A BUDGET BILL submitted by the Governor in Accordance with Article VII of the Constitution
AN ACT 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, and 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; and to amend the tax law, in relation to permitting certain banking corporations otherwise subject to tax under article 32 of the tax 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 the administrative code of the city of New York to be taxed under subchapter 2 of such code (Part A); to amend the tax law, in relation to simplifying the tax on insurance corporations to eliminate the tax on such corporations based on income, capital or subsidiary capital; to repeal various sections of article 33 of the tax law relating thereto; to amend the tax law, in relation to the tax on insurance corporations based on income, capital or subsidiary capital; to repeal subparagraph 15 of paragraph (a) of subdivision 9 of section 208 of the tax law relating to the determination of entire net income of an attorney-in-fact for a mutual insurance company which is an interinsurer or reciprocal insurer; and to amend the insurance law, in relation to annuities and providing for the repeal of such provisions of the insurance law upon expiration thereof (Part B); to amend the tax law, in relation to exemptions from sales and compensating use taxes for certain clothing and footwear (Part C); to amend the tax law, in relation to certain fees imposed on limited liability companies and limited liability partnerships (Part D); to amend the real property tax law, in relation to providing refunds of real property taxes paid by qualified empire zone enterprises and to amend the tax law, in relation to the credit for real property taxes provided to qualified empire zone enterprises (Part E); to amend the tax law, in relation to establishing income modifications for certain deductions claimed with respect to sport utility vehicles (Part F); to amend the tax law, in relation to payments of estimated tax by partnerships, limited liability companies, and S corporations on behalf of certain partners, members and shareholders (Part G); 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 (Part H); to amend the tax law, in relation to establishing certified capital company program four to encourage investments in high technology companies through state supported research centers (Part I); and to amend the tax law, in relation to enhancing the provisions relating to the operation of video terminals at race tracks; and to amend chapter 383 of the laws of 2001 amending the tax law relating to authorizing the division of the lottery to conduct a pilot program involving the operation of video lottery terminals at certain race tracks, in relation to eliminating the expiration of and making permanent certain provisions thereof (Part J)
This bill contains provisions needed to implement the Revenue portion of the 2003-04 Executive Budget.
This bill makes permanent certain provisions of the Tax Law and the Administrative Code of the City of New York relating to the taxation of banking corporations and to extend for one year the applicability of the transitional provisions relating to the enactment and implementation of the Federal Gramm-Leach-Bliley Act.
Section 1 of the bill amends section 51 (the effective date provision) of Chapter 298 of the Laws of 1985, as amended, to make permanent 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, 2003.
Section 2 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 make permanent the provisions concerning the bad debt deduction for commercial banks for New York State franchise tax purposes. In order 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, 2003.
Section 3 amends subdivisions (c) and (d) of section 68 (the effective date provision) of Chapter 525 of the Laws of 1988 to make permanent 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 extends for 1 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 (j) to Tax Law section 1452. This new subsection is the same as subsections (h) and (i) of section 1452, except that it applies by its terms to taxable years beginning on or after January 1, 2003, and before January 1, 2004.
Section 5 amends subparagraph (iv) of section 1462(f)(2) of the Tax Law to extend for 1 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 adds a new subdivision (i) to section 11-640 of the New York City Administrative Code that parallels the amendment to Tax Law section 1452 made in section 4.
Section 7 amends subparagraph (iv) of subdivision (f) of section 11-646 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 avoid filing a combined report, with 65 percent or more owned subsidiary banking corporations.
Section 8 provides that the bill takes effect immediately.
Chapter 298 of the Laws of 1985 made significant 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 providing that they would no longer be effective as to commercial banks for taxable years beginning on or after January 1, 1990. This sunset provision has been extended numerous times since 1990. These provisions are currently expired. They are not effective for taxable years beginning on or after January 1, 2003. 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 sections 1452(h) and (i) establish 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 in subsection (h), 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. The transitional provisions in subsection (i) are substantively the same and apply to taxable years beginning on or after January 1, 2001, and before January 1, 2003. Thus, these transitional provisions sunset for taxable years beginning on or after January 1, 2003.
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, 2003, 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, 2003. 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 regarding combination of such corporations for purposes of the franchise taxes imposed by the City of New York.
The amendments made by Chapter 298 of the Laws of 1985, Chapter 817 of the Laws of 1987 and Chapter 525 of the Laws of 1988 first were scheduled to sunset in 1990. They have been extended numerous times since then. The Gramm-Leach-Bliley transitional provisions were first enacted in 2000 and were extended once for 2 years.
Making the Bank Tax Provisions Permanent:
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, 2003. 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 2 sets of books and records, 1 based on the pre-1985 law and 1 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 make these provisions permanent. 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.
Extension of the 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 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, 2002. 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 find themselves unwittingly subjecting themselves 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 the transitional relief 1 additional year. This extension allows taxpayers to retain their taxable status during 2003 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 2003 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 2003 to file combined reports with 65 percent or more owned subsidiaries or to avoid combination with such subsidiaries. During this 1 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.
This bill simplifies Article 33 of the Tax Law by eliminating the tax on insurance corporations under such article based on income so that the only tax base under Article 33 shall be insurance premiums.
Section 1 of the bill amends subdivision (e) of section 1500 of the Tax Law to delete from the definition of “taxpayer” in such subdivision the reference to section 1501 of the Tax Law, which is repealed by this bill.
Section 2 repeals subdivisions (g), (h), (i) and (j) of section 1500 of the Tax Law which contain definitions that relate to sections of Article 33 of the Tax Law that are repealed by this bill.
Section 3 repeals section 1501 of the Tax Law which imposes taxes on every insurance corporation exercising its franchise, doing business, employing capital, owning or leasing property, or maintaining an office in New York.
Section 4 repeals section 1502 of the Tax Law which provides for the computation of the taxes imposed under section 1501.
Section 5 amends subdivision (a) of section 1502-b to eliminate the reference therein to section 1501 of the Tax Law, which is repealed by this bill.
