A BUDGET BILL submitted by the Governor in accordance with Article VII of the Constitution
AN ACT to amend the tax law, in relation to amending the definition of new business for purposes of the refundability of certain credits under articles 9-A, 22, 32 and 33 thereof and making technical corrections to the empire zones program act, as enacted by part GG of section 1 of chapter 63 of the laws of 2000 and to the sales tax on certain gas or electric utility service thereto and the general municipal law, in relation to extending the empire zone program and in relation to a revision of an empire zone (A); to amend the tax law, in relation to the calculation of the business allocation percentage under article 9-A thereof for manufacturers and in relation to the alternative minimum tax under article 9-A thereof (B); to amend the tax law, in relation to providing a tax credit under the article 9-A corporation franchise tax and article 22 personal income tax thereof for soil improvement projects and farmland improvement projects and in relation to extending the agricultural property tax credit under the article 9-A corporation franchise tax and the article 22 personal income tax to taxpayers who own agricultural assessment property (C); to amend the tax law, in relation to providing a tax credit under article 9-A and article 22 thereof for donations of land, easements on land and other interests in real property for conservation purposes (D); to amend the tax law and the parks, recreation and historic preservation law, in relation to providing a credit against income tax for the rehabilitation of historic homes or for the purchase of rehabilitated historic homes in certain instances (E); to amend the public housing law, in relation to increasing the dollar amount of statewide limitation on the low-income housing tax credit (F); to amend the tax law, in relation to allowing taxpayers which are biotechnology companies to claim a refund of their investment tax credits (G); to authorize and direct the comptroller to make deposits to the dedicated highway and bridge trust fund (H); to amend the tax law, in relation to certain tax surcharges (I); to amend chapter 298 of the laws of 1985, amending the tax law relating to the franchise tax on banking corporations imposed by the tax law, authorized to be imposed by any city having a population of one million or more by chapter 772 of the laws of 1966 and imposed by the administrative code of the city of New York and relating to other provisions of the tax law, chapter 883 of the laws of 1975 and the administrative code of the city of New York which relates to such franchise tax, to amend chapter 817 of the laws of 1987, amending the tax law and the environmental conservation law, constituting the business tax reform and rate reduction act of 1987, to amend chapter 525 of the laws of 1988, amending the tax law and the administrative code of the city of New York relating to the imposition of taxes in the city of New York, in relation to the effectiveness of certain provisions of such chapters; to amend the tax law, in relation to permitting certain banking corporations otherwise subject to tax under article 32 of such law to make an election to be taxed under article 9-A of such law; and to amend the administrative code of the city of New York, in relation to permitting certain banking corporations otherwise subject to tax under subchapter 3 of chapter 6 of title 11 of such code to be taxed under subchapter 2 of such code (J); to amend chapter 405 of the laws of 1999 amending the real property tax law relating to improving the administration of the school tax relief (STAR) program and other laws, in relation to the Lottery game of quick draw (K); 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 (L); to amend the tax law and the administrative code of the city of New York, in relation to the credit and deduction for college tuition under the personal income tax (M); to amend chapter 166 of the laws of 1991, amending the tax law and other laws relating to taxes, in relation to the expiration of certain provisions contained therein and to repeal subdivision 8 of section 1809 of the vehicle and traffic law, in relation to the expiration of the provisions of such section (N); and to amend the tax law, in relation to the tobacco products tax on moist snuff under article 20 thereof (O)
This bill contains various provisions needed to implement the Revenue portion of the 2001-02 Executive Budget.
The purpose of this bill is to amend the General Municipal Law, in relation to extending the Empire Zones program and to permit qualifying Empire Zones to expand from two square miles to four square miles and to amend the Tax Law, in relation to (i) amending the definition of a new business for purposes of the refundability of certain new business credits under Articles 9-A, 22, 32 and 33 of such Law, and making conforming and clarifying amendments, and (ii) making technical amendments to (a) the Empire Zones Program Act and (b) last year’s utility tax reform bill with respect to sales tax on certain sales of transportation, transmission or distribution of gas or electricity.
Summary of Provisions:
New Business Provisions. Section 1 of the bill amends, without substantive change, the five-year new business period at Tax Law section 210.12(j)(3) during which a taxpayer is eligible for refund of the investment tax credit (ITC). The statute currently expresses the five-year concept as “more than four taxable years (excluding short taxable years) prior to the taxable year during which the taxpayer first becomes eligible for the investment tax credit.” This is changed to read simply “more than five taxable years (excluding short taxable years),” which is a more understandable expression of the concept. This change also removes uncertainty under the Empire Zones ITC as to how a taxpayer claiming credit there is to measure the five-year period. The Empire Zones ITC (see Tax Law section 210.12-B(d)) refers to section 210.12(j), thereby incorporating the period which under current law is measured by claiming the regular ITC.
Sections 9 and 10 of the bill identically amend, with respect to the above, the Article 32 bank franchise tax (Tax Law section 1456(i)(8)(A) and (C)) and the Article 33 insurance franchise tax (Tax Law section 1511(q)(7)(A) and (C)).
Bill section 2 makes conforming changes necessitated by the bill section 1 amendments.
Bill section 3 makes the same “five years” language change to the Article 22 personal income tax ITC at Tax Law section 606(a)(10) new (B). Like the Article 9-A language change described above, this amendment does not make a substantive change to the definition of a new business. Likewise, this change removes uncertainty under the Empire Zones ITC (see Tax Law section 606(j)(4)) as to how a taxpayer claiming credit there is to measure the five-year period.
Section 3 of the bill further amends the Article 22 ITC at Tax Law section 606(a)(10) to delete the condition in subparagraph (A) that a taxpayer does not qualify as a new business if he or she has previously claimed a refund of ITC. This condition limits a personal income tax (PIT) taxpayer to claiming a new business refund for investments made in only one of the five years of the new business period. There is no such condition for new business taxpayers under Article 9-A, so that corporate taxpayers which are new businesses can claim refund of the credit for investments made in each year of the five-year new business period. Further, this condition, because it is referenced in other new business credit refund provisions, precludes a PIT taxpayer from claiming a new business refund of certain other credits once a new business ITC refund is claimed. Thus, for example, an individual is ineligible to claim a refund of the qualified emerging technology company employment credit if he or she previously received a refund of the ITC. (See, for example, Tax Law section 606(q)(5)(A).)
Bill sections 4 through 6 coordinately amend Tax Law section 606(i)(B), which flows through S corporation credits to the shareholders under the PIT, to delete the condition that credit refund does not apply if the shareholder has previously claimed a refund of ITC. Amending three times is necessitated by varying effective dates of section 606(i) amendments enacted by Chapter 63, Laws of 2000.
Bill sections 7 and 8 make conforming changes necessitated by the bill section 3 amendments.
Empire Zones Provisions. Bill section 11 amends General Municipal Law section 969 to extend the Empire Zones Program from July 31, 2004, to December 31, 2020.
Bill section 12 amends Tax Law section 14 (the Empire Zones Program), to make various technical corrections. For purposes of Tax Law Articles 9-A, 22, 32 and 33, the benefit period (renamed the “business tax benefit period”) is defined (a) in the case of a business enterprise with a test date occurring on or before December 31, 2001, as the first 15 taxable years beginning on or after January 1, 2001, and (b) in the case of a business enterprise with a test date occurring on or after January 1, 2002, as the first 15 taxable years next following the business enterprise’s test year.
Section 12 of the bill also amends the benefit period for purposes of Tax Law Articles 28 and 29. The benefit period (renamed the “sales and use tax benefit period”) is amended to start such period of 120 months beginning on the later of (a) March 1, 2001, or (b) the first day of the month next following the date of certification by the Commissioner of Taxation and Finance pursuant to Tax Law section 14(h).
Section 12 of the bill amends the definition of “employment test” by providing that, if the base period is zero years and the enterprise has an employment number in an Empire Zone of greater than zero with respect to a taxable year, then the employment test will be met, provided that the taxpayer qualifies as a new business. The employment test definition is further amended to provide that, if there has been a change in zone boundaries or if there are newly designated zones and such change resulted in the inclusion of the taxpayer within such zone, then the employment test is to be determined with respect to a taxable year as if the boundaries of the revised zone on the last day of the taxable year existed during the base period. Where an area has been newly designated as an Empire Zone, the employment test will be determined with respect to a taxable year as if such newly designated zones existed during the base period. Lastly, the definition of “employment test” is amended to cover the situation where a business enterprise relocates to an Empire Zone from a business incubator facility. In that case, the employment test will be determined with respect to a taxable year as if such business enterprise was located in the zone during the base period.
Section 12 of the bill amends the definition of “test year” by providing that if a business enterprise does not have a taxable year that ends on or before the test date, the enterprise will be deemed to have such taxable year.
Section 12 of the bill amends the definition of “test date” to clarify that the term means the later of July 1, 2000, or the date prior to July 1, 2005, on which the business enterprise was first certified under General Municipal Law Article 18-B.
Bill section 12 amends the definition of “taxable year” to add Article 9 to the definition and to provide that if the business enterprise does not have a taxable year because it is exempt from taxation or otherwise not required to file a return under Tax Law Articles 9, 9-A, 22, 32 or 33, then the term “taxable year” means the business enterprise’s Federal taxable year, or, if the enterprise does not have a Federal taxable year, then calendar year.
