Tax provisions in New York State’s new budget: Newly automatic credits, revised incentives, and more
Gov. Andrew Cuomo recently signed into law the New York State 2020-2021 budget, which contains several key tax measures.
One of the major provisions in the budget includes decoupling from the Internal Revenue Code (IRC) changes made by the federal Coronavirus Aid, Relief, and Economic Security (CARES) Act. Specifically, New York State is decoupling from an increase to the limitation on the business interest deduction contained in IRC Section 163(j)(10)(A)(i) and from personal income tax changes to the IRC enacted after March 1, 2020, for taxable years beginning before 2022.
The budget bill included several other changes as follows:
Personal income tax
- For tax years beginning on or after Jan. 1, 2020, the Long-Term Care Insurance credit amount is reduced to $1,500, and only taxpayers with a New York adjusted gross income (AGI) of less than $250,000 are eligible.
- New York State will automatically determine the Earned Income Tax credit if it has all applicable information on file to calculate eligibility, and if a taxpayer is entitled to a refund, the refund will be issued (no interest will be paid).
- Where a taxpayer has elected to itemize deductions, New York State will be able to automatically use the standard deduction when the standard deduction is greater than the allowable itemized deductions.
- New York City will automatically determine whether a taxpayer is eligible to receive the New York City Household Credit, and if the credit has not been claimed, the city will automatically compute the credit and refund the amount allowable (no interest will be paid).
Tax credits and incentives
- The Hire-A-Vet credit is now available through 2021 for a qualified veteran who commences employment prior to Jan. 1, 2021.
- A new category is added to the Excelsior Jobs Program for defined “green projects.” The refundable credits provide a higher benefit for qualifying green projects: (1) Excelsior jobs credit is available up to 7.5% instead of 6.85% of gross wages paid per new job; (2) investment credit is equal to 5% instead of 2% of the cost or other basis for federal income tax purposes of the qualifying investment; and (3) research and development credit on qualifying expenditures attributable to activities conducted in New York is 8% instead of 6%.
- Film Production and Post-Production credits are reduced from 30% to 25% of qualifying production costs, and the availability of such credits is extended to 2025. Various changes were also made to definitions relating to these credits.
- New York State updated the definition of the wholesale price for the Tobacco Products Tax as “the price for which a manufacturer or other person sells tobacco products to a distributor, including the federal excise taxes paid by the manufacturer or other person.”
- Tax on liquor containing not more than 2% alcohol by volume is reduced to zero from one cent per liter.
What does CohnReznick think?
Given these challenging and uncertain times due to the COVID-19 pandemic, it is critical to monitor on a daily basis state and local tax changes and the impact that the provisions in the budget have on individuals and businesses.
Any advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues. Nor is it sufficient to avoid tax-related penalties. 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.
Coronavirus Resource Center
InsightFlorida businesses required to report new hires of independent contractors effective Oct. 1, 2021New hire information for independent contractors is now required to be reported to the Florida Department of Revenue. Learn more.
InsightNew York State issues pass-through entity tax guidance: Making an election, estimated payments, and moreArvinder Kaur, Corey L. RosenthalTechnical Memorandum TSB-M-21(1)C, (1)I addresses issues such as, how does an entity make an election, or pay an estimated payment? Read more.
InsightPrepare to apply quickly for New York’s Restaurant Return-to-Work Tax Credit programYelena Belaks, Stan SolomonRead which businesses are eligible, how and when to apply, and other key information for New York businesses impacted by COVID-19.