Section 6 repeals section 1503 of the Tax Law which provides for the computation of entire net income.
Section 7 repeals section 1504 of the Tax Law which provides for the allocation of entire net income and capital to New York for purposes of determining an insurance corporation’s tax liability.
Section 8 repeals section 1505 of the Tax Law which establishes a maximum tax liability of every insurance corporation based on a percentage of such corporation’s premiums on risks resident or located in New York.
Section 9 amends subdivision (a) of section 1505-a of the Tax Law relating to the Metropolitan Commuter Transportation District surcharge by providing that the surcharge is based on the portion of taxable premiums of each insurance corporation carrying on business in the District that are written on risks located or resident in such District.
Section 10 amends paragraph 2 of subdivision (d) of section 1505-a of the Tax Law to provide that any retaliatory tax credit relating to the tax surcharge imposed by such section shall apply only for retaliatory taxes imposed or assessed for taxable years beginning before January 1, 2003. As so amended, section 1505-a(d) allows the credit if the retaliatory tax is paid after January 1, 2003, so long as the retaliatory tax relates to the doing of business in another state during taxable years beginning before January 1, 2003.
Section 11 amends subdivision (e) of section 1505-a of the Tax Law to change the reference to Tax Law section 1501(b) therein to section 1510(b) (which describes life insurance companies that cease to be authorized to do business in New York State but continue to receive premiums on risks resident or located in the State).
Section 12 amends section 1510 of the Tax Law to provide for a premiums based tax for all insurance corporations (except captive insurance companies and others expressly excepted from taxation) carrying on business in New York. The rate of tax is set at 2 percent of premiums written, procured or received on risks resident or located in New York. This section also provides that, in calculating the direct premiums that are taxable, an insurance corporation may deduct from total gross premiums the premiums it receives by way of reinsurance from unauthorized insurance corporations if such reinsurance premiums relate to excess line insurance transactions authorized under the Insurance Law and if the excess line tax imposed by section 2118 of the Insurance Law is payable with respect to the transaction. This bill section also amends paragraph 2 of subdivision (c) of section 1510 to delete the exception for ocean marine insurance in the paragraph. The effect of this latter amendment is to include this type of insurance in the base subject to the premiums tax. Section 12 also adds a new subdivision (d) to section 1510 to provide that the minimum tax under section 1510 shall be $250.
Section 13 amends paragraph 1 of subdivision (c) of section 1511 of the Tax Law to provide that the credit for retaliatory taxes paid to another state or states by domestic insurance corporations shall apply only for retaliatory taxes paid to such state or states for the privilege of doing business therein for taxable years beginning before January 1, 2003. As so amended, section 1511(c) allows the credit if the retaliatory tax is paid after January 1, 2003, so long as the retaliatory tax relates to the doing of business in another state during taxable years beginning before January 1, 2003.
Section 14 amends paragraph 2 of subdivision (e) of section 1511 of the Tax Law to provide that the credit established in such subdivision shall not reduce the tax payable to less than the minimum tax fixed by Tax Law section 1510(d) (which is set at $250).
Sections 15 – 27 make similar amendments to other subdivisions of section 1511 of the Tax Law to provide that the credits established in such subdivisions shall not reduce the tax payable to less than the minimum tax set forth in Tax Law section 1510(d). Section 18 also amends subparagraph (3) of Tax Law section 1511(h), relating to the empire zone capital credit, to limit the effect of this subparagraph to taxable years beginning before January 1, 2003, because the subparagraph requires a modification of entire net income of an insurance company under certain circumstances, and this tax base is eliminated by the bill.
Section 27-a repeals subdivision (s) of section 1511 of the Tax Law.
Section 28 amends subdivision (t) of section 1511 of the Tax Law by redesignating this subdivision as subdivision (s). The existing language of subdivision (t) is added to this newly designated subdivision (s), except that the reference in existing subdivision (t) to the limitation on tax pursuant to section 1505 of the Tax Law is deleted since Tax Law section 1505 is repealed by this bill.
Section 29 amends subdivision (c) of section 1512 of the Tax Law to eliminate reference to taxes imposed under section 1501, which is repealed by this bill.
Section 30 amends subdivision (b) of section 1513 of the Tax Law to eliminate the reference therein to the tax imposed under section 1501.
Section 31 amends paragraph 2 of subdivision (a) of section 1514 of the Tax Law (relating to the mandatory first installment of estimated taxes for certain life insurance corporations) by providing that the 40 percent mandatory installment established in the paragraph only applies to taxable years beginning before January 1, 2003.
Section 32 amends subdivisions (e) and (f) of section 1514 of the Tax Law by eliminating the references therein to sections 1503 and 1501, respectively.
Section 33 repeals subdivisions (f) and (g) of section 1515 of the Tax Law relating to the filing of combined reports by certain insurance corporations and their affiliates, and the discretion of the Commissioner of Taxation and Finance to adjust items of income, deduction, and capital in certain circumstances. These subdivisions are no longer necessary when premiums are the sole base of taxation.
Section 34 amends subdivision (j) of section 14 of the Tax Law to remove the reference therein to subdivision (s) of Tax Law section 1511 (relating to the QEZE tax reduction credit for insurance corporations) which is removed from Article 33 by this bill.
Section 35 amends subdivision (a) of section 16 of the Tax Law to remove the reference therein to Article 33 of the Tax Law.
Section 36 amends subdivision (f) of section 16 of the Tax Law (relating to the QEZE tax reduction credit) to remove references therein to section 1502 of the Tax Law (which is repealed by this bill), Article 33, and “entire net income plus compensation,” which is a tax base established in section 1502 of the Tax Law.
Section 37 amends subdivision (g) of section 16 of the Tax Law to remove the reference therein to Article 33 of the Tax Law.