Bill section 12 amends the definition of “employment number” to provide that such number will not include individuals employed by a related person, as such term is defined in Internal Revenue Code section 465(b)(3)(c), unless such related person was never allowed an Empire Zone tax credit with respect to such employee.
Bill section 12 makes technical changes to the sales and use tax exemption terminology used in subdivision (h) of section 14 to conform that terminology to that used in connection with current sales and use tax administrative practice.
Lastly, bill section 12 adds a definition of new business for purposes of QEZE benefits.
Section 13 of the bill amends the definition of “employment increase factor” within Tax Law section 15(d) (the QEZE credit for real property taxes) to provide that where an enterprise increases employment but the test year employment number is zero, the employment increase factor will be 1.0, provided that the taxpayer qualifies as a new business.
Section 13 of the bill also amends Tax Law section 15(e) to clarify that the term “eligible real property taxes” means taxes imposed on real property located in an Empire Zone at the time when the owner of the real property (i.e., the taxpayer claiming the credit) is both certified pursuant to General Municipal Law Article 18-B and a QEZE.
Section 14 of the bill amends the QEZE credit for real property taxes by adding a credit recapture provision where a taxpayer’s eligible real property taxes, which were the basis for the allowance of the credit, are subsequently reduced as a result of a final order in any proceeding under Article 7 of the Real Property Tax Law.
Section 15 of the bill amends Tax Law section 16 (QEZE tax reduction credit) to specifically set forth the computation of the zone allocation factor for purposes of the credit. Section 15 of the bill also amends the QEZE tax reduction credit tax factor to provide a method of calculating the credit for sole proprietors, partners, S corporation shareholders and combined filers.
Sales Tax Relating to Gas and Electric Service. Bill section 16 technically amends last year’s utility tax reform bill to clarify that the reduced rate of sales tax on the transportation, transmission or distribution (T&D) of electricity or gas under Tax Law section 1105-C will apply to sales of T&D in those areas of the State where the Public Service Commission (PSC) has approved the ’single retailer model' for the regulated utility operating within that area. To accomplish this, the bill adds a new subdivision (d) to section 1105-C of the Tax Law to make it clear that the reduced rate of tax on T&D will apply in those regions of the State where the competitive model approved by the PSC is the single retailer model. Under this model, a single retailer provides the customer with both the electricity and the T&D. Without this clarification, in light of the present structure, consumers in such an area would not be able to take advantage of the reduced rate when purchasing electricity or gas from unregulated vendors (who are referred to as energy service companies, “ESCOs”). One area of the State, the region served by Rochester Gas and Electric (RG&E), presently has the single retailer model.
Expansion of Empire Zones. Bill section 17 permits pre-existing Empire Zones that meet the criteria set forth in bill section 2, to expand beyond two square miles.
Bill section 18 establishes the criteria that would permit an Empire Zone to revise its boundaries to capture up to four square miles of eligible land. These criteria are based on combinations of population loss, low per capita personal income, and high unemployment in eligible counties. According to these criteria, Empire Zones within counties meeting the following criteria are eligible for such expansion: the zone is located outside the Metropolitan Commuter Transportation District and either the per capita personal income of the county in which the zone is located is 95 percent or less of the State average for 1998, and the county population decreased 2 percent or more between 1990 and 1999; or, the per capita personal income of the county in which the zone is located is 95 percent or less of the State average for 1998, and the average annual unemployment rate for 1999 in the largest city within that county is 130 percent or more of the State average, and the county population decreased between 1990 and 1999.
Existing Law:
New Business Provisions. With respect to the new business amendments, under the Articles 9-A, 32 and 33 franchise taxes, a corporation which is a subsidiary of a parent taxable under any of those Articles, or under Tax Law section 183, 184 or 185, is not a “new business” and is accordingly ineligible to claim refund of ITC. Under the Article 22 personal income tax, a taxpayer is entitled to claim ITC refund as a new business only once, so that even if ITC is earned in each of the five years of the new business period, it is refundable for only one of those years.
Empire Zones Provisions. With respect to the Empire Zones amendments, the Empire Zones program under the General Municipal Law is currently set to expire on July 31, 2004. This expiration date conflicts with the newly enacted Empire Zones Program Act which specifically includes within the potential base of qualified empire zone enterprises those businesses certified under Article 18-B of the General Municipal Law prior to January 1, 2005. Empire Zones are limited currently to no more than two square miles.
Under the Empire Zones Program Act, the income and corporate tax benefits apply to the 15 taxable years next following the business enterprise’s test year, but only for tax years with respect to which the employment test is met. The income and corporate benefits are applicable to taxable years beginning on or after January 1, 2001.
The sales and use tax benefits are available for each day of the ten taxable years next following the business enterprise’s test year, but only where the year in question immediately follows a year which meets the employment test. The sales and use tax benefits are available beginning March 1, 2001. In the case of an enterprise with a test date falling within the year 2000, the 10 and 15 year benefit periods start not in the year immediately following the test year, but in the year after that.
Under the current definition of “employment test,” it is not clear how the test is calculated if the base period is zero years. In addition, if there is a change in zone boundaries or new zones are designated, the employment test is silent as to how the employment test is to be calculated. Nor does the current definition of employment test provide a rule where a business enterprise relocates to an Empire Zone from a business incubator facility operated by a municipality or by a public or private not-for-profit entity.
The current definition of “test year” does not explicitly deem a test year for taxpayers who do not have a taxable year that ends on or before the test date.
The current definition of “test date” provides that it is the later of July 1, 2000, or the date prior to July 1, 2005, on which the business enterprise was certified under General Municipal Law Article 18-B.
A “taxable year” is currently defined as the taxable year of the business enterprise under Articles 9-A, 22, 32 or 33 of the Tax Law.
The term “employment number” is defined to mean the average number of individuals, excluding general executive officers (in the case of a corporation), employed full-time by the enterprise for at least one-half of the taxable year.
With respect to the QEZE sales and use tax provisions in subdivision (h) of section 14, the law currently provides that a QEZE applies to the Department of Taxation and Finance for a QEZE exemption certificate and that a QEZE furnishes an exemption purchase certification to vendors in order to receive its sales and use tax exemption.
With respect to the QEZE credit for real property taxes, the term “eligible real property taxes” is defined as taxes imposed on real property which is owned by the taxpayer and located in Empire Zones with respect to which the taxpayer is certified pursuant to Article 18-B of the General Municipal Law. The credit does not contain any recapture provision.
With respect to the QEZE tax reduction credit, no specific statutory rules are set forth to explain or limit the calculation of the tax factor where the taxpayer is a sole proprietor of a QEZE, a member of a partnership which is a QEZE or where the taxpayer is a shareholder of a New York S corporation which is a qualified empire zone enterprise. No specific rules are set forth for determining the tax factor where the taxpayer is required or permitted to make a report on a combined basis.
Sales Tax Relating to Gas and Electric Services. With respect to the sales tax on certain utility service, in Part Y of Chapter 63 of the Laws of 2000, the Legislature enacted a comprehensive energy tax reform program. As part of that program, Tax Law section 1105-C was added to Article 28 of the Tax Law. Section 1105-C reduced the sales tax on T&D on those sales that involved sales of electricity by an unregulated vendor (an ESCO) and delivery (sale of T&D) by the regulated utility operating in that particular area. The sales tax on the sale of unbundled T&D in these circumstances was, through a series of reductions, reduced to a zero percent rate on and after September 1, 2003.
Prior Legislative History: The 2000-01 Enacted Budget contained provisions creating the QEZE program including tax credits and sales and use tax exemptions. Sales tax provisions relating to sales of gas and electricity by an ESCO were included in the 2000-01 Enacted Budget.
Statement in Support:
New Business Provisions. The new business provisions of this bill eliminate unnecessary and probably unintended impediments to “new business” status. The bill clarifies the language of the five-year new business period for claiming refunds of credits both under the corporation franchise and personal income taxes, and eliminates restrictions on claiming such refunds under the personal income tax which are not present under the corporation tax. Refundable credits are important to new businesses during the start-up years, and encouraging new businesses in New York is important to the State’s economic revitalization. This bill makes the credit refunds operate as intended and ensures that Article 22 taxpayers are not penalized by their choice to do business in unincorporated form.
Empire Zones Provisions. With respect to the technical corrections relating to the Empire Zones program, extension of the Zone Program is essential for the operation of the Empire Zones Program Act. Currently, under the Empire Zones Program Act the last possible date for an enterprise to be certified under Article 18-B of the General Municipal Law and possibly qualify as a qualified empire zone enterprise is June 30, 2005. However, Zone designation ends July 31, 2004, and so qualified enterprises cannot be certified after that date. In addition, the Empire Zones Program Act was designed to provide income and corporate tax benefits to business enterprises for 14 years following an enterprise’s test year and sales and use tax benefits for each day of the ten taxable years next following the enterprise’s test year, but only for taxable years with respect to which the employment test is met. If Zone designation expires in 2004, then an enterprise will no longer be able to meet the employment test because the test is based upon a business enterprise’s employment number in Empire Zones. Thus, the expiration of the Empire Zones Program on July 31, 2004, effectively ends the tax benefits provided under the Empire Zones Program Act as well.
