates the fixed dollar minimum tax under Article 9-A of the Tax Law for certain homeowners associations.
Summary of Provisions: Bill section 1 amends the opening paragraph of Tax Law section 210.1, in Article 9-A, to eliminate the fixed dollar minimum tax in the case of homeowners associations which have no homeowners association taxable income for Federal income tax purposes. Section 2 provides that the bill takes effect immediately and shall apply to taxable years beginning on and after January 1, 2000.
Existing Law: Homeowners associations are subject to tax as business corporations under Article 9-A of the Tax Law. Article 9-A imposes the franchise tax on general business corporations. The taxpayer pays the highest of four taxes, two based on net income, one on capital and one a fixed dollar minimum, plus a tax on subsidiary capital. The lowest fixed dollar minimum tax is $100.
Prior Legislative History: This was submitted with the Governor’s 1999-2000 Executive Budget.
Statement in Support: Homeowners associations generally exist to manage, maintain and care for residential property. Homeowners associations that qualify and elect to file for federal purposes pursuant to section 528 of the Internal Revenue Code (IRC) are not taxed at the federal level on their “exempt function income.” Exempt function income includes any amount received as membership dues, fees, or assessments from owners of the association’s condominium units, real property or timeshare rights in real property. Homeowners associations are subject to a tax on homeowners association taxable income, IRC section 528(b). Such homeowners association taxable income would include, for example, amounts received from persons who are not members of the association, such as commercial tenants. If a homeowners association does not qualify to file or does not elect to file pursuant to section 528 of the Code, then it is taxed as a corporation on taxable income. In such a case, regular assessments paid by association members for services rendered would be income to the corporation and the excess of this income over expenses would be subject to tax.
At the State level, homeowners associations are subject to tax under Article 9-A. If a homeowners association elects to file pursuant to IRC section 528, the association’s entire net income for purposes of Article 9-A of the Tax Law is presumed to be the same as its homeowners association taxable income as computed under section 528(d) of the IRC. Thus, for Article 9-A purposes, a homeowners association electing to file pursuant to IRC section 528 is taxed only on net income that is not exempt function income.
Frequently, a homeowners association will have no homeowners association taxable income, and thus pay no federal tax, and yet be subject to the fixed dollar minimum tax under Article 9-A of the Tax Law of $100. It is unduly burdensome to impose a fixed dollar minimum tax at this level where the homeowners association does not pay any federal tax and the association’s purpose is not to generate a profit. Eliminating the State’s fixed dollar minimum tax for homeowners associations which have no homeowners association taxable income (whether or not it elects to file pursuant to Code section 528) is equitable in light of their generally non-commercial nature.
Part Q. Petroleum business taxes. This bill eliminates the minimum taxes imposed under the petroleum business tax (Article 13-A of the Tax Law).
Summary of Provisions: Section 1 of the bill would amend section 301-a(a) of the Tax Law to repeal the minimum tax on petroleum businesses.
Section 2 of the bill would amend section 301-e(a) of the Tax Law to repeal the minimum tax on aviation fuel businesses.
Section 3 of the bill provides that the bill shall take effect March 1, 2001. Any rules or regulations that are necessary to implement the provisions of the bill, however, may be promulgated and any procedures, forms, or instruction necessary for such implementation may be adopted and issued on and after the date the bill becomes a law. In addition, the provisions of Article 13-A amended by the bill would continue in effect with respect to the administration, collection and enforcement of taxes accruing prior to amendment.
Existing Law: Section 301-a of Article 13-A of the Tax Law presently imposes a minimum tax of $25 per month on petroleum businesses. In addition, section 301-e of Article 13-A imposes a minimum tax of $2 per month on aviation fuel businesses.
Prior Legislative History: A similar proposal was submitted as an Article VII bill last year (S.1603-A/A.6434). It was also included in the Senate’s omnibus budget bill S.2-A.
Statement in Support: This will remove an unpopular and unnecessary tax burden.
Part R. Multi-state lottery. This bill authorizes the Division of the Lottery to join any joint, multi-jurisdiction, or out-of-State lottery game to make it competitive with other states that offer large jackpot lottery games.
Summary of Provisions: The following sections of Article 34 of the Tax Law governing the New York State Lottery for Education would be amended as follows:
Existing Law: Current law allows the Division of the Lottery to introduce new lottery games with no more than 40 percent of sales proceeds being used to pay prizes. This prize level has never been used successfully in a joint or multi-jurisdiction lottery game, which typically return at least 50 percent of sales proceeds to players as prizes. A detailed multi-jurisdiction lottery statute was enacted in 1988 as Tax Law section 1617, but its authorization for a multi-jurisdiction game expired on June 30, 1989.