Section 38 repeals subparagraph 15 of Tax Law section 208.9(a) relating to the deduction of certain amounts paid to an attorney-in-fact for a mutual insurance company that is a reciprocal insurer. This deduction was allowed to such an attorney-in-fact because the reciprocal insurer for which it acted reported entire net income to New York State that was increased due to the Federal election specified in subparagraph 15. Since the entire net income base of taxation for insurance companies is eliminated by this bill, the deduction allowed to such an attorney-in-fact is no longer appropriate.
Section 39 amends paragraph 1 of subsection (e) of Tax Law section 1085 relating to penalties for underpayment of estimated tax to provide that corporations taxable under Article 33 of the Tax Law for taxable years beginning on or after January 1, 2003, that either have entire net income of $1 million or more in any of the three preceding taxable years, or taxable premiums of $3.75 million in any of such preceding taxable years cannot utilize the exceptions for addition to tax established in paragraphs 1 and 2 of subdivision (d) of Tax Law section 1085.
Section 40 amends paragraph 2 of Insurance Law section 4223(c) to reduce the statutory minimum annuity nonforfeiture interest rate from 3 percent to 1 1/2 percent.
Section 41 provides that the bill shall be effective immediately and apply to taxable years beginning on or after January 1, 2003, except that the amendment made by section 12 of the bill to Tax Law section 1510(c)(3) applies retroactively to taxable years beginning on or after January 1, 1990. This amendment also provides that claims for credit or refund based solely on this amendment, that would be barred by the statute of limitations contained in Tax Law section 1087, may nevertheless be filed by a taxpayer if the otherwise barred claim is filed within 120 days of the date that section 12 takes effect. Section 41 also provides that the amendment made to Insurance Law section 4223 by section 40 shall take effect on July 1, 2003 and shall sunset and be deemed repealed on June 30, 2005. However, section 41 further provides that any annuity contract entered into after the effective date of the amendment made by section 40 and prior to the repeal of this provision shall remain in effect and be valid after the repeal date.
Article 33 of the Tax Law imposes tax on every insurance corporation exercising its franchise, doing business, employing capital or owning or leasing property in New York State. The basic tax is set forth in Tax Law sections 1501 (which imposes the tax) and 1502 (which explains the way to determine the amount of tax) and is the highest of the tax calculated on several different bases, including allocated entire net income, capital, entire net income plus compensation of officers and certain corporate stockholders, and the minimum tax of $250. A separate additional tax based on the capital of the taxpayer’s subsidiaries allocated to New York is also imposed. A further additional tax is imposed under section 1510 on the premiums of authorized insurance companies on risks resident or located in New York.
Article 33 also contains a provision that limits the amount of tax that may be imposed under sections 1501 and 1510. The limitation is contained in Tax Law section 1505 and is currently 2 percent of premiums.
A tax surcharge is also imposed under section 1505-a for insurance corporations in the Metropolitan Commuter Transportation District. The surcharge is currently 17 percent of the tax imposed under sections 1501 and 1510 allocated to the District, with the taxes imposed under these sections based on the rates in effect prior to 2000.
The current tax imposed on insurance corporations in New York is complicated, in large part due to the several bases that are used to determine total tax liability. This bill would simplify the way New York taxes insurance companies and would conform the State’s insurance corporation tax to the system of taxation used by most other states, which is a tax based solely on premiums. Such a premiums based tax is simpler to understand and administer. Furthermore, a review of these other states’ taxes shows that a rate of 2 percent of premiums written, received or procured by insurance companies, as proposed in this bill (except for captive insurance corporations), is near the median of such other states’ rates.
This bill: changes the year-round State and local sales and compensating use tax clothing and footwear exemption to an exemption during 4 7-day exemption periods each year; raises the dollar limit on the price of an exempt item from under $110 to under $500; authorizes localities to elect the amended exemption and authorizes localities flexibility in electing the amended exemption and repealing the year-round exemption during a transition period.
Section 1 amends the “permanent” year-round exemption in section 1115(a)(30) of the Tax Law for certain clothing costing less than $110 per item and footwear costing less than $110 per pair of shoes or other articles of footwear from the State’s sales and compensating use taxes. The exemption is amended to apply only during 4 7-day periods beginning on the Tuesday before Dr. Martin Luther King Jr. Day and ending on such day, beginning on the first Saturday in April and ending on the following Friday, beginning on the second Saturday in July and ending on the following Friday, and beginning on the Tuesday before Labor Day and ending on Labor Day. Also, the dollar limitation of the price per item of exempt clothing or per pair of shoes or other articles of footwear is increased from $109.99 to $499.99.
Section 2 makes conforming amendments to section 1210(k) of the Tax Law, which authorizes New York City to adopt a resolution to elect the clothing/footwear exemption from the local 4 percent sales and use taxes imposed in the city (the “MAC taxes” or “local NYC taxes”) by section 1107 of the Tax Law; that is, to specify that the exemption would apply during the same periods that it applies to the State’s taxes, in accordance with applicable sales/use tax transitional provisions.
Section 3 is an unconsolidated provision authorizing counties, cities and school districts which impose general sales and use taxes pursuant to section 1210(a)(1) or 1211 of the Tax Law and New York City where the local NYC MAC taxes are in effect (together, “localities”), to make certain elections, or not, relating to the transition period between the bill’s enactment and the date the amended clothing/footwear exemption takes effect on June 1, 2003. Bill section 3(a)(1) provides that, if a locality which already has the “permanent” exemption in effect or had already elected it to take effect at a future date wants the amended exemption to take effect on June 1, 2003, or at such future date, then such locality need not do anything. Bill section 3(a)(2) provides that if a locality currently has the permanent exemption in effect but does not want the amended exemption to take effect on June 1, 2003 (that is, it would have no clothing/footwear exemption at all), then it must enact a model enactment prepared by the Commissioner of Taxation and Finance and give proper notice to the Commissioner at least 40 days prior to June 1, 2003, the date section 1 of the bill becomes effective. Upon enactment of this Budget Bill on or before April 1, 2003, such a locality will have to act expeditiously to accomplish all of the following tasks by April 21, 2003, to meet the statutory 40 day notice requirement prior to June 1, 2003: (1) schedule its local legislative body to meet, (2) request the model enactment from the Commissioner of Taxation and Finance, (3) hold its meeting and adopt its enactment and (4) mail a certified copy of the enactment to the Commissioner.