The technical corrections made to Tax Law section 14 are necessary to properly administer the tax benefits provided by the program. The amendments to the benefit periods for the income, corporate and sales and use tax benefits ensure that a taxpayer will receive the maximum number of tax years for such benefits. Under current provisions, given the interplay of the effective date of the program with the statutory provisions, a taxpayer (particularly a taxpayer which is a fiscal year filer rather than a calendar year filer) may not receive such benefits for the maximum period permitted by the Zones Program.
The changes to the various definitions contained within Tax Law section 14 were necessary for a number of reasons, as outlined below. Amending the definition of employment test is necessary to ensure that taxpayers new to New York, who, by definition, would not have a base year, are able to meet the employment test if they have at least one employee in an Empire Zone with respect to a taxable year. Similarly, it is not clear how the employment test would work where there was a change in the boundary line of an Empire Zone or where a zone has been newly designated. Lastly, the current definition would restrict the ability of a business enterprise to qualify as a QEZE if such taxpayer relocates to an Empire Zone from a business incubator facility.
The amendment to the definition of “test year” is important to ensure that those taxpayers who do not have a taxable year ending on or before the test date will be deemed to have such taxable year.
Under the Empire Zones Program, one company could have multiple certification dates for multiple business locations. The amendment to the definition of “test date” in the bill clarifies that it is the enterprise’s first certification date which begins the enterprise’s eligibility for benefits.
The definition of “taxable year” is amended to include Article 9 and to clarify that an enterprise must use its Federal taxable year or, if the enterprise does not have a Federal taxable year, then calendar year, if the enterprise does not have a taxable year because it is exempt from taxation or otherwise not required to file a return under Tax Law Articles 9, 9-A, 22, 32 or 33. It appears that the provisions added to the definition of “taxable year” were inadvertently omitted when the Empire Zones Program Act was enacted.
The bill amends the definition of “employment number” to specify that such number will not include individuals employed by a related person, as such term is defined in Internal Revenue Code section 465(b)(3)(c), unless such related person was never allowed an Empire Zones credit with respect to such employee. This provision is intended to prevent an abuse where two related corporations could “double dip”, for example, by having one corporation claim the Empire Zones wage tax credit for employees and then transfer those employees to a second related corporation which would count them toward its employment number.
The bill amends the definition of “employment increase factor” as contained within the QEZE credit for real property (which definition is also applicable to the QEZE tax reduction credit) to provide that if a taxpayer has an excess in its employment number and where the test year employment number is zero, then the employment increase factor will be 1.0, provided that the taxpayer qualifies as a new business. This amendment is necessary to ensure that a taxpayer is creating new jobs for purposes of the QEZE credit for real property and the QEZE tax reduction credit.
The bill also makes a technical correction to the QEZE credit for real property taxes, to clarify that the term “eligible real property taxes” means those taxes imposed on real property at a time when the taxpayer is certified pursuant to Article 18-B of the General Municipal Law. The bill also adds a recapture provision if the real property taxes which were the basis for the allowance of the credit are subsequently reduced as a result of a final order in any proceeding under Article 7 of the Real Property Tax Law. This recapture provision is necessary to avoid a taxpayer gaining an undue windfall.
The technical corrections made to the QEZE tax reduction credit in terms of providing a method of calculating the tax factor for sole proprietors, partners, New York S corporation shareholders and combined filers is essential for the proper administration of this credit.
Sales Tax Relating to Gas and Electric Services. With respect to amendments relating to sales tax on certain utility service, consumers in those areas of the State where the single retail model is operating should not be disadvantaged since they are unable to purchase T&D on a unbundled basis from the regulated utility operating in that area.
Expansion of Empire Zones. This bill would significantly enhance the ability of qualifying upstate Empire Zones, many of which have already exhausted their allotted two square miles, to expand and thereby utilize the remarkably attractive tax benefits associated with Empire Zones certification so as to encourage business development and create new jobs in the State.
The purpose of this bill is to amend Article 9-A of the Tax Law in relation to the calculation of the business allocation percentage for manufacturers and to gradually reduce and ultimately eliminate the alternative minimum tax imposed on general business corporations.
Summary of Provisions:
Business Allocation Percentage for Manufacturers. Section 1 of the bill adds a new subparagraph 10 to section 210.3(a) of the Tax Law to provide a specific business allocation percentage for manufacturers. This bill requires a manufacturer to utilize a business allocation percentage that is determined using a higher weighted receipts factor than other taxpayers under Article 9-A. The higher weighted receipts factor will be phased-in over five years beginning January 1, 2001. For taxable years beginning on or after January 1, 2001, and before January 1, 2003, a manufacturer will use a 60 percent weighted receipts factor. For taxable years beginning on or after January 1, 2003, and before January 1, 2004, a manufacturer will use an 80 percent weighted receipts factor. For taxable years beginning on or after January 1, 2004, and before January 1, 2005, a manufacturer will use a 90 percent weighted receipts factor. Lastly, for taxable years beginning on or after January 1, 2005, a manufacturer will use a 100 percent weighted receipts factor and the property and payroll factors will not be counted.
Clause B of this new subparagraph 10 sets forth the definition of a manufacturer. A “manufacturer” is defined as a taxpayer which during the taxable year is principally engaged in the production of goods by manufacturing, processing, assembling, refining, mining, extracting, farming, agriculture, horticulture, floriculture, viticulture, commercial fishing and research and development. In addition, in those cases where a combined report is filed by a group of corporations, the entire combined group shall be considered a “manufacturer” if the combined group during the taxable year is principally engaged in the activities described above. A taxpayer or combined group will be considered to be “principally engaged” in those activities if, during the taxable year, more than 50 percent of its gross receipts are derived from such activities. In determining a combined group’s gross receipts, intercorporate receipts shall be eliminated.
Section 2 of the bill amends section 210.3-a of the Tax Law to conform the definition of the alternative business allocation percentage for manufacturers with the provisions of new subparagraph 10 of section 210.3(a) added by section one of this bill.
Section 3 of the bill amends section 209-B of the Tax Law by adding new subdivision 2-c. Subdivision 2-c requires a manufacturer to determine the portion of its business activity carried on within the Metropolitan Commuter Transportation District by using a higher weighted receipts factor than other taxpayers under Article 9-A. This higher weighted receipts factor is phased-in and computed in the same manner as the new business allocation percentage for manufacturers added in section 1 of this bill.
Alternative Minimum Tax. Section 4 of the bill amends section 210.1(c)(ii) of the Tax Law by gradually reducing the amount of the alternative minimum tax. In 2001 and 2002, the rate will be 2 percent of the minimum taxable income base. In 2003, the amount will be 1 percent of the minimum taxable income base. In 2004, the amount will be one-half percent of the minimum taxable income base. In 2005 and after, the rate will be zero.
Existing Law:
Business Allocation Percentage for Manufacturers. Under Article 9-A of the Tax Law, business income and business capital are apportioned to New York based on a taxpayer’s business allocation percentage. In general, the business allocation percentage is the average of three factors: a property factor, a payroll factor and a receipts factor. In calculating the factors, the taxpayer compares the amount of the property, payroll or receipts in New York, with the taxpayer’s respective amounts of property, payroll and receipts wherever located. In determining the New York business allocation percentage, the receipts factor is given double weight in comparison to the property and payroll factors. Thus, half of the business allocation percentage is based on the taxpayer’s receipts factor, while the property and payroll factors each comprise one-quarter of the business allocation percentage.
An annual surcharge is imposed on any corporation exercising its corporate franchise, doing business, owning or leasing property, employing capital, or maintaining an office in the area described as the Metropolitan Commuter Transportation District. The surcharge applies only to the portion of tax attributable to activity conducted in the district, measured by the average of the percentages of tangible property, receipts and payroll within the district. This apportionment formula generally tracks the business allocation percentage used to allocate a corporation’s business income within the State. However, the receipts factor is not double-weighted.
Alternative Minimum Tax. Currently the alternative minimum tax is two and one-half percent of a taxpayer’s minimum taxable income base.
Prior Legislative History: A single receipts factor for manufacturers has not been previously introduced. The AMT was reduced from 3.0 percent to 2.5 percent in the 1999-2000 Enacted Budget.
Statement in Support:
Business Allocation Percentage for Manufacturers. This bill will reduce the net tax burden on manufacturing companies by phasing-in and eventually using a manufacturing company’s receipts factor only when determining that company’s share of income to be apportioned to New York. Under the Tax Law’s current allocation method used for apportioning a manufacturing company’s New York income, many traditional upstate based New York manufacturing industries compute higher payroll (i.e., employment) and property (i.e., facilities) factors as compared to their receipts factor. This is due to the fact that these New York “export” industries sell a high percentage of their products outside New York which allows them to allocate the receipts from those sales outside New York. Accordingly, these manufacturing taxpayers incur a larger tax liability than they would encounter under a system that does not use an apportionment formula that places half its weight on a taxpayer’s property and payroll factors. Moreover, these same manufacturing companies are discouraged from increasing their employment and expanding their facilities in New York because such activities would result in an increase in their New York tax liability under the present three factor apportionment system. Accordingly, this bill will help reduce the tax liability of manufacturers in New York and also encourage them to retain and expand their facilities, other property and employment in New York.