Prior Legislative History: A similar proposal was submitted in 1999, but died in committee.
Statement in Support: The bill allows the Lottery to participate in a joint, multi-jurisdiction, or out-of-State lottery game and to use 50 percent of sales proceeds for prizes. This prize to sales level is necessary to be able to join with other states that currently award prizes at such level.
Research indicates that 16 percent of New York Lottery players also participate in multi-jurisdiction lottery games. Because such games are not currently offered in New York, these sales are necessarily made in other jurisdictions, most likely in New Jersey, Connecticut or Massachusetts, which do offer such games. These sales are being lost by the New York Lottery and are benefiting other states at New York’s expense. The New York Lottery must address these and future sales losses or risk a further erosion of its sales base to out-of-State competitors.
The existing statute’s authorization of New York participation in a multi-jurisdiction lottery game expired on June 30, 1989, and needs to be replaced. Even if the statutory authorization had not expired in 1989, the detailed requirements written into the statute would have prevented New York from participating in Lotto*America, a game formerly offered by the Multi-State Lottery Association (“MUSL”), in Powerball, a highly popular game now being offered by MUSL, or in The Big Game, a multi-state game currently being offered in Massachusetts and New Jersey.
Part S. Increased funding for the dedicated transportation funds. This bill redistributes certain funds received from the motor fuel tax, petroleum business tax and certain motor vehicle fees from the General Fund to the Dedicated Highway and Bridge Trust Fund and the Dedicated Mass Transportation Trust Fund, and authorizes the deposit of various fees and charges collected by the Department of Transportation into the Dedicated Highway and Bridge Trust Fund. It also repeals the Emergency Highway Reconditioning and Preservation Fund and the Emergency Highway Construction and Reconstruction Fund.
Summary of Provisions: Section one amends Tax Law section 282-b to provide for the deposit of seventy-five percent of the moneys received by the Department of Taxation and Finance pursuant to the provisions of this section into the Dedicated Fund Accounts (the Dedicated Highway and Bridge Trust Fund and the Dedicated Mass Transportation Trust Fund) pursuant to section 301-j(d) of the Tax Law, beginning April 1, 2001. Beginning April 1, 2003, all of the moneys received by the Department of Taxation and Finance pursuant to section 282-b will be deposited into the Dedicated Fund Accounts.
Section two amends Tax Law section 282-c to provide for the deposit of all of the moneys received by the Department of Taxation and Finance pursuant to the provisions of this section into the Dedicated Fund Accounts pursuant to section 301-j(d) of the Tax Law beginning April 1, 2003.
Section three amends Tax Law section 284-a to provide for the deposit of seventy-five percent of the moneys received by the Department of Taxation and Finance pursuant to the provisions of this section into the Dedicated Fund Accounts pursuant to section 301-j(d) of the Tax Law beginning April 1, 2000. Beginning April 1, 2003, all of the moneys received by the Department of Taxation and Finance pursuant to section 284-a will be deposited into the Dedicated Fund Accounts.
Section four amends Tax Law section 284-c to provide for the deposit of all of the moneys received by the Department of Taxation and Finance pursuant to the provisions of this section into the Dedicated Fund Accounts pursuant to section 301-j(d) of the Tax Law beginning April 1, 2003.
Section five amends Tax Law section 289-e to provide for the deposit of all taxes, interest, penalties and fees collected after March 31, 2000 pursuant to section 282-a of the Tax Law into the Dedicated Fund Accounts pursuant to section 301-j(d) of the Tax Law.
Section six amends Tax Law section 301-h(d) to provide for the deposit of all of the moneys collected pursuant to this section into the Dedicated Fund Accounts pursuant to section 301-j(d) of the Tax Law beginning on April 1, 2001.
Section seven amends Tax Law section 301-j(d) to provide for the deposit and disposition of the additional moneys earmarked by this bill into the Dedicated Fund Accounts.
Section eight amends Tax Law section 312(b) to provide for the deposit of eighty and three-tenths percent of the taxes, interest and penalties from the tax imposed by sections 301-a and 301-e of the Tax Law into the Dedicated Fund Accounts and disposed of pursuant to section 301-j(d) of the Tax Law, beginning April 1, 2001. This section also provides, beginning with April 2001, for the Comptroller to deduct the amount of $625,000 monthly from the taxes, interest and penalties received pursuant to Tax Law sections 301-a and 301-e, and to deposit such amount into the Dedicated Fund Accounts pursuant to section 301-j(d).