Section 3(b) provides that a locality which does not have the permanent exemption in effect as of the date the bill is enacted or which had elected it to take effect at some future date, but wishes to elect the amended exemption to take effect on June 1, 2003, can do so by adopting a model enactment and mailing a certified copy of it to the Commissioner of Taxation and Finance at least 40 days prior to June 1, 2003. Such a locality will also have to act expeditiously to accomplish all of the above tasks by April 21, 2003, to meet the statutory 40 day notice requirement prior to June 1, 2003. A locality acting under section 3(a) or (b) will also have to comply with the usual rules in section 1210(a)(1), (d) and (e) and New York City would also have to comply with section 1210(k) as amended by bill section 2, in regard to other mailing and notice requirements. A school district would have to comply with the mailing and notification requirements of section 1211(d) and (e).
Once the transition period provided for in section 3 is over and the State’s amended clothing/footwear exemption has taken effect on June 1, 2003, localities will continue to be able to elect or repeal the amended exemption under section 1210 of the Tax Law, just as they did the permanent exemption. Likewise, any such election or repeal of the amended exemption must take effect only on March 1 each year, in accordance with section 1210(d) and (e) or 1211(d) and (e) of the Tax Law.
Section 4 provides that sections 1 through 3 of the act shall not be construed as either a failure or refusal to continue to impose the section 1107 local New York City MAC taxes on clothing and footwear for the periods they would be exempt from tax or a reduction in the rate of MAC taxes on such clothing and footwear during such periods. Except during such periods, if New York City elects for the amended exemption to apply during such periods, purchasers of clothing and footwear in New York City would continue to be subject to the local New York City MAC taxes on their clothing and footwear purchases, vendors of such clothing and footwear would still be required to collect and pay over such MAC taxes, the Commissioner of Taxation and Finance would still be required to collect and account for such local MAC taxes, and the State Comptroller would still be required to deposit and pay over such taxes, as required under existing provisions of law, as if the act did not become law.
Section 5 provides that the bill takes effect immediately; but, section 1 will take effect on June 1, 2003, and apply in accordance with the usual transitional provisions of sections 1106 of the Tax Law.
Section 1115(a)(30) of the Tax Law exempts clothing and footwear to be worn by human beings (as defined in section 1101(b)(15) of the Tax Law) from the State’s sales and use taxes imposed by sections 1105(a) and 1110 of such law, if the cost per item of clothing or per pair of shoes or other articles of footwear is less than $110. Sections 1210(a)(1) and 1211 of the Tax Law authorize counties, cities and school districts which impose the general sales and use taxes pursuant to section 1210 (counties and cities) or section 1211 (school districts) to elect the same clothing/footwear exemption from their local taxes. Section 1210(k) authorizes New York City to elect to provide the exemption from the local New York City MAC taxes imposed by section 1107 in the city, by enacting a resolution set out in section 1210(k)(2). If the city enacts the resolution as prescribed, then section 1107 is deemed to be amended to provide the clothing/footwear exemption as if enacted by the State Legislature and approved by the Governor.
Section 1210(d) of the Tax Law provides that a county or city can elect the clothing/footwear exemption effective only on March 1 of a given year and can repeal any such exemption effective only on March 1 of the same or a subsequent year. Section 1210(d) also provides that, for any such enactment to be given effect, the county or city must mail a certified copy of its enactment by certified or registered mail to the Tax Commissioner at the Commissioner’s Albany office at least 90 days prior to its effective date. However, the Commissioner can waive and reduce such 90-day period to a period of not less than 30 days if the Commissioner deems it consistent with the Commissioner’s duties under Article 29 of the Tax Law to do so. In addition, section 1210(e) of the Tax Law provides that, for any enactment governed by section 1210(d) to be effective, the county or city must also mail certified copies of the enactment to the Secretary of State, State Comptroller and the county or city clerk. Section 1211, subdivisions (d) and (e), provide similar requirements for school districts.
Section 1109(f) of the Tax Law provides that the clothing/footwear exemption is not automatically incorporated into the section 1109 MCTD, 0.25 percent taxes, as other State sales/use tax exemptions usually are. Section 1109(g) authorizes a county or city located in the MCTD to elect the current clothing/footwear exemption from its local taxes. The MCTD consists of seven downstate counties and New York City. If a county or city elects the exemption from its local sales/use taxes, then the exemption would also apply to the State’s section 1109, 0.25 percent rate of taxes imposed in the area of the MCTD located in such county or city. In the event of such an election, section 1109(g) also provides that the State and the locality making the election would each be required to reimburse 50 percent of the revenue lost on account of such exemption to the MTOA Fund established by State Finance Law section 88-a.
The State’s fiscal plan assumes receipt of the revenues that would be generated by converting the year-round clothing/footwear exemption to an exemption applicable only during the 4 annual 7-day periods. The dates of these periods are intended to benefit consumers availing themselves of sales that typically occur during such periods, for example, the back-to-school shopping that precedes Labor Day. Localities which have the current year-round exemption and elect the amended exemption will also benefit from the increased revenues. Likewise, limiting the exemption to 4 7-day periods each year will likely make it possible for those localities which were not able to afford the year-round exemption to elect the amended exemption, thus improving the competitive position of vendors in such localities.
This bill increases the filing fees under the Tax Law for limited liability companies and limited liability partnerships.