Alternative Minimum Tax. This bill will reduce the tax for taxpayers that currently pay under the State minimum taxable income base because of the use of tax credits, or Federal preference items (such as accelerated depreciation for the purpose of the Federal alternative minimum tax). Many of these taxpayers have invested in New York and have earned tax credits or have claimed accelerated depreciation that is classified as a tax preference item for Federal purposes. These companies have been prevented from taking full advantage of their State tax credits or deductions by the alternative minimum tax. The phase-down and eventual elimination of the alternative minimum tax will help restore the full value of the State tax credits and deductions. In addition, the elimination of the alternative minimum tax will significantly reduce administrative complexity for taxpayers and simplify the tax forms.
The purpose of this bill is to encourage the maintenance, restoration and improvement of agricultural land by amending the Article 9-A corporation franchise tax and Article 22 personal income tax to extend the agricultural property tax credit to taxpayers who own agricultural assessment property leased to another person, and to provide a tax credit for soil improvement projects and farmland improvement projects.
Summary of Provisions: Bill section 1 states that it is the policy of the Legislature to encourage the maintenance of existing farmland and to provide for the restoration of agricultural lands for farming purposes.
Extension of Agricultural Property Tax Credit. Section 2 of the bill amends the agricultural property tax credit under the Article 9-A franchise tax to extend the credit to owners of agricultural assessment property which is leased to another person. “Agricultural assessment property” is defined at new Tax Law section 210.22(d)(3) to be land which receives, or is eligible to receive, an agricultural assessment under section 305 or section 306 of the Agriculture and Markets Law, and land improvements, structures and buildings (excluding buildings used for the taxpayer’s residential purpose) located on such land which are used or occupied to carry out agricultural production.
Bill section 2 also makes a clarifying, non-substantive change to the agricultural property tax credit to delete from the definition of “eligible farmer,” and add to the conditions for credit, the provision that an owner under a land contract, and not the record owner, is the owner entitled to claim credit.
Bill section 6 makes the same amendments to the agricultural property tax credit under the Article 22 personal income tax.
Tax Credit for Soil Improvement Projects and Farmland Improvement Projects. Bill section 3 amends section 210 of the Tax Law by adding a new subdivision 35 to provide a credit to taxpayers equal to 25 percent of the taxpayer’s eligible expenditures with respect to a soil improvement project or a farmland improvement project which meets certain specified requirements. The soil improvement project must restore land for agricultural production purposes by improving land which has not been used in agricultural production for at least two years prior to the completion of the soil improvement project. Eligible expenditures for a soil improvement project are defined as fees for architectural, archeological, geological and engineering services, the cost of developing plans and specifications, fees for consultant and legal services and direct expenses related to the project implementation. Direct expenses are those expenditures listed in section 175(1)(c) of the Internal Revenue Code, expenditures related to the application of lime on and the installation of tile in the land which is the subject of the soil improvement project, and expenditures related to the construction and installation of fences and the repair of fences and silos which are required as part of the soil improvement project. The farmland improvement project must consist of activities relating to the construction of fencing, the installation of fencing, the repair of fencing or the repair of silos, or any combination of these activities on farmland. For this purpose, farmland means any land which receives or is eligible to receive an agricultural assessment pursuant to section 305 or 306 of the Agriculture and Markets Law for the taxable year.
In no event may the credit exceed $10,000 with respect to any particular soil improvement project or farmland improvement project. The credit may not reduce the taxpayer’s tax to less than the higher of the alternative minimum tax base or the fixed dollar minimum tax base. Any excess may be carried forward and applied against the taxpayer’s tax in future years. While a taxpayer will be allowed to claim a credit for both a soil improvement project and a farmland improvement project in the same taxable year, a taxpayer is allowed to claim each credit only once. The taxpayer will be required to recapture the credit allowed within 60 months, if the land which is the subject of the soil improvement project or farmland improvement project is not used in agricultural production.
Bill section 7 amends section 606 of the Tax Law to add a comparable credit for personal income taxpayers in new subsection (hh). Under section 606(hh), the credit may not reduce the taxpayer’s tax to less than zero and any excess may be carried forward.
Bill sections 4 and 5 make the necessary amendments to section 606(i) of the Tax Law to allow S corporation shareholders to claim the credit for soil improvement projects and farmland improvement projects.
Existing Law:
Extension of Agricultural Property Tax Credit. The agricultural property tax credit is a refundable credit available under the Article 9-A corporation franchise tax and the Article 22 personal income tax, to taxpayers which are eligible farmers and which own land used in agricultural production. An eligible farmer is a taxpayer whose gross income from farming is at least 2/3 of the amount of gross income from all sources in excess of $30,000. The credit is for the amount of school district property taxes paid during the taxable year. However, if acreage used in agricultural production exceeds 250 (plus acreage under Federal set-aside) the credit is for 50 percent of the taxes on the acreage in excess of 250. The credit amount phases down to zero between $100,000 and $150,000 of modified adjusted gross income (AGI). Modified AGI is AGI reduced by principal payments on farm indebtedness.
Under Article 25AA of the Agriculture and Markets Law, land used in agricultural production is eligible for an agricultural assessment. Land used in agricultural production generally means not less than ten acres of land used as a single operation in the preceding two years for the production for sale of crops, livestock or livestock products of an average gross sales value of $10,000 or more.
Tax Credit for Soil Improvement Projects and Farmland Improvement Projects. Current law does not contain any tax credits specifically intended to encourage landowners to make soil improvements necessary to restore the land for agricultural production purposes. In addition, current law does not contain any tax credits specifically intended to encourage landowners to make necessary farmland improvements. However, a taxpayer may be entitled to a deduction for some of those expenses, if the taxpayer is using the property for business purposes.
Prior Legislative History: The tax credit for soil improvement projects and farmland improvement projects is new legislation. The school district tax credit contained in this bill is similar to those contained in legislation, Senate 5900 and Senate 4285/Assembly 7377, introduced in 1999. Senate 5900 remained in the Senate Investigations, Taxation, and Government Operations Committee and Senate 4285/Assembly 7377 remained in the Senate Investigations, Taxation and Government Operations Committee and in the Assembly Ways and Means Committee at the close of the 2000 session.
Statement in Support:
Extension of Agricultural Property Tax Credit. The bill recognizes the need to motivate non-farmer owners of farmland to enter into business relationships with those that can work and maintain the land as a productive resource. The potential for tax savings will encourage landowners to seek out potential renters for their idle land, and to consider either making the investments in fences, farm roads, and other improvements necessary to make the land attractive to a farmer, or to sign a multi-year agreement under which the farmer might make this investment on his own. The financial benefits of this new credit may be shared between the landowner and the farmer. This proposal represents an important first step in dealing with the stewardship of farmland resources by non-farmer owners.
This bill will further achieve the purpose of the Farmers’ School Property Tax Relief Program by allowing participation by landowners who pay school property taxes on agricultural assessment property which is leased to another person. Rented land comprises a substantial portion of total available agricultural acreage in New York. Although eligible for an agricultural assessment pursuant to the Agricultural Districts Law, rented land is not covered in the Farmers’ School Property Tax Relief Program. Landowners, who may rent up to 100 percent of their agricultural acreage, are not presently authorized to take advantage of this important tax break available to farmer landowners. As a result, there is no significant incentive to rent their land to farmers.
Farmers whose operations are located on land where suburban and rural areas come together need to rent significant portions of their acreage because they cannot afford to own the land which is often valued for development purposes. Allowing landowners to receive a tax credit for school property taxes paid on that land will effectively assist farmland restoration and preservation efforts and keep agricultural landscapes in New York State. It will provide farmers with better access to land needed to ensure the economic viability of their farms, including land which may otherwise be sold or leased for development.
Tax Credit for Soil Improvement Projects and Farmland Improvement Projects. More farmers must be enabled to compete for land for farming purposes against those who are simply looking for the cheapest sites on which to locate new warehouses, shopping centers, and low-density housing developments. There are several million acres of open “farmland” in New York State that are owned by non-farmers. Demographic trends suggest that the non-farmer owned area will continue to grow at the expense of owner-operated farms. Some of the land owned by non-farmers is currently rented to farmers, but an even larger share is found in the tens of thousands of parcels of “ex-farmland” which lie virtually neglected from a land management perspective, gradually growing up to second-growth forest. An effective policy to deal with the loss of New York’s agricultural base must include incentives to keep in or return to production under sound long-term management practices farmland that is not farmer-owned.
The State Constitution charges the people of New York with encouraging the development and improvement of agricultural lands for the production of food and other agricultural products, as well as to provide for the conservation of soil and water resources of the State. Agricultural production has become an increasingly competitive industry, which accounts for farms going out of business and land out of production. A limited amount of funds are available for long term agricultural land retention strategies such as purchase of development rights. At the same time, many farmers are seeking land to supplement their current land base. Due to competing interests for the land, depressed farm incomes, and costs of improving the land to an acceptable level of productivity, farmers are experiencing difficulty in acquiring additional lands for their operations. This bill will provide tax incentives to maintain existing farmland and restore other land to agricultural production. This, in turn, will help protect the long-term agricultural base, preserve the open space benefits and protect water quality.
