First Look at the Tax Provisions of the New York State 2021/2022 Budget Act

On April 7, 2021, the New York State Assembly passed the comprehensive New York State 2021/2022 Budget Act, which Governor Andrew Cuomo subsequently signed it into law on April 19, 2021. The Budget Act contains several key tax measures that CPAs should be aware of; this article provides a high-level summary of the key provisions.

 

Personal Income Tax

Effective for taxable year 2021, the Budget Act adds three new tax brackets for “high income taxpayers.” These new tax brackets are for single taxpayers reporting more than $1.1 million in taxable income and joint taxpayers reporting more than $2.2 million (from 8.82% to 9.65%), as well as additional tax brackets for those reporting more than $5 million (10.3%) and more than $25 million (11.90%). These replace the current top tax brackets of 8.82%. This provision also reduces the tax rates for middle-income taxpayers (Part A, sections 1, 2, 3).

Taxpayers that have required some or all of their employees to work remotely as a result of the state disaster emergency caused by the outbreak of coronavirus (COVID-19) may designate that remote work as having been performed at the location where work was performed, prior to the declaration of the emergency for purposes of tax benefits that are based on maintaining a presence within the state or within specific areas of the state. This will prevent taxpayers from losing certain tax benefits because they may be performing some actions outside of the required jurisdiction.

This provision is effective immediately and shall be deemed to have been in full force and effect since on or after March 7, 2020; it will last until the expiration of the state disaster emergency (Part NN, section 1),

New York adjusted gross income (NYAGI) is determined without the exclusion, deduction, or credit of the amount of any gain excluded from federal gross income for the taxable year attributable to an investment in a qualified opportunity fund under IRC section 1400z-2(a)(1)(A) [Part DDD, section 3 adding Tax Law section 612(b)(42) and NYC Administrative Code section 11-1712(b)(39)].

NYAGI shall be determined without the exclusion, deduction, or credit of the amount of any gain excluded from federal gross income for the taxable year to an investment in a qualifies opportunity fund under IRC section 1400z-2(a)(1)(A) [Part DDD, section 3 adding Tax Law section 612(c)(43) and NYC Administrative Code section 11-1712(c)(38)].

Effective immediately and applying to taxable years beginning on or after January 1, 2020, any death benefit, to the extent includible in federal AGI, paid to the taxpayer in a lump sum pursuant to the COVID-19 family death benefit program established by the Metropolitan Transportation Authority in 2020 is excludable from NYS AGI; this subtraction shall not exceed $500,000 and shall not apply to any benefit payable under such program other than a lump sum death benefit [Part RR, adding Tax Law section 612(c)(44)].

 

Exemption of Certain Underpayments from Interest Accumulation

Effectively immediately, the commissioner may, for good cause, waive interest on any underpayment of tax imposed under article 22 for taxable year 2020 that is due solely to insufficient withholding of tax on unemployment compensation (Part OOO, section 1).

 

Resident Tax Credit
Pass-through Entity Taxes

A New York resident may take a credit against the tax otherwise due that is substantially similar to the pass-through entity tax imposed by New York upon the income of a partnership or S corporation of which the resident is a partner, member, or shareholder for the taxable year by another state, a political subdivision of such state, or the District of Columbia, upon income both derived therefrom and subject to tax [Part C, section 1, adding Tax Law Article 24-A, section 620(b)(1)].

The credit is equal to the product of:

• the taxpayