April 7, 2021
Below please find information regarding the recently released Revenue Budget bill, and associated outcomes for new state budget.
4/7/2021 NYS Budget Revenue Bill Update
The Final Budget includes increased income and corporate taxes to generate an additional $4.3 billion in new revenue. We have embedded a chart detailing the final revenue package but have detailed here key provisions that were accepted or rejected:
- Two new personal income tax brackets are created: 10.3 percent for income between $5 million and $25 million, and 10.9 percent for income over $25 million. The new rates would expire by the end of 2027. The personal income tax rate would increase to 9.65 percent from 8.82 percent for individuals making over $1 million and for joint filers making more than $2 million;
- The corporate franchise tax rate would also increase to 7.25 percent from 6.5 percent, but will remain unchanged for small businesses. The Legislature had proposed a rate of 9.5% in the Senate and a 18% surcharge for businesses with incomes over $1 million in the Assembly;
- Middle class tax cut delay proposed by the Governor was eliminated by the Legislature yielding lower personal income tax rates(under the plan personal income tax rates are reduced by 20% by 2025) with those earning between $27,900-$161,550 will pay 5.5% and those earning between $161,550-$323,200 will pay 6% if continued;
- Estate Tax increased rates were rejected, the Senate had proposed increased rates and to make permanent a rate of 20% for estates with taxable income over $10.1 million;
- A “Pied-a-Terre” on NYC properties as non-primary homes was rejection as proposed by the Senate;
- Capital Gains tax amendments on individuals and businesses were rejected;
- Establishes the Pandemic Recovery and Restart Program. Program includes:
- Restaurant-return-to-work Tax Credit ($35 million) –A credit equal to $5 thousand per FTE equivalent net employee increase not to exceed $50 thousand for small businesses that have experienced a minimum of 40 percent revenue or employment loss; and
- Establishes and implements the $3 billion ‘Restore Mother Nature’ environmental bond act of 2022.
Overall, new state revenue was primarily designated for additional school aid, and $2.1 billion for an excluded workers fund providing financial assistance as a result of the pandemic to undocumented workers in New York State.
The State also received $12.5 billion in direct federal assistance and additional assistance for Schools, Medicaid, Transportation and other entities under the American Rescue Plan Act. (details to come).
|Executive Revenue Proposal
|FYE 2022 Enacted Budget
|Enact temporary PIT surcharge on high-income taxpayers
|Modifies the Executive proposal on income tax rates for single filers reporting over $1.1 million, and joint filers reporting over $2.2 million or more, would increase to 9.65% from 8.82%. For head of household filers, the bottom bracket starts at $1.6 million and goes up to $5 million. New tax brackets are established for those making $5 million or more who would be taxed at 10.3%, and those earning over $25 million would be taxed at 10.9%. The new rates would expire in 2027.
|Delay middle class tax cut for one year
|Pass-Through Entity Tax (SALT Cap Mitigation)
|Modifies the Executive proposal to enact a pass-through entity tax by including a higher tax rate of 9.65 percent for entities proceeds between $2 million and $5 million, 10.3 percent for proceeds between $5 million and $25 million, and 10.9% for proceeds exceeding $25 million and allowing for more immediate effective date of tax year 2021.
|Excelsior Child Care Services Tax Credit (Expansion of Excelsior Investment Tax Credit)
|Modifies the Executive proposal to enact employer childcare credits by allowing existing participants to receive the Excelsior Investment Tax Credit without applying again.
|Reform Tax Filing Requirements for Canadian bus and limo corps, Provide that all federal subchapter S corps be treated as subchapter s corps for state tax purposes
|Eliminates $15 tax per trip for out-of-state taxi or omnibus corporations conducting between one and twelve trips into the state per calendar year. Rejects subchapter S conformity.
|Extend Film Tax Credit for one year
|Increase Wage and Withholding filing penalty
|Modifies the Executive proposal to increase penalties on employers for failure to provide complete and accurate wage reports. The Enacted proposes a maximum penalty per employer of $20,000 versus the Executive proposal of $50,000.
|Cannabis Regulation and Taxation Act
|Rejected (passed into law outside of budget).
|Sales tax on vacation rentals
|Reform State Racing Admissions Tax
|Modifies the Executive proposal to remove secrecy provision allowance for disclosure of information to Gaming Commission or DOB.
|Increase the interest free period for DTF to review and issue refund claims of $100k or more
|Make permanent the authority for counties and certain cities to impose local sales tax at the rate of four percent or current rate if higher
|Extend Dodd-Frank for three years
|Technical corrections to sales tax remote vendor registration
|Amend the real estate transfer tax (RETT) to add responsible person billing language to Article 31, prohibit grantors (sellers) from passing the basic RETT through to grantees (buyers), and provide a technical fix to the LLC disclosure requirements enacted last year by exempting publicly traded companies, REITs, UPREITs, and mutual funds from the requirement to list all members/shareholders.