The purpose of this bill is to amend the Tax Law, in relation to providing a tax credit under Article 9-A (corporation franchise tax) and Article 22 (personal income tax) for qualified conservation contributions.
Summary of Provisions: Section 1 of the bill amends Article 9-A by adding a new subdivision 34 to section 210, providing a qualified New York conservation contribution credit. A taxpayer will be allowed a credit for qualified New York conservation contributions made during the taxable year. A qualified New York conservation contribution is defined by reference to Federal law (Internal Revenue Code section 170(h)(1)). Under Federal law, a qualified conservation contribution is a contribution of a qualified real property interest to a qualified organization exclusively for conservation purposes. The amount of the credit is equal to 25 percent of the taxpayer’s qualified conservation contribution which qualifies for deduction for the taxable year under Internal Revenue Code section 170(a), provided that the qualified real property interest is located within New York State and without regard to the limitations set forth in Internal Revenue Code section 170(b). The total amount of the credit may not exceed $250,000 with respect to any taxable year. The credit is not refundable but any excess may be carried over for five taxable years.
Bill section 2 amends Tax Law section 606(i)(B), which flows through S corporation credits to the shareholders under the personal income tax, to provide the credit.
Section 3 of the bill amends Article 22 (personal income tax) to add the qualified New York conservation contribution credit at section 606 (gg). Its provisions parallel section 210.34..
Existing Law: There is currently no credit for qualified conservation contributions available under Tax Law Articles 9-A or 22. However, when calculating Federal income tax, a taxpayer is allowed an itemized deduction for qualified conservation contributions pursuant to IRC section 170, and such itemized deduction flows into the New York itemized deduction without change (Tax Law section 615). Article 49 of the Environmental Conservation Law provides the statutory basis for conservation easements, the purpose of which is to preserve or maintain the scenic, open, historic, archaeological, architectural, or natural condition, character, significance or amenities of the real property in a manner consistent with the public policy.
Prior Legislative History: This is new legislation.
Statement in Support: This bill will help further the conservation goals of the State and its local governments by providing a tax credit to encourage landowners to donate real property or other interests in real property, such as conservation easements, to non-profit organizations or to governmental entities for conservation purposes.
The purpose of this bill is to provide taxpayers/homeowners with an economic incentive to help revitalize older neighborhoods by providing a State tax credit for rehabilitating an historic home.
Summary of Provisions: A new subsection (ii) is added to section 606 of the Tax Law to provide that a taxpayer shall be allowed a credit against personal income tax equal to either 15 percent or 25 percent of the qualified rehabilitation expenditures made by the taxpayer with respect to a qualified historic home. A credit in the amount of 15 percent would be allowed for qualified rehabilitation expenditures if only the exterior work has been approved by a local landmarks commission or by the Office of Parks, Recreation and Historic Preservation. A credit in the amount of 25 percent would be allowed for qualified rehabilitation expenditures that have been approved by the Office of Parks, Recreation and Historic Preservation or by a local government certified pursuant to section 101(c)(l) of the National Historic Preservation Act (16 USCS § 470a). For the 25 percent credit, approval is necessary for both exterior work and interior work affecting primary significant historic spaces.
For any residence of a taxpayer, the credit allowed may not exceed $50,000. If the credit allowed for any taxable year exceeds the taxpayer’s tax for such year, the excess credit may be refunded.
The bill defines a “qualified rehabilitation expenditure” as any amount properly chargeable to a capital account in connection with the certified rehabilitation of a qualified historic home for property for which depreciation would be allowable under section 168 of the Internal Revenue Code if the qualified historic home were used in a trade or business. It will not include any expenditure in connection with the rehabilitation of a building unless at least 5 percent of the total expenditures are allocable to the rehabilitation of the exterior of the building. The total expenditures must total $20,000 or more. However, in the case of qualified historic home which is a targeted area residence under section 143(j) of the Internal Revenue Code or is located in a State Empire Zone, the expenditures must total $5,000 or more. A targeted area residence is a building located within a census tract in which 70 percent or more of the families have income which is 80 percent or less of the statewide median income or in an area of chronic economic distress.
A “qualified historic home” means a certified historic structure which has been substantially rehabilitated and which is owned by the taxpayer and is used or will be used by the taxpayer as a residence during the taxable year in which the taxpayer is allowed the credit.
A “certified rehabilitation” is any rehabilitation of a certified historic structure which has been approved and certified as being consistent with the standards established by the Commissioner of Parks, Recreation and Historic Preservation for rehabilitation by the Office of Parks, Recreation and Historic Preservation, by a local government certified pursuant to section 101 (c)(1) of the National Historic Preservation Act or by a local landmark commission established pursuant to section 96-a or 119-dd of the General Municipal Law. A certified rehabilitation will have three steps. The first step will be the initial certification that the structure meets the definition of the term “certified historic structure”. The second certification will be issued prior to construction and will certify that the proposed rehabilitation work is consistent with standards established by the Commissioner of Parks, Recreation and Historic Preservation for rehabilitation. The third step is the final certification which will be issued when construction is completed. The final certification will certify that the work was completed as proposed and that the costs are consistent with the work completed.
In the case of a building other than a qualified purchased historic home, qualified rehabilitation expenditures will be treated as being made on the date of the final certification of the rehabilitation. For purchased qualified historic homes, the taxpayer will be treated as having made the qualified rehabilitation expenditures made by the seller of the home on the date of purchase. The bill defines “purchased qualified historic home” as any substantially rehabilitated certified historic structure purchased by the taxpayer if the taxpayer is the first purchaser of such structure after the date of the final certification of the rehabilitation and the purchase occurs within five years after such date. The structure must be the residence of the taxpayer during the year the taxpayer is allowed the credit. In this instance, no tax credit may be allowed to the seller of the residence.
The bill further provides that if, before the end of the two year period beginning on the date of the final certification of the rehabilitation or, if applicable, the date of the purchase of the building, the taxpayer disposes of his or her interest in the building or the building ceases to be used as the taxpayer’s residence, the taxpayer’s tax for the taxable year in which such disposition or cessation occurs will be increased by the recapture portion of the credit allowed for all prior taxable years with respect to the rehabilitation. The recapture portion would equal the product of the amount of credit claimed multiplied by a ratio, the numerator of which is 24 minus the number of months the building is used as the taxpayer’s residence and the denominator of which is 24.
Existing Law: Currently there is no State tax credit for the rehabilitation of historic homes used as residences.
Prior Legislative History: A similar bill, A. 00042, has been introduced for the 2001 legislative session and has been referred to the Assembly Ways and Means Committee. Similar legislation was introduced in the Senate during the 2000 legislative session and in 1997.
Statement in Support: This bill establishes a financial incentive for rehabilitating historic residential property in the State. In return for rehabilitating such properties, taxpayers will receive a State tax credit. In essence, the bill accomplishes a dual purpose: it provides an incentive for taxpayers to preserve a dwindling asset of the State -- historic homes; and it provides another mechanism to promote the rehabilitation of vital housing stock.
There also are fiscal gains that result from these “historic home improvement” projects. The National Trust for Historic Preservation has determined the public benefits of a $200,000 rehabilitation to be as follows:
(a) 2.6 construction jobs and 2.2 related jobs resulting in $134,160 wages paid;
(b) $10,205 more per year in income taxes paid;
(c) sales taxes paid in the amount of $16,214; and
(d) additional annual property taxes of $3,000 to $4,000 on the rehabilitated property, in addition to returning previously abandoned or delinquent properties to the tax rolls.
For these reasons, the bill will have an important impact on the revitalization of abandoned or decaying neighborhoods, promoting neighborhood stability, reducing blight and enhancing nearby property values. Similar legislation introduced at the Federal level was endorsed by the National Conference of Mayors.
The purpose of this bill is to increase to $4 million the aggregate dollar amount of low-income tax credits that may be allocated to eligible investors in low-income housing.
Summary of Provisions: Section 1 of the bill amends subdivision 4 of section 22 of the Public Housing Law to increase the aggregate dollar amount of tax credits, which the Commissioner of the Division of Housing and Community Renewal (DHCR) may allocate to eligible low-income buildings, from $2 million to $4 million.
Existing Law: Subdivision 4 of section 22 of the Public Housing Law currently allows the Commissioner of DHCR to allocate a total of $2 million of low-income housing tax credits. This $2 million in credit allocation by the Commissioner can be claimed each year for ten years, for a total credit allowed over the ten-year life of the Program of $20 million.
Prior Legislative History: This proposal is an expansion of the Governor’s 2000-01 Enacted Budget.
Statement in Support: The State Credit program is modeled after the Federal Low-Income Housing Tax Credit (LIHC) Program. LIHC is currently the most efficient and successful housing production program in the country. The program provides tax benefits (“credits”), rather than appropriated funds, to developers who invest their own funds in housing for low-income persons and families. The demand for credit in New York State far exceeds the supply.