Section nine amends section 401(21) of the Vehicle and Traffic Law by adding a new paragraph to provide for the deposit of twenty-three and one-half percent and fifty-four and one-half percent of all registration fees in the Dedicated Highway and Bridge Trust Fund and the Dedicated Mass Transportation Trust Fund beginning after March 31, 2001 and March 31, 2002, respectively. These percentages are in addition to the forty-five and five-tenths percent already deposited into the Dedicated Highway and Bridge Trust Fund. This section also amends refund provisions to include the Dedicated Mass Transportation Trust Fund.
Section ten provides for the deposit into the Dedicated Highway and Bridge Trust Fund and the Dedicated Mass Transportation Trust Fund beginning April 1, 2002, of moneys now deposited into the General Fund pursuant to the Vehicle and Traffic Law. The specific amounts listed ($25.6 million in State fiscal year 2002-03, $62.3 million in State fiscal year 2003-04, and $164.5 million in State fiscal year 2004-05 and each year thereafter), represent the share of motor vehicle fees other than registration fees already fully earmarked that are necessary to provide for the Governor’s five-year Transportation Plan.
Section eleven amends section 89-b(3)(a) of the State Finance Law to authorize the deposit of certain fees, fines and penalties collected by the Department of Transportation into the Dedicated Highway and Bridge Trust Fund, effective April 1, 2000.
Section twelve repeals sections 89 and 89-a of the State Finance Law effective April 1, 2003. These sections establish the Emergency Highway Reconditioning and Preservation Fund and the Emergency Highway Construction and Reconstruction Fund, respectively.
Sections thirteen through fifteen amend the last paragraph of section 52 of the Highway Law, section 385(15) of the Vehicle and Traffic Law and section 15 of the State Finance Law, respectively, to clarify which moneys are to be deposited in the Dedicated Highway and Bridge Trust Fund.
Section sixteen provides that this act shall take effect immediately, although section eight shall take effect on the same date as section 6 of part H of Chapter 407 of the Laws of 1999 takes effect, sections eleven and thirteen through fifteen shall take effect April 1, 2000, and section twelve shall take effect April 1, 2003.
Existing Law: All of the tax revenues and motor vehicle fees being directed into the Dedicated Highway and Bridge Trust Fund and the Dedicated Mass Transportation Trust Fund pursuant to this bill are currently deposited into the General Fund. The fees, fines and penalties authorized to be deposited in the Dedicated Highway and Bridge Trust Fund pursuant to sections eleven, thirteen, fourteen and fifteen of the bill are currently being deposited in such Fund through administrative action.
Prior Legislative History: None.
Statement in Support: This bill provides for the dedication of additional existing revenues and fees into the Dedicated Highway and Bridge Trust Fund and the Dedicated Mass Transportation Trust Fund that are necessary to support the Governor’s five-year transportation plan for highways and bridges, transit, aviation, rail and local transportation programs.
BUDGET IMPLICATIONS:
Part A. The revenue loss associated with utility deregulation, when fully effective, will be $150 million. A $3 million loss is reflected in the 2000-2001 Financial Plan. As a result, enactment of this bill is needed to implement the 2000-2001 Executive Budget.
Part B. The revenue loss associated with the Power for Jobs expansion has been reflected in the Financial Plan and enactment of this bill is needed to implement the 2000-01 Executive Budget.
Part C. The revenue loss associated with the New Technology credits for Upstate High Technology Enterprise Zones has been reflected in the Financial Plan and enactment of this bill is needed to implement the 2000-01 Executive Budget.
Part D. The revenue loss associated with the Emerging Technology credit for Upstate High Technology Enterprise Zones has been reflected in the Financial Plan and enactment of this bill is needed to implement the 2000-01 Executive Budget.
Part E. The revenue loss associated with interest free loans for Upstate High Technology Enterprise Zones has been reflected in the Financial Plan and enactment of this bill is needed to implement the 2000-01 Executive Budget.
Part F. The revenue loss associated with energy tax credits for Upstate High Technology Enterprise Zones has been reflected in the Financial Plan and enactment of this bill is needed to implement the 2000-01 Executive Budget.
Part G. The revenue loss for the small business rate reduction will be $5 million and the repeal of the S corporation differential rate will be $35 million when fully effective, respectively. This amount has been reflected in the Financial Plan and enactment of this bill is needed to implement the Executive Budget.
Part H. The revenue loss associated with the urban jobs tax credit has been reflected in the Financial Plan and enactment of this bill is needed to implement the 2000-01 Executive Budget.
Part I. There will be a one-time $1 million revenue loss in 2000-01 associated with the small brewers' tax exemption. This amount has been reflected in the 2000-01 Financial Plan and enactment of this bill is needed to implement the Executive Budget.
Part J. The revenue loss associated with tax exemptions for Web hosting facilities has been reflected in the Financial Plan and enactment of this bill is needed to implement the 2000-01 Executive Budget.
Part K. The 2000-2001 revenue loss associated with the low income housing credit is $2 million. Enactment of this bill is needed to implement the Executive Budget.
Part L. The revenue loss associated with investment tax credits for biotechnology companies has been reflected in the Financial Plan and enactment of this bill is needed to implement the 2000-01 Executive Budget.
Part M. The revenue loss associated with the green buildings tax credit has been reflected in the Financial Plan and enactment of this bill is needed to implement the 2000-01 Executive Budget.
Part N. The revenue loss associated with transportation access tax credits has been reflected in the Financial Plan and enactment of this bill is needed to implement the 2000-01 Executive Budget.
Part O. The revenue loss associated with sales tax exemptions for farm products has been reflected in the Financial Plan and enactment of this bill is needed to implement the 2000-01 Executive Budget.
Part P. The elimination of the fixed dollar minimum tax for certain homeowners associations will have a minimal impact on the Financial Plan. The revenue loss is reflected in the Financial Plan and the enactment of this bill is necessary to implement the 2000-01 Executive Budget.
Part Q. The elimination of the petroleum business tax minimum taxes would cause a minimal estimated annual State revenue loss of approximately $350,000 in its first full year in effect.
Part R. Enactment of the multi-state lottery authorization is necessary to implement the 2000-2001 Executive Budget because it is estimated that multi-jurisdictional lottery sales will provide $124 million in receipts for education in 2000-01, and $166 million annually in 2001-02 and subsequent years.
Part S. Enactment of the authorization to redistribute certain funds to the dedicated transportation funds is necessary to implement the 2000-01 Executive Budget because the Fund redistributions have been incorporated into the Financial Plan accompanying the 2000-01 Executive Budget. Approximately $163 million of motor fuel tax revenue that would otherwise have been deposited into the General Fund will be shifted to the Dedicated Highway and Bridge Trust Fund and the Dedicated Mass Transportation Trust Fund in State fiscal year 2000-01.
EFFECTIVE DATE:
Part A. This act shall take effect immediately, provided that: repeal of section 186 and 186-b of the tax law shall take effect January 1, 2000; repeal of sections 189 and 189-a of the tax law shall take effect January 1, 2005; the sales and compensating use tax portions of this act shall take effect April 1, 2000; and the real property tax portions of this act shall be in effect between January 1, 2000 and December 31, 2009.
Part B. This act shall take effect immediately and remain in effect through December 31, 2004. However, applications for the allocation of the 200 megawatts of power shall be approved on or before December 31, 2000.
Part C. This act shall take effect immediately and apply to tax years beginning on or after January 1, 2002 and before January 1, 2012.
Part D. This act shall take effect immediately and apply to tax years beginning on or after January 1, 2002 and before January 1, 2012.
Part E. This act shall take effect immediately and apply to tax years beginning on or after January 1, 2002 and before January 1, 2012.
Part F. This act shall take effect immediately and apply to tax years beginning on or after January 1, 2002 and before January 1, 2012.
Part G. This act shall take effect immediately. The small business rate reduction shall take effect June 30, 2003. The repeal of the S corporation tax will take effect June 30, 2002. However, the S corporation tax rate will be reduced by 50 percent after June 30, 2001.
Part H. This act shall take effect immediately and apply to tax years beginning on or after January 1, 2002.
Part I. This act shall take effect January 1, 2000.
Part J. The bill will take effect March 1, 2001.
Part K. This act shall take effect immediately.
Part L. The bill takes effect immediately and applies to taxable years beginning on or after January 1, 2001.
Part M. This act shall take effect immediately and shall apply to property placed in service in taxable years beginning on or after January 1, 2001.
Part N. This bill takes effect immediately and applies to contributions made on or after January 1, 2000 in taxable years beginning on or after such date.
Part O. This bill will take effect on March 1, 2001.
Part P. This act shall take effect immediately and shall apply to taxable years beginning on and after January 1, 2000.
Part Q. This act shall take effect March 1, 2001.
Part R. This bill is effective immediately.
Part S. This act shall take effect immediately, although section eight shall take effect on the same date as section 6 of part H of Chapter 407 of the Laws of 1999 takes effect, sections eleven and thirteen through fifteen shall take effect April 1, 2000, and section twelve shall take effect April 1, 2003.