Country / Language

2014-2015 New York State Budget Tax Reform


4/9/14

Synopsis

On March 31, 2014, Governor Cuomo signed New York State’s 2014-2015 budget, which contained significant beneficial tax changes for both individual and business taxpayers.

Issue

New York State’s 2014-2015 Budget, as enacted, contains significant new tax provisions, including:

Business Tax Reform

  • Effective January 1, 2014
    • Reduces the tax rate on manufacturers from 5.9% to 0%
       
  • Effective January 1, 2015
    • Establishes a bright-line “economic nexus” threshold whereby corporations are deemed to be doing business within New York if receipts derived from New York sources are  $1,000,000 or more
    • Repeals the Bank Franchise Tax  and merges it into the Article 9-A Corporate Franchise Tax
    • Repeals the organization and license taxes and maintenance fees imposed on foreign corporations
    • Repeals the Minimum Income Tax base and the separate tax on Subsidiary Capital
    • Repeals the exclusions from income relating to  income from subsidiary capital and 50% of dividends from non-subsidiary capital
    • The MTA Surcharge is permanent and the tax rate is increased from 17% to 25.6% for 2015, after which time the rate will be annually adjusted by the Commissioner
    • Adopts a “market source” apportionment rule for sourcing receipts
    • Adopts a mandatory unitary filing for taxpayers (1) engaging in a unitary business with other corporations and (2) that own or control directly or indirectly more than 50% of another corporation’s capital stock
    • Modifies the net operating loss (“NOL”) deduction for losses incurred prior to 2015 and establishes new rules regarding the deductibility of  NOLs generated in taxable years beginning after 2014
       
  • Effective January 1, 2016
    • Reduces the Corporation Franchise Tax rate from 7.1% to 6.5%
    • Phases-out the Capital Base Tax for corporations on their assets owned in New York  over a six (6) year period
       

Estate and Trust Tax Reform

  • Increases the filing threshold for estate taxes from $1 million to $2.06 million for decedents dying on or after April 1, 2014 and before April 1, 2015, and  increases such exclusion, each year over the next four years, to $5.25 million
  • Maintains the top tax rate  at 16% and indexes such tax rate to inflation effective January 1, 2019
  • New York tax law and New York City administrative codes are amended as they relate to taxing residents who are grantors of exempt resident trusts that qualify as non-grantor incomplete gift trusts on income from the trust, and taxing residents who are beneficiaries of all other exempt resident trusts or nonresident trusts on the distribution of accumulated income that they receive from the trusts
     

Personal Income Tax Reform

  • Extends the earned income tax credit for two years to tax years before January 1, 2017
  • Eliminates the personal income tax add-on minimum tax for tax years beginning on or after January 1, 2014
  • Exempts from income any distributions from length of service defined contribution or benefit plans to volunteer fire fighters and ambulance workers over age 59 ½, effective for tax years beginning on or after January 1, 2014
     

Credits and Incentives

  • Enacts a 20% real property tax credit, beginning January 1, 2014, for manufacturers that own or lease property
  • Creates an income tax credit for hiring persons with development disabilities, which will be in effect for taxable years beginning on or after January 1, 2015 and expiring January 1, 2020
  • Expands the Youth Works Tax Credit to allow an additional $1,000 credit for eligible employees who are employed for one additional year and amends the definition of qualified employee to include certain full-time high school students
  • Creates a refundable credit for excise tax on telecommunication services paid by START-NY companies for tax years beginning on or after January 1, 2014
  • Creates a refundable music and theatrical production income tax credit for production tours, which is 25% of qualified production expenditures
  • Expands the Empire Film Production Credit to include a 10% additional credit for Albany and Schenectady counties
  • Extends the Empire State Commercial Production Tax Credit for two years for tax years beginning before January 1, 2017
     

Property Tax Reform

  • Enacts up to $1.5 billion in property tax relief over the next three (3) years. Taxpayers will qualify if their local governments meet certain requirements
    • The State implemented a property tax freeze credit that will provide a refundable personal income tax credit where a taxpayer’s property taxes or rent exceed a certain percent of their income
  • Allows surviving spouses to use current income when applying for enhanced STAR benefits
     

Affordable Housing

  • Increases the total amount of low-income housing credits available during the 2015-2016 and 2016-2017 by $8 million per year
     

Utility Surcharge

  • Accelerates the phase-out of the utility surcharge  over the next three years
     

New York City Tax Reform

  • Creates a “Circuit Breaker Tax Credit” which is available against personal income tax for homeowners and renters earning less than $200,000, with a maximum credit of $150
  • Eliminates the personal income tax add-on minimum tax for tax years beginning on or after January 1, 2014
  • Extends the sales and use tax exemptions for leases in certain commercial leases in lower Manhattan
  • Extends the Industrial and Commercial Abatement Program, the Energy Cost Savings Program, Lower Manhattan tax credits, and the relocation and employment assistance program credits
     

What Does CohnReznick Think?
There are a number of significant tax changes included in the signed budget bill.  Given the number and complexity of the changes, New York taxpayers, including corporate taxpayers based outside New York, should review the new rules to see how the changes impact their specific tax position. 

Contact

For more information, please contact one of the following CohnReznick tax professionals:

  • Corey Rosenthal, Principal, State and Local Tax Practice, at 646-625-5729
  • Patrick Duffany, Partner and State and Local Tax Practice Leader, at 860-368-3607
     

To learn more about CohnReznick’s State and Local Tax Practice, please visit our webpage.


Circular 230 Notice: In compliance with U.S. Treasury Regulations, the information included herein (or in any attachment) is not intended or written to be used, and it cannot be used, by any taxpayer for the purpose of i) avoiding penalties the IRS and others may impose on the taxpayer or ii) promoting, marketing, or recommending to another party any tax related matters.

This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

Search Our People

Search Our People

Look ahead. Gain insight. Imagine more. Is your business ready to break through?

View our new TV commercial..

Industry Outlooks

Industry Outlooks

Gain insight into what is ahead for the Commercial Real Estate, Technology and Middle Market Private Equity industries.

READ MORE

Learn about our upcoming events.

READ MORE

Working With Us

Working With Us

What makes CohnReznick different from others in our profession? And what should our clients come to expect when working with us? The answer is The CohnReznick Advantage. Contact us to learn how we can out the CohnReznick Advantage to work for your business.


People

The value of an organization is determined by the skills and qualities of its leaders. With more than 280 partners serving clients nationwide, CohnReznick is renowned for the diverse experiences, knowledge and backgrounds of its leadership.

Learn More

Services

We align our services in three segments: Accounting and Assurance, Tax, and Advisory. This approach allows us to provide holistic solutions to complex business problems and to seize upon opportunities requiring an integrated approach.

Learn More

Industries

Accounting and tax issues different significantly based on an organization's industry. We provide clients with expertise in nearly two dozen industries – we know the opportunities, the obstacles, the competitive landscape.

Learn more

Insights

CohnReznick professionals are thought leaders in their industries. Clients benefit from relevant and timely economic, legislative and industry insights that can keep them a step ahead of competition.

Learn More

Global Reach

Our involvement in the Nexia International network of firms enables us assist our clients wherever they do business-providing local expertise and connections wherever they needed. Nexia is comprised of 20,000 professionals operating in over 100 countries.

Learn More