Section 1 amends section 658(c)(3) of the Tax Law to increase the filing fee for limited liability companies and limited liability partnerships to $100 per member of the company or partnership, as of the last day of the taxable year. The minimum and maximum fees are raised to $500 and $25,000 respectively. The fees are applicable to subchapter K limited liability companies, limited liability partnerships under Article 8-B of the Partnership Law and foreign limited liability partnerships which have any income derived from New York sources. In addition, this provision is amended to require that the filing fee be paid within 30 days after the last day of the taxable year of the limited liability company or partnership.
The filing fee is $50 times the number of members of the company or partners, as of the last day of the taxable year. The minimum fee is $325, and the maximum fee is $10,000. The filing fee is currently required to be paid when the information return for the limited liability company or partnership is filed. That return must be filed on or before the 15th day of the fourth month after the last day of the taxable year of the limited liability company or partnership.
This is a new amendment. The filing fees were enacted in 1994 and have not been increased.
Since the fees were first imposed in 1994, there has been a proliferation of limited liability companies and partnerships. However, there has been no concurrent increase in the filing fees for these entities.
This bill provides a mechanism by which municipalities share in the costs of the Empire Zones Program.
Section 1 amends section 556 of the Real Property Tax Law, which currently provides for the refund of real property taxes under certain circumstances. The amended section 556 would provide that the QEZE (qualified empire zone enterprise) real property tax refund voucher, issued by the Commissioner of Taxation and Finance pursuant to section 15 of the Tax Law, would be submitted by the QEZE to the County Director of Real Property Tax Services, along with an application for refund in a form prescribed by the State Board of Real Property Services in consultation with the Commissioner of Taxation and Finance. The county would be obliged to issue a refund in the amount specified on the voucher. The county would absorb its share of the cost of the refund and charge the balance to the other local taxing jurisdictions in proportion to their relative share of the taxes, much as the cost of traditional property tax refunds is currently apportioned. This procedure would apply to payments in lieu of taxes (PILOTs) to the same extent as taxes, except that the cost of PILOT refunds would be apportioned among each county, city, town, village, and school district in the same proportion as the PILOT was apportioned among them. Special provisions would be included to ensure that this refund application procedure will work in New York City as well.
Section 2 makes a conforming change to section 559(3) of the Real Property Tax Law.
Section 3 amends section 15 of the Tax Law to modify the computation of the QEZE credit for real property taxes for any QEZE certified pursuant to Article 18-B of the General Municipal Law on or after January 1, 2004, essentially by reducing the credit at the State level to one half of what is currently authorized. In addition, the definition of “eligible real property taxes” is amended to provide that the payments in lieu of taxes under PILOT agreements executed or amended on or after January 1, 2001, will not constitute eligible real property taxes to the extent that the payment exceeds the product of (1) the greater of (i) the cost or other basis for Federal income tax purposes, determined on the later of January 1, 2001, or the effective date of the QEZE’s certification pursuant to Article 18-B of the General Municipal Law, of real property owned by the QEZE and located in empire zones with respect to which the QEZE is certified, or (ii) the cost or other basis for Federal income tax purposes of that real property on the last day of the taxable year, and (2) the estimated effective full value tax rate within the county in which such property is located, as most recently reported to the Commissioner of Tax and Finance by the Secretary of the State Board of Real Property Services. The State Board will be required to annually calculate estimated effective full value tax rates within each county for this purpose based upon the most current information available to it in relation to county, city, town, village and school district taxes.
Section 4 requires the Commissioner of Taxation and Finance to issue to a QEZE a real property tax refund voucher, setting forth the amount of the refund of real property taxes or PILOTs to which the QEZE would be entitled at the local level. That amount generally would be equal to the credit authorized at the State level, unless the QEZE has been required to recapture a portion of the credit, in which case an adjustment would be made on the real property tax refund voucher.
Under section 15 of the Tax Law, a qualified empire zone enterprise or QEZE (which is an entity certified pursuant to Article 18-B of the General Municipal Law which satisfies an annual employment test) is entitled to a credit against its corporate franchise tax or income tax. The credit is measured in part by the eligible real property taxes the QEZE has paid to local taxing jurisdictions during the taxable year. In certain circumstances, the amount of the credit could equal the total amount of real property taxes paid by the QEZE to the local taxing jurisdictions, essentially providing a total reimbursement by the State to the taxpayer for the property taxes paid. The Tax Law includes payments in lieu of taxes as “eligible real property taxes.” However, payments in lieu of taxes made pursuant to agreements executed on or after January 1, 2001, will not constitute eligible real property taxes unless approved by both the Department of Economic Development and the Office of Real Property Services as satisfying generally accepted and recognized norms and standards of real property tax appraisals.
Section 556 of the Real Property Tax Law provides a mechanism for the payment of real property tax refunds.
The State tax credit for real property taxes paid by qualified empire zone enterprises, enacted in 2000 as part of the Empire Zones Program Act, has proven to be an effective tool in attracting businesses to locate in New York State or expand their operations in New York State. However, this tax credit, which in many instances provides taxpayers with a reimbursement for their total real property tax bill in municipalities which include empire zones, has proven to be costly to the State’s General Fund. While it is clear that the benefits have accrued to the State by the job growth facilitated by the Empire Zones Program, the local taxing jurisdictions have also benefited greatly by this job growth. However, under current law, the local taxing jurisdictions have not been required to contribute to the costs of this tax credit. This bill establishes a mechanism by which the local taxing jurisdictions will reimburse the taxpayers for one-half of the tax benefits provided to the taxpayers by the real property tax credit. As a result, the costs of this part of the Empire Zones Program to the State’s General Fund are reduced, without any reduction in benefits to the businesses participating in the Program.
This bill amends Articles 9-A and 22 of the Tax Law to provide an addition modification for the amount deducted by a taxpayer, except an eligible farmer, under Internal Revenue Code 179 for a sport utility vehicle with a vehicle weight in excess of 6,000 pounds, and to provide a related subtraction modification for any recapture amount included in Federal adjusted gross income attributable to such deduction.
Sections 1 and 2 amend the calculation of entire net income under Article 9-A by providing modifications concerning the expense deduction allowed to taxpayers under section 179 of the Internal Revenue Code.