DHCR has consulted with for-profit and not-for-profit housing developers, bankers, syndicators and other government housing agencies in promulgating regulations to enact the State Tax Credit Program. These housing professionals have expressed reservations about the program due to the limited availability of funds for the State Credit Program. Increasing the allocation of credits to $4 million would help encourage developers and investors to devote substantial resources to the program.
The purpose of this bill is to allow biotechnology companies to claim a refund of their investment tax credits.
Summary of Provisions: Bill section 1 amends section 210.12 of the Tax Law to allow biotechnology companies which do not qualify as new businesses to claim a refund of their investment tax credits. To be eligible to claim the refund, a biotechnology company must satisfy three requirements. First, it must be primarily engaged in applying technologies to produce or modify products, improve plants or animals, to develop microorganisms for specific uses, to identify targets for pharmaceutical development, or 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 cannot be 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, must be less than 100.
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 base 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 as an overpayment of tax to be credited or refunded.
Prior Legislative History: This proposal was part of the Governor’s 2000-01 Executive Budget.
Statement in Support: Small biotechnology companies in New York State have a great need for cash to fund their research. When these companies are new businesses, the refundable investment tax credit provides them with a needed source of cash. This bill will allow those companies which do not qualify as new businesses, either because they no longer are considered to be new businesses or because they never satisfied the new business requirements, to use their investment tax credit as a source of cash.
The purpose of this bill is to redistribute revenues received from certain motor vehicle fees from the General Fund to the Dedicated Highway and Bridge Trust Fund in order to fund the snow and ice control expenses of the Department of Transportation which are also being moved from the General Fund to the Trust Fund.
Summary of Provisions: Section 1 provides for the deposit, beginning April 1, 2001, into the Dedicated Highway and Bridge Trust Fund of moneys now deposited into the General Fund pursuant to the Vehicle and Traffic Law. The specific amounts listed ($169 million in State fiscal year 2001-02, $171.6 million in State fiscal year 2002-03, and $152.7 million in State fiscal year 2003-04), represent motor vehicle fees not previously earmarked that are necessary to provide adequate coverage for the bonds that are sold and backed by the Dedicated Highway and Bridge Trust Fund.
Existing Law: The motor vehicle fees being directed into the Dedicated Highway and Bridge Trust Fund pursuant to this bill are now deposited into the General Fund.
Prior Legislative History: None.
Statement in Support: This bill provides for the dedication of additional existing revenues into the Dedicated Highway and Bridge Trust Fund necessary to improve the debt service coverage ratio of the Dedicated Highway and Bridge Trust Fund Bond Program, thereby allowing the State to continue to issue Dedicated Fund bonds to fund the transportation capital program in future years. A minimum revenue to debt service ratio of 2:1 is required as a test for authorizing the issuance of additional Dedicated Highway and Bridge Trust Fund bonds.
The shift is revenue neutral since an equivalent amount of disbursements for the Department of Transportation’s snow and ice, arterial maintenance, and bus inspection programs will also be moved from the General Fund to the Dedicated Highway and Bridge Trust Fund.
The purpose of this bill is to extend for four years the temporary MTA tax surcharges imposed under Articles 9, 9-A, 32 and 33 of the Tax Law to help finance mass transportation expenditures in the Metropolitan Commuter Transportation District.
Summary of Provisions: Sections 1 through 7 of the bill amend sections 183-a, 184-a, 186-c, 189-a (Article 9), 209-B (Article 9-A), 1455-B (Article 32) and 1505-a (Article 33) of the Tax Law , respectively, by extending the MTA surcharges imposed in the Metropolitan Commuter Transportation District through taxable years ending prior to December 31, 2005 (or June 30, 2005 with respect to section 189-a).
Section 8 of the bill permits taxpayers to avoid penalty on unpaid installments of estimated MTA surcharge due on March 15, 2001, (or on April 15 in the case of certain fiscal filers) where such payments are made by the first date following April 15, 2001 on which such an installment is due, if the legislation is not enacted by March 15, 2001.
Existing Law: Under current law, the MTA surcharges are imposed for taxable years ending before December 31, 2001.
Prior Legislative History: The MTA surcharge was last extended for four years as part of Chapter 59 of the Laws of 1997.
Statement in Support: This legislation is necessary to assist with the financing of mass transportation expenditures in the Metropolitan Commuter Transportation District. The Metropolitan Commuter Transportation District has relied on these funds in the past and needs continued funding for the future.
The purpose of this bill is to extend the sunset date of certain provisions of the Tax Law and the Administrative Code of the City of New York relating to the taxation of banking corporations.
Summary of Provisions: Section 1 of the bill amends section 51 (the effective date provision) of Chapter 298 of the Laws of 1985, as amended, to extend for one additional year (to January 1, 2002) the provisions of such chapter which relate to commercial banks. Chapter 298 significantly revised the New York State and New York City franchise taxes imposed on all banking corporations. Section 51 of that chapter provides that its amendments, other than those which relate to savings banks and savings and loan associations and to the alternative minimum tax measured by assets, sunset for taxable years beginning on or after January 1, 2001.
Section 2 of the bill amends subdivisions (d) and (f) of section 110 (the effective date provision) of the Business Tax Reform and Rate Reduction Act of 1987 (L. 1987, Ch. 817) to extend for one additional year (to January 1, 2002) the provisions concerning the bad debt deduction for commercial banks for New York State franchise tax purposes. To prevent a windfall to New York State, the Business Tax Reform and Rate Reduction Act of 1987 decoupled from the changes made by the Federal Tax Reform Act of 1986 with regard to the bad debt deduction. This decoupling was effective for taxable years beginning on or after January 1, 1987. However, the provisions concerning the bad debt deduction for commercial banks sunset for taxable years beginning on or after January 1, 2001.
Section 3 of the bill amends subdivisions (c) and (d) of section 68 (the effective date provision) of Chapter 525 of the Laws of 1988 to extend for one additional year the amendments to the bad debt deduction for commercial banks for the New York City banking corporation franchise tax. Chapter 525 is the New York City equivalent to the Business Tax Reform Rate and Reduction Act of 1987 and this bill section parallels bill section 2.
Section 4 of the bill extends for one additional year the transitional provisions in Tax Law section 1452 relating to the enactment and implementation of the Federal Gramm-Leach Bliley Act which eliminated many of the prohibitions against the affiliation of banks, insurance companies and securities firms. This extension is accomplished by adding a new subsection (i) to Tax Law section 1452. This new subsection is the same as subsection (h) of section 1452, except that it applies by its terms to taxable years beginning on or after January 1, 2001 and before January 1, 2002.
Section 5 of the bill adds a new subparagraph (v) to Tax Law section 1462 (f)(2) to extend for one additional year the right of a financial holding company to file a combined report, or avoid filing a combined report, with 65 percent or more owned subsidiary banking corporations.
Section 6 of the bill adds a new subsection (h) to section 11-640 of the New York City Administrative Code that parallels the amendment to Tax Law section 1452 made in section 4 of the bill.
Section 7 of the bill adds a new subparagraph (v) to section 11-646(f)(2) of the New York City Administrative Code to extend for one additional year the right of a financial holding company to file a combined report, or to avoid filing a combined report, with 65 percent owned subsidiary banking corporations.
Existing Law: Chapter 298 of the Laws of 1985 made several changes to the franchise tax on banking corporations under the Tax Law and the Administrative Code of the City of New York. Many of those amendments, however, were made subject to a sunset provision (extended numerous times since 1985) providing that they would no longer be effective as to commercial banks for taxable years beginning on or after January 1, 2001. Similarly, amendments made by Chapter 817 of the Laws of 1987 and Chapter 525 of the Laws of 1988 relating to bad debt deductions of commercial banks under the Tax Law and the Administrative Code of the City of New York also sunset for such years.
Tax Law section 1452(h) establishes transitional provisions relating to the Federal Gramm-Leach-Bliley Act which removed the prohibition against the affiliation of banks, securities firms and insurance companies. Under the transitional provisions, a banking corporation in existence before January 1, 2000, that was subject to tax under Article 32 of the Tax Law remains taxable under Article 32 in 2000. A corporation in existence before January 1, 2000, that was subject to tax under Article 9-A during 1999 remains taxable under this article in 2000. A corporation formed on or after January 1, 2000, and before January 1, 2001, may elect to be taxed under either Article 32 or Article 9-A if it is either (1) a “financial subsidiary” as defined in Tax Law section 1452(h), or (2) owned 65 percent or more by a financial holding company (as defined in Tax Law section 1450(h)) and is principally engaged in activities which are financial in nature or incidental to financial activities as described in sections 4(k)(4) or 4(k)(5) of the Federal Bank Holding Company Act of 1956, as amended (and regulations promulgated thereunder). These transitional provisions apply to taxable years beginning on or after January 1, 2000, and before January 1, 2001. Thus, these transitional provisions sunset for taxable years beginning on or after January 1, 2001.
Section 11-640(g) of the Administrative Code of the City of New York sets forth parallel transitional provisions for purposes of the franchise taxes imposed by the City of New York.