|Technical changes to cigarette licensing provisions
|Reduce the tax return filing frequency for Alcoholic Beverage Tax (ABT) and Highway Use Tax (HUT) taxpayers
|Amend the Tax Law to make the Technology Service Provider (TSP) responsible for collecting and remitting the taxicab tax and congestion surcharge
|Amend the Tax Law in relation to tax return preparer penalties for failure to register and to require the display of certain documents by tax return preparers
|Modifies the Executive proposal in relation to tax return preparer penalties by keeping the ability to abate the fine (but reducing the period from 90 to 15 days) and eliminating the proposed daily penalties for subsequent non-compliance.
|Allows DTF the right to appeal adverse Tax Appeals Tribunal decisions
|Modernization and consolidation of the process for reporting real property transfers and for paying the associated tax and fees
|Improve and enhance STAR Program administration
|Modifies the Executive proposal by eliminating:
–Proposal to close the Enhanced STAR Exemption to newly eligible Basic Exemption beneficiaries.–Proposal to move up the date to switch to the STAR Credit voluntarily.
–Proposal to allow DTF to provide decedent reports to local assessors.
–Proposal to consolidate all STAR appeals under DTF.
Modifies proposal to transition all mobile home STAR exemptions to the STAR Credit by adding language-permitting DTF to automatically switch impacted mobile homeowners after the 2021-22 school year.
|Technical and conforming changes to the Real Property Tax Law
|Amend the real property tax law and general municipal law in relation to establishing a standardized approach for real property tax assessment for solar and wind infrastructure.
|Authorize mobile sports wagering and establish a casino tax rate petition process
|Modifies Executive proposal to authorize online sports wagering with limited-operator model. $5 million in annual revenue to go to youth sports, $6 million to combat problem-gambling, remainder of revenue dedicated to education.
|Authorize the Gaming Commission to issue a RFI for the purpose of soliciting interest regarding the three unawarded gaming facility licenses
|Eliminate Quick Draw restrictions
|Eliminate restrictions on lottery draw game offerings
|Modifies the Executive proposal to remove restrictions on lottery draw game offerings to allow certain draw games twice daily instead of at the Commission’s discretion. Includes a study of the additional revenue from these changes by March 1, 2022.
|Decouple the Gaming Commission and the Gaming Inspector General
|Modifies the Executive proposal to decouple the Gaming Commission and the Gaming Inspector General by adding an annual reporting requirement and eliminating the limited immunity language for employees that provide evidence.
|Extend pari-mutual tax rate and simulcast provisions for one year
|Extend alternative fuels exemptions for five years
|Extend Farm Workforce Retention Credit for three years
|Extend low-income housing credits for five years
|Extend and enhance the Musical and Theatrical Production Credit for four years
|Extend the Hire-A-Vet Credit for two years
|Modifies the Executive proposal to extend the Hire-A-Vet Credit for two years by extending it for only one year.
|Extend the Economic Transformation and Facility Redevelopment Tax Credit for five years
|Extend implementation deadline for the Secure Choice Savings Program for enrollment
|Temporarily suspend payments from Rivers Casino to Saratoga Casino and Raceway
|Modifies Executive proposal to suspend certain racing support payments and instead prospectively establishes a payment to purses of licensed racetracks in the region, the NYS Horse Breeding Development Fund and Thoroughbred breeding and development equal to .038% multiplied by gross gaming revenue from slot machines.
|Additional Revenue Parts MM – OOO
|Exempts from sales tax breast pump replacement parts, pump collection and storage supplies.
|Clarifies that employers may designate remote work as having been performed at the location it was performed prior to the state disaster emergency pursuant to EO 202 for the purposes of tax benefits.
|Allows for waiver of interest on underpayment of personal income tax for the year 2020 due solely to insufficient withholding of tax on unemployment compensation.
|Establishes the Pandemic Recovery and Restart Program. Program includes:
o Restaurant-return-to-work Tax Credit ($35 million) –A credit equal to $5 thousand per FTE equivalent net employee increase not to exceed $50 thousand for small businesses that have experienced a minimum of 40 percent revenue or employment loss
o NYC Musical and Theatrical Production Tax Credit ($100 million) – A credit of 25% the sum of production expenditures not to exceed $3 million per qualified production in the first year and $1.5 million in the second year. Creates the NYS Council on the Arts Cultural Programs Fund.
|Increases the amount overpayment that does not trigger interest on amounts less than one dollar to amounts less than five dollars.
|Subtracts any death benefit provided by the MTA COVID-19 Death Benefit Program from federal adjusted gross income not exceeding $500 thousand.
|Extends tax exemption for certain food and beverage provided by vending machines for one year.
|Establishes and implements the $3 billion ‘Restore Mother Nature’ environmental bond act of 2022.
|Establishes the COVID-19 Pandemic Small Business Recovery Grant Program that provides $800 million in grant funding for small businesses including for-profit arts and cultural institutions impacted by the COVID-19 pandemic.
|Includes state lands in the towns of Blooming Grove and Chester as lands subject to real property taxation for all purposes.
|Increases the maximum allowable amount of Airport Improvement and Revitalization loans and grants to eligible applicants from $1.5 million to $2.5 million.