Section 2 adds a new subparagraph 16 to paragraph (b) of subdivision 9 of section 208 of the Tax Law to provide that in determining entire net income, the Federal adjusted gross income of a taxpayer, except an eligible farmer as defined in Tax Law section 210.22, shall be modified by adding thereto the amount deducted under section 179 of the Internal Revenue Code for a sport utility vehicle with a gross vehicle weight in excess of 6,000 pounds. Section 1 adds a new subparagraph 16 to paragraph (a) of subdivision 9 of section 208 of the Tax Law to provide that a taxpayer who was required to add back the IRC section 179 expense deduction pertaining to a sport utility vehicle may subtract from Federal adjusted gross income any amount recaptured pursuant to subsection (d) of section 179 of the Internal Revenue Code with respect to the sport utility vehicle that was the subject of the add back modification.
Sections 3 and 4 require similar adjustments in the calculation of New York adjusted gross income under the personal income tax.
Section 5 provides that the bill shall be effective immediately and apply to taxable years beginning on or after January 1, 2003.
The New York State franchise tax on general business corporations under Article 9-A of the Tax Law and the personal income tax under Article 22 of the Tax Law are “Federally conformed” taxes. That means that the starting point for calculating income for New York State purposes is the taxpayer’s Federal adjusted gross income. Section 208 of the Tax Law provides that entire net income shall be presumably the same as the entire taxable income which the taxpayer is required to report to the United States Treasury Department, subject to any modification required under section 208 and 210 of Article 9-A. Section 611 of the Tax Law provides that the New York taxable income of a resident individual shall be the “New York adjusted gross income” less any New York deductions or exemptions. Tax Law section 612 states that a taxpayer’s New York adjusted gross income (New York AGI) shall be the taxpayer’s Federal adjusted gross income (Federal AGI) modified by certain additions and subtractions.
Internal Revenue Code (IRC) 179 allows a taxpayer to elect to deduct the cost of certain tangible property acquired by purchase for use in an active trade or business (“section 179 property”). The section 179 deduction is limited to $25,000 for taxable year 2003 and thereafter, and applies only for the first year that the property is placed in service in the trade or business.
Passenger vehicles purchased and used in an active trade or business can qualify as section 179 property. However, the deduction allowable under section 179 for most passenger vehicles is limited by the amounts specified in IRC section 280F. These specified amounts are considerably less than the maximum deduction under IRC section 179 which is $25,000 for taxable year 2003 and thereafter. The limitation imposed by IRC section 280F applies to “passenger automobiles” as defined in such section. An automobile with a gross vehicle weight in excess of 6,000 pounds, however, falls outside the definition of “passenger automobile” in section 280F, and so is not covered by the depreciation dollar caps contained in section 280F. Several large sport utility vehicles have a gross vehicle weight over 6,000 pounds, therefore removing these vehicles from the section 280F limitation and permitting a taxpayer to expense up to $25,000 of the cost of purchasing such large vehicles in the first year of service.
Internal Revenue Code section 280F established dollar caps on the amount of depreciation that could be taken for certain tangible property described therein, including passenger automobiles. The term “passenger automobile” in section 280F, however, does not include any sport utility vehicle (SUV) with a gross vehicle weight in excess of 6,000 pounds. Since the restrictions of section 280F do not apply, up to $25,000 of the cost to purchase these large vehicles may be immediately deducted under IRC section 179, and further depreciation deductions may be allowed under other Internal Revenue Code provisions. Many of these large SUVs are purchased by professionals such as physicians and attorneys.
The depreciation limitations in section 280F for passenger automobiles were designed to permit large vehicles (weighing more than 6,000 pounds) commonly used by farmers to avoid the limitations. Nevertheless, the advent of large SUVs has resulted in a loophole providing an unintended benefit for taxpayers that acquire these vehicles since the section 280F limitations do not apply to such property. This bill would close the SUV loophole for New York State purposes by requiring that any amount deducted at the Federal level by a taxpayer under section 179 for the purchase of a large SUV shall be added back in determining New York entire net income or adjusted gross income.
At some point, section 179 property may cease to be in qualified use such that all or part of the deduction allowed by Code section 179 section must be recaptured. To the extent that any such recaptured amount increases Federal AGI, it is appropriate to allow a subtraction modification for the recapture amount attributable to the section 179 deduction for large SUVs that is required to be added back under this bill.
This bill requires payments of estimated tax by partnerships, limited liability companies, and S corporations on behalf of nonresident individual partners, members, or shareholders and on behalf of all partners, members, or shareholders that are C corporations.
Section 1 of the bill adds a new paragraph (4) to Tax Law section 658(c) to require entities that are partnerships, limited liability companies which are treated as partnerships, or S corporations, and which have income from New York sources, to pay estimated tax on behalf of nonresidents or C corporation partners, members, or shareholders on their distributive shares or pro rata shares of such income. This provision would not apply to a partner, member, or shareholder if the estimated tax required to be paid by the entity for that partner, member, or shareholder is not more than $300 for the taxable year or if the partner, member, or shareholder has elected to be included in an authorized group return. If the entity does not pay the estimated tax, a penalty of $50 for each failure per partner, member, or shareholder is imposed. Accordingly, an entity which fails to pay all 4 required installments of estimated tax on behalf of a member would incur a $200 penalty for the year with respect to that member. The entity is also subject to an addition to tax if there is an underpayment of estimated tax by the entity as determined pursuant to Tax Law section 685(c). The entity is required to advise partners, members, or shareholders the amount of estimated tax paid, within 30 days after payment of the estimated tax is made. The entity is also required to provide to the Commissioner of Taxation and Finance information identifying the partners, members, or shareholders and the amount of estimated tax that the entity has paid on behalf of each partner, member, or shareholder.