Tax Law section 1462(f)(2)(iv) provides that a financial holding company, for its taxable year beginning on or after January 1, 2000 and before January 1, 2001, may be included in a combined return with any banking corporation whose voting stock is 65 percent or more owned or controlled, directly or indirectly, by that financial holding company, without seeking permission from the Department of Taxation and Finance, provided both companies are taxpayers in New York. In addition, the Department of Taxation and Finance may not require a financial holding company to file a combined return with any banking corporation whose voting stock is 65 percent or more owned or controlled, directly or indirectly by that financial holding company. These provisions apply only to financial holding companies which register for the first time to be bank holding companies on or after January 1, 2000, and before January 1, 2001 . Registration as a bank holding company is a general prerequisite to becoming a financial holding company.
Section 11-646(f)(2)(i) of the Administrative Code of the City of New York establishes similar provisions allowing combination of such corporations for purposes of the franchise taxes imposed by the City of New York.
Prior Legislative History: The bank tax was last extended for four years in 1997 under provisions of Chapter 59 of the Laws of 1997. Transitional provisions relating to the Federal Gramm-Leach-Bliley Act allowing certain entities to maintain their taxable status in 2000 were enacted in the 2000-01 Enacted Budget.
Statement in Support: (a) Extension of Bank Tax. Several provisions of State and New York City law which relate to the taxation of commercial banks sunset for taxable years beginning on or after January 1, 2001. The consequences of allowing these provisions to sunset are significant. Because commercial banks will not know whether or to what extent the expired amendments will be reinstated, they will be compelled to keep two sets of books and records, one based on the pre-1985 law and one based on the law as amended by Chapters 298, 817 and 525. This uncertainty would significantly complicate the computation by the banks of their estimated tax liability. There will be confusion for certain taxpayers regarding their taxable status, if they became subject to the bank tax only as a result of Chapter 298. Such taxpayers will be taxable under the State and City franchise taxes on general business corporations if the amendments sunset and will owe estimated tax under those taxes.
Allowing the amendments to sunset would resurrect certain problems that Chapter 298 was intended to solve. Since the amendments applicable to thrifts and the calculation of their tax liability do not sunset, thrifts and commercial banks will once again be taxed under different schemes. If the amendments sunset, commercial banks will be required to allocate their income and expenses by the method they used prior to the enactment of Chapter 298 in 1985. Before 1985, most commercial banks used separate accounting as their allocation method. This caused significant administrative and auditing problems for the New York State Department of Taxation and Finance and the New York City Department of Finance. Further, the sunset of the amendments will eliminate combined reporting for commercial banks and reinstate consolidated reporting.
Finally, the sunset of the amendments made by Chapter 817 of the Laws of 1987 and Chapter 525 of the Laws of 1988 will, in effect, conform New York’s bad debt deduction for commercial banks to the present Federal bad debt deduction scheme put in place by the Tax Reform Act of 1986, a policy rejected by New York State in 1987 and New York City in 1988.
The provisions of Chapter 298 of the Laws of 1985 which relate to the taxation of commercial banks and the bad debt provisions for commercial banks included in Chapter 817 of the Laws of 1987 and Chapter 525 of the Laws of 1988 have been effective in accomplishing their legislative goals. It is appropriate, therefore, to extend these provisions at this time. This action will eliminate the uncertainty the commercial banks presently face with regard to their taxable status in New York and will avoid the problems and undesired results described above.
(b) Extension of Gramm-Leach-Bliley Transitional Provisions. The Federal Gramm-Leach-Bliley Act enacted in 1999 allows banks, insurance companies and securities firms for the first time to freely affiliate. This dramatic change on the Federal level prompted the formation of a task force by the Department of Taxation and Finance to review State tax statutes to determine the most appropriate way of taxing these industries as the lines between them blur. It also resulted in the passage of transitional provisions by the State and City of New York to guide financial institutions in the proper filing and reporting of tax liability while these issues were being studied.
These transitional provisions, however, expire for tax years beginning after December 31, 2000. Without these provisions, businesses in the financial industry may encounter unexpected tax consequences or be left with difficult uncertainties concerning their tax status. This comes about by the fact that, in order to affiliate, the banking, securities and insurance industries must do so under the umbrella of a financial holding company. Since most financial holding companies are, by definition, bank holding companies, securities firms making the financial holding company election and their subsidiaries may find themselves subject to liability under the Bank Tax provisions of Article 32 (i.e., Tax Law section 1452(a)(9)). This sudden reclassification of a company from an Article 9-A taxpayer to an Article 32 taxpayer will cause a considerable administrative and compliance burden. In addition, in light of the expanded activities that may be engaged in by financial subsidiaries, these companies may have a difficult time determining whether or not they meet the requirements of section 1452(a)(9) and should be classified as an Article 32 taxpayer. Moreover, the ability of such companies to join in the filing of a combined report is left open to question. Comparable issues exist for financial holding companies and their affiliates under the New York City General Corporation Tax and Banking Corporation Tax.
This bill extends for one additional year the transitional relief passed last year. This extension allows taxpayers to retain their taxable status during 2001 and allows financial subsidiaries and newly formed companies owned or controlled by financial holding companies to elect to be taxed for their taxable years beginning in 2001 under either Article 9-A or Article 32 and the comparable provisions of the New York City General Corporation Tax and Banking Corporation Tax. It also authorizes bank holding companies present in New York that elect to become financial holding companies in 2001 to file combined reports with 65 percent or more owned subsidiaries or to avoid combination with such subsidiaries. The extensions are set forth in newly added provisions to the Tax Law and the Administrative Code of the City of New York which follow similar provisions enacted in 2000, except that these new provisions apply to taxable years beginning on or after January 1, 2001, and before January 1, 2002. During this one year extension, it is anticipated that the government/industry task force will continue its work in examining the most appropriate way to tax the financial sector in this new environment of free affiliation between banks, securities firms and insurance companies.
The purpose of this bill is to make permanent the Division of the Lottery’s authority to operate the Quick Draw game.
Summary of Provisions: Section 1 of part J of Chapter 405 of the Laws of 1999 is amended to delete the automatic expiration of the laws authorizing the Quick Draw game on March 31, 2001.
Existing Law: Current law includes a sunset provision which automatically repeals the authorization to operate the Quick Draw game on March 31, 2001.
Prior Legislative History: The Quick Draw game was reauthorized last year, and is set to expire again on March 31, 2001. Prior to reauthorization, the game was shut down for a period of several months.
Statement in Support: Quick Draw has been operated by the Division of the Lottery, with an interruption of several months last year, since September 1995. By the end of October 2000, Quick Draw reached the $2.5 billion mark in sales since inception while generating over $750 million for education and $150 million to Lottery retailers as commissions. Ticket sales during State fiscal year 1999-2000 were over $328 million. In that fiscal year, Quick Draw produced over $100 million in earnings which were available for aid to education, representing more than 6 percent of total Lottery profits. During 2000-01, Quick Draw is averaging over $9.6 million in weekly sales. Quick Draw continues to bring in a major portion of the Lottery’s aid to education. For State fiscal year 2001-02, it is anticipated that Quick Draw sales will approximate $500 million and total revenues in support of education are estimated at $154.2 million.
This bill seeks to safeguard these revenues by making the Quick Draw game’s authorization permanent. Permanent authorization may also have the effect of encouraging retailers who are reluctant to offer the game because of concerns about its stability to register to sell the game, resulting in an increase in Quick Draw sales and revenue.
The purpose of this bill is to repeal an obsolete multi-jurisdiction lottery provision and replace it with a new provision authorizing any joint, multi-jurisdiction, and out-of-state lottery game adopted in accordance with the existing statutory requirements for Lottery planning and reporting.
Summary of Provisions: Subdivision (a) of Tax Law section 1604 is amended to add to the existing list of Division of the Lottery powers the authority to cooperate with other jurisdictions in joint, multi-jurisdiction, and out-of-state lottery games. Paragraph 3 of subdivision a of Tax Law section 1612 is amended to permit use of up to 50 percent of sales proceeds to pay prizes in joint, multi-jurisdiction, and out-of-state lottery games. Tax Law section 1617 is repealed and replaced by a new section 1617 providing for joint, multi-jurisdiction, and out-of-state lottery games, including a combined drawing, a combined prize pool, and such other cooperative arrangements as may be necessary or desirable.
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. That is an unrealistically low level which has never been used successfully in a joint or multi-jurisdiction lottery game. Typically, joint or multi-jurisdiction lottery games 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: Senate Bill 3975 was introduced in 1999 and 2000. The bill died in the Racing, Gaming and Wagering Committee.
Assembly Bill 7509 was introduced in 1999 and 2000. The bill died in the Racing, Gaming and Wagering Committee.
The Budget Bill 9295 included the joint, multi-state, or out-of-state proposal as part of an omnibus tax legislation in 2000. This bill died in the Ways and Means Committee.
Statement in Support: The bill allows the Division of the Lottery to participate in joint, multi-jurisdiction, and out-of-state lottery games and to use 50 percent of sales proceeds for prizes. Research indicates that 21 percent of New York Lottery players currently 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 benefitting 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. 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.
The purpose of this bill is to amend the Tax Law and the Administrative Code of the City of New York, in relation to the credit and deduction for college tuition under the personal income tax.
Summary of Provisions: Section 1 of the bill amends Tax Law section 606(t), concerning the personal income tax credit or deduction for college tuition expenses enacted in Chapter 63, Laws of 2000. The amendments make three changes to the statutory scheme:
(a) The dollar limitation on tuition expenses of $10,000 per year is expanded to $10,000 per year for each student.
(b) A single dollar limitation of $10,000 per year for each student is made applicable to a husband and wife (whether filing jointly or separately.)
(c) A dependent student will not be entitled to claim the credit or deduction. Any tuition paid by a dependent student will be attributed to the parent and used by the parent to claim the credit or deduction.
Bill section 2 makes a conforming amendment to the New York City personal income tax, adding the tuition deduction to the City Resident Income Tax in the New York City Administrative Code.
Existing Law: As enacted by Chapter 63, Laws of 2000, Tax Law sections 606(t) and 615(d)(4) provide a credit or itemized deduction for qualified college tuition expenses, phasing in over the four years, 2001 through 2004. When fully phased in, the maximum deduction is $10,000 per year, and the maximum credit is 4 percent of the deduction, or $400.
Prior Legislative History: The college tuition deduction or credit was passed as a portion of the 2000-01 New York State Budget and is effective beginning in the 2001 tax year.
Statement in Support: The bill will enable a larger credit or deduction to taxpayers paying higher tuitions and having more than one student in college at the same time. The bill also will shift the credit or deduction for tuition paid by a dependent child to the parent, which, in the case of the deduction, will maximize the value of the deduction at the parent’s presumably higher tax rate. Also, this treatment conforms to the Federal treatment of dependent-paid tuition under the Federal credits for college tuition (see IRC section 25A(g)(3)), and so may minimize errors in claiming the New York credit.
The purpose of this bill is to make permanent the provisions pertaining to the payment of mandatory surcharges and the crime victims assistance fee.
Summary of Provisions: The bill would amend subdivision (p) of section 406 of Chapter 166 of the Laws of 1991 to make permanent the provisions pertaining to the payment of mandatory surcharges pursuant to section 1809-a of the Vehicle and Traffic Law and would repeal subdivision eight of section 1809 of the Vehicle and Traffic Law to similarly make permanent the mandatory surcharges and the crime victims assistance fee paid pursuant to its provisions.
Existing Law: Under current law, the provisions pertaining to the mandatory surcharges and the crime victims assistance fee expire on October 31, 2001 (section 1809), and November 1, 2001 (section 1809-a).
Prior Legislative History: Chapter 452, Laws of 1999, previously extended these provisions through 2001.
Statement in Support: The bill would preserve the State’s current revenue structure.
The purpose of this bill is to change the method of calculating the tobacco products tax imposed by Article 20 of the Tax Law on moist snuff from a percentage of wholesaler’s price to a tax based on weight in ounces.
Summary of Provisions: Bill section 1 adds a new definition to the Article 20 tobacco products tax for moist snuff.
Bill section 2 amends subdivision 1 of Tax Law section 471-b to provide a change in the method of calculating the Article 20 tobacco products tax on moist snuff from a 20 percent tax on the wholesaler’s price to a tax of 39 cents per ounce.
Bill section 3 amends subdivision 1 of Tax Law section 471-c to change the use tax on tobacco products in the same manner as set forth in amended subdivision 1 of section 471-b.
Bill sections 4 and 5 amend subdivision 1 of Tax Law section 473-a and Tax Law section 474 to provide for procedural amendments to reflect the change in the method of calculating the Article 20 tobacco products tax on moist snuff from a percentage of wholesaler’s price to a tax based on weight in ounces. Section 473-a deals with the returns which must be filed by tobacco products distributors, while section 474 relates to records which must be kept by transporters, dealers and distributors.
Existing Law: Moist snuff is currently taxed at 20 percent of the wholesale price.
Prior Legislative History: None.
Statement in Support: The current system of taxing moist snuff is based on a percentage of the wholesale price. As a result, premium-priced brands are taxed at a higher rate than less expensive brands (i.e., value brands). This differential is not present in the imposition of other excise taxes, such as on motor fuel, alcohol beverages and cigarettes, where the rate of tax is based on the volume. By changing the calculation of the tax from a percentage of the wholesale price to a volume-based rate, all moist snuff will be taxed at an equal rate.
The Fiscal Plan impacts below have been incorporated into the 2001-02 Financial Plan and enactment of this bill is necessary to implement the 2001-02 Executive Budget.
The expansion of the Empire Zones is estimated to result in a revenue loss of $83 million in State fiscal year 2002-03. This reduction in revenues has been reflected in the Financial Plan and, as a result, enactment of this bill is necessary to implement the 2001-02 Executive Budget. The technical changes relating to new businesses and Empire Zones have no fiscal impact for the 2001-02 Financial Plan. With respect to the sales tax amendment on T&D services, there is no fiscal impact because legislation passed last year anticipated that customers in single-retailer territories within the State would qualify for the reduced rate if they purchased their energy from an ESCO.
The revenue loss in 2001-02 is estimates at $23.3 million.
The bill has no fiscal cost in 2001-02. This bill will result in a revenue loss of $3 million in State fiscal year 2002-03 and $13 million per year in subsequent years.
This bill has no fiscal cost in fiscal 2001-02 and an anticipated $3 million cost in 2002-03.This bill will reduce tax revenues by $13 million, when fully effective.
This bill will reduce revenues by $3 million in State fiscal year 2002-03 and by $10 million thereafter. The bill has no fiscal cost in 2001-02.
This bill would reduce tax revenues by $2 million beginning in State fiscal year 2001-02. As with the existing program, since the additional $2 million in credit allocation by the Commissioner of DHCR can be claimed each year for ten years, the total credit allowed over the 10-year life of the Program expansion would be an additional $20 million, for a total program amount of $40 million.
The revenue loss will be $1 million starting in 2001-03.
Certain Fund redistributions have been incorporated into the Financial Plan accompanying the 2001-02 Executive Budget. Approximately $169 million of motor vehicle fees that would otherwise have been deposited into the General Fund will be shifted to the Dedicated Highway and Bridge Trust Fund in State fiscal year 2001-02.
This bill maintains the existing annual revenue stream available to support transportation services in the Metropolitan Commuter Transportation District, mitigating the need for fare increases.
This act has no fiscal impact for the 2001-02 Financial Plan. This legislation preserves receipts under existing statute.
It is estimated that enacting this legislation will produce net increases in revenue for education of $151.8 million in 2001-02 and thereafter.
This legislation will produce net increases in revenue for education of $125 million in 2001-02.
This bill will ensure that the college tuition deduction and credit conform to the intent, and thus fiscal impact, of the original legislation passed last year.
Without this legislation, the State will suffer a loss of $25 million in revenues in 2001-02 and $71 million in 2002-03 and thereafter. Similarly, the cities that now receive half of the mandatory surcharge for parking, stopping, and standing violations will lose revenue of $7 million in 2001-02 and $21 million in 2002-03 and thereafter.
This bill would produce a minimal revenue gain.
Sections 1 through 11, 14 and 15 of this act shall take effect immediately and apply to taxable years beginning on and after January 1, 2001, provided, however, that section 5 of this act shall take effect on the same date as section 3 of part E of Chapter 63 of the Laws of 2000 takes effect; section 6 of this act shall take effect on the same date as the repeal of section 47 of part Y of Chapter 63 of the Laws of 2000 takes effect; sections 12 and 13 of this act shall take effect immediately and apply to taxable years beginning on and after January 1, 2001, however, the amendments made by sections 12 and 13 of this act which define the term “new business” in subdivision (j) of section 14 of the Tax Law and reference such definition shall apply to taxable years beginning on and after July 1, 2004 and will not be applicable to any taxpayer which was a QEZE for a taxable year beginning prior to July 1, 2004. Section 16 of this act shall take effect June 1, 2000, and shall apply to sales made, services rendered and uses occurring on and after such date although made, rendered or occurring under a prior contract. Where service is purchased or sold on a monthly, quarterly or other basis, and the bills for such service are based on meter readings, the amount received on each bill for such service for a month or other term shall be a receipt or consideration subject to tax, but such taxes shall be applicable to all bills based on meters read on and after June 1, 2000, only where more than one-half of the number of days included in the month or other period billed are days subsequent to May 31, 2000.
This act shall take effect immediately.
This act shall take effect immediately and apply to taxable years beginning on or after January 1, 2002.
This act shall take effect immediately and apply to taxable years beginning on and after January 1, 2002.
This act shall take effect immediately and apply to taxable years beginning on or after January 1, 2002.
This act shall take effect immediately.
This act shall take effect immediately and apply to taxable years on or after January 1, 2002.
This act shall take effect April 1, 2001.
The bill shall take effect immediately and shall apply to taxable years beginning on and after January 1, 2001.
This act shall take effect immediately and remain in effect through December 31, 2001; provided, however, that sections four through seven of this act shall apply to taxable years beginning on or after January 1, 2001.
This act shall take effect immediately.
This act shall take effect immediately.
This act shall take effect immediately.
This act shall take effect April 1, 2001.
This act shall take effect on the first day of the month next succeeding 90 days after the date on which this act shall have become law and shall apply to moist snuff which first becomes subject to taxation under Article 20 of the Tax Law on or after such date.