Section 2 adds a new paragraph (11) to Tax Law section 197-b(d) to allow any partner or member who is a C corporation subject to taxation under Article 9 to apply any payment of estimated tax made by the entity against the estimated tax of the C corporation partner or member. Sections 3, 4 and 5 make parallel amendments to Articles 9-A, 32 and 33 with respect to corporate partners or members subject to the taxes imposed by those articles.
Section 6 adds a new subsection (i) to Tax Law section 686 to allow the entity to receive a refund of any estimated tax that the entity inadvertently pays on behalf of a member that the entity is not required to make under Tax Law section 685(c)(4).
Section 7 provides that estimated tax payments required to be made before September 15, 2003, will be deemed timely and no addition to tax or penalty will be applied, provided that the entity makes such payments by September 15, 2003.
Section 8 provides that the bill takes effect immediately and applies to taxable years ending after December 31, 2002.
Pursuant to Tax Law section 685(c), quarterly estimated tax payments are required to be made by taxpayers whose income is not subject to income tax withholding. In addition, C corporations subject to franchise tax in New York State are required to make quarterly estimated tax payments. Failure to pay required installments of estimated tax incurs a penalty amounting to an interest charge. There is no requirement under the existing Tax Law that a partnership, limited liability company, or S corporation pay estimated tax payments on behalf of its partners, members, or shareholders.
Requiring payment of estimated tax on a partner’s, member’s, or shareholder’s distributive share of entity income at the entity level will significantly improve tax compliance in the case of those nonresident partners, members, or shareholders who evade payment of their tax liabilities under the present estimated tax system. Partners, members, or shareholders may apply any payment of estimated tax made on their behalf to their estimated tax liability.
This bill provides taxpayers/homeowners with an economic incentive to help revitalize older neighborhoods by providing a State tax credit for rehabilitating an historic home.
A new subsection (ff) 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 and the taxpayer(s New York adjusted gross income for such year does not exceed $100,000, the excess credit may be refunded. If the taxpayer(s New York adjusted gross income exceeds $100,000, the excess credit may be carried over to future taxable years.
The bill defines a “qualified rehabilitation expenditure” as any amount which is 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 would 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 $5,000 or more.
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. The qualified historic home must be a targeted area residence under section 143(j) of the Internal Revenue Code or be located in a State empire zone. 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 “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 3 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 would be treated as being made on the date of the final certification of the rehabilitation. For purchased qualified historic homes, the taxpayer would 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 would 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.
Currently, there is no State tax credit for the rehabilitation of historic homes used as residences.
A similar credit was proposed as part of the Governor(s 2001-02 Executive Budget (Part E of S.1149-A/A. 2001-A).
This bill will establish a financial incentive for rehabilitating historic residential property in areas of economic distress 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, that is, its historic homes; and it provides another mechanism to promote the rehabilitation of vital housing stock.
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.
This bill establishes a fourth certified capital company program in order to encourage investments in high technology companies through State-supported research centers.
Section 1 amends the definition of a certified capital company in Tax Law (11(a)(3) by adding any subsidiary of the New York State Urban Development Corporation to the list of entities that may qualify as a certified capital company.
Sections 2 and 3 amend the definition in Tax Law section 11(a)(6) of a “qualified business.” Certified capital companies must invest in “qualified businesses.” Bill section 2 provides that among the requirements for a “qualified business” under certified capital company program four (CAPCO Program 4), the business may be located outside New York State at the time the first investment is made. However, within 1 year, the business must relocate its headquarters and principal business operations to New York.
In addition to the other requirements, section 3 requires that, under CAPCO Program 4, the qualified business also must be involved in commerce by: (I) having a minimum relationship with a research center which has received financial support from the State of New York through any of the following: the Center of Excellence Program pursuant to section 3 of Part T of Chapter 84 of the Laws of 2002, the Gen*NY*sis program pursuant to section 5 of Part T of Chapter 84 of the Laws of 2002, the Centers for Advanced Technology Program authorized by section 3102-B of the Public Authorities Law, or the Capital Facilities Program established under section 209-P of the Executive Law; or (II) conducting a high technology or biotechnology project authorized by the Rebuilding the Empire State Through Opportunities in Regional Economies (RESTORE) New York program pursuant to paragraph d of section 6 of Part T of Chapter 84 of the Laws of 2002. The Insurance Department, in consultation with the New York State Urban Development Corporation and the Office of Science, Technology and Academic Research, is required to promulgate rules and regulations that establish the requirements for determining whether a business has a minimum relationship with a research center described in item (I) of this clause.
Section 4 amends Tax Law (11(b)(2) to provide that the Superintendent of Insurance may certify a subsidiary of the New York State Urban Development Corporation as a certified capital company if it meets the criteria set forth in subdivision (b) of section 11.
Section 5 amends Tax Law section 11(b)(9) to provide that the Superintendent of Insurance may start accepting applications to become a certified capital company in certified capital company program four by August 1, 2003.
Section 6 amends Tax Law section 11(c)(6)(A) to provide that the requests for allocations for tax credits to be provided to certified investors in certified capital companies under CAPCO Program 4 may first be submitted on December 1, 2003. All requests for tax credit allocations received by the Superintendent of Insurance, prior to that date, will be treated as having been received on December 1, 2003, and, if satisfactory, will be given equal priority for allocation.
Section 7 amends Tax Law section 11(h) to establish CAPCO Program 4. Under CAPCO Program 4, the aggregate amount of certified capital for which taxpayers may be allocated tax credits may not exceed $250 million. The credits may not be claimed until taxable years beginning in 2005. The certified capital may first be invested in certified capital companies in 2003.
Section 8 amends Tax Law section 11(i) to provide that the maximum amount of certified capital that may be allowed in any one year to a certified investor in one or more certified capital companies under CAPCO Program 4 is $10 million.
Section 9 amends Tax Law section 1511(k) to provide that insurance companies are allowed a tax credit equal to 50 percent of their investments in certified capital companies under CAPCO Program 4.
Section 10 provides that the bill takes effect immediately.
Certified capital companies are a type of venture capital company. Venture capital companies which want to be characterized as certified capital companies must meet the requirements set forth in Tax Law section 11 and must be certified as certified capital companies by the Superintendent of Insurance. Certified capital companies are required to invest in “qualified businesses” which are small, independently owned and operated New York companies which are involved in commerce for the purpose of developing and manufacturing products and systems. The certified capital companies are required to make investments in qualified businesses pursuant to a time frame set in the law. At least 50 percent of their investments must be made within 4 years. Under the Tax Law, insurance companies that invest in certified capital companies are entitled to a tax credit equal to their investment. However, if the certified capital companies do not meet the required time frames for investments, a portion of the credits provided to the insurance companies will be disallowed and the insurance companies would be required to recapture that portion, if claimed already.
There have been three CAPCO programs to date. CAPCO Program 1 allowed investments in certified capital companies starting in 1998. Tax credits under that program were first allowed in 1999. A total of $100 million of credits was allowed under that program, with $50 million allocated to 1999 and $50 million allocated to 2000. Under CAPCO Program 2, $30 million of tax credits were allocated to 2001 and investments in certified capital companies were allowed to begin in 2000. Under CAPCO Program 3, the aggregate amount of certified capital for which taxpayers were allowed tax credits was $150 million for 2002, which certified capital may be invested in certified capital companies beginning in 2001. CAPCO Program 3 placed additional restrictions on the investments by certified capital companies. Under that program, one-third of the certified capital raised by each certified capital company must be used to make qualified investments in qualified businesses located in empire zones and another third of the certified capital must be used to make qualified investments in qualified businesses located in underserved areas outside of empire zones.
The CAPCO programs have proven to be a successful vehicle for funding venture capital companies in New York and encouraging those companies to invest in small companies which are developing and manufacturing products and systems in New York. State-supported research centers are vital to the development of the high technology industry in New York State. Authorization for the Empire State Development Corporation to participate in the CAPCO Program would provide the corporation, which administers the successful Small Business Technology Investment Fund, with additional resources to facilitate job creation in emerging and small businesses. The tax credits provided under CAPCO Program 4 will encourage investment in high technology companies through those State-supported research centers. Allowing insurance companies to claim credits beginning in 2005 would ensure that the CAPCOs would have met their first investment threshold of 25 percent after two years. As a result, the credits will follow the investment.
This bill enhances the provisions of law relating to the operation of video lottery terminals at racetracks.
This bill:
The original legislation authorizing video lottery terminals has not been implemented. The tracks have consistently objected that the hours of operation are too short, the distribution of the net proceeds would result in substantial net revenue losses, and the sunset date made it difficult to obtain long term financing. This legislation addresses the concerns raised by the tracks.
Enactment of this bill is necessary to implement the 2003-04 Executive Budget in order to maintain the current Article 32 revenue stream.
Enactment of this bill is necessary to implement the 2003-04 Executive Budget because it is expected to increase revenue to the State by $160 million annually when fully effective.
Enactment of this bill is necessary to implement the 2003-04 Executive Budget because this legislation would result in revenue gains of $363.4 million for 2003-04 and $418.9 million for 2004-05 for the State.
This bill will increase personal income tax receipts by $25 million in 2003-04. Therefore, enactment of this bill is necessary to implement the 2003-04 Executive Budget.
Enactment of this bill is necessary to implement the 2003-04 Executive Budget because this legislation would limit revenue exposure under the Empire Zones program.
This bill will increase personal income tax receipts by $1 million in 2004-05 and $2 million annually thereafter. Therefore, enactment of this bill is necessary to implement the Financial Plan included with the 2003-04 Executive Budget.
This bill will increase personal income tax receipts by $15 million in 2003-04 and $25 million annually in subsequent years. Therefore, enactment of this bill is necessary to implement the 2003-04 Executive Budget.
Enactment of this bill is necessary to implement the Financial Plan included in the 2003-04 Executive Budget. It will reduce personal income tax receipts by $10 million annually starting in 2004-05.
Enactment of this bill is necessary to implement the 2003-04 Executive Budget because it will continue this successful program which stimulates economic development by encouraging investment in small companies throughout the State.
Due to the timing of implementation, the 2003-04 Financial Plan contains no net proceeds from this proposal but there are significant out year revenues associated with timely enactment of this proposal.
This bill is effective immediately.
This bill is effective immediately and is applicable to taxable years beginning on or after January 1, 2003, except that the amendment made by section 12 of the bill to Tax Law section 1510(c)(3) applies retroactively to taxable years beginning on or after January 1, 1990. This amendment also provides that claims for credit or refund based solely on this amendment, that would be barred by the statute of limitations contained in Tax Law section 1087, may nevertheless be filed by a taxpayer if the otherwise barred claim is filed within 120 days of the date that section 12 takes effect. Section 41 also provides that the amendment made to Insurance Law section 4223 by section 40 shall take effect on July 1, 2003 and shall sunset and be deemed repealed on June 30, 2005. However, section 41 further provides that any annuity contract entered into after the effective date of the amendment made by section 40 and prior to the repeal of this provision shall remain in effect and be valid after the repeal date.
This bill is effective immediately, provided that section 1 shall take effect on June 1, 2003, and apply in accordance with applicable transitional provisions in sections 1106 of the Tax Law.
This bill is effective immediately and applies to taxable years beginning on or after January 1, 2003.
This bill is effective immediately. However, the amendments made to the Tax Law by sections 3 and 4 will apply to taxable years beginning on or after January 1, 2004, except that the amendment made by section 3 to subdivision (e) of section 15 of the Tax Law will apply to tax years beginning on or after January 1, 2003.
This bill is effective immediately and is applicable to taxable years beginning on or after January 1, 2003.
This bill is effective immediately and applies to taxable years ending after December 31, 2002.
This bill is effective immediately and applies to taxable years beginning on or after January 1, 2004.
This bill is effective immediately.
This bill is effective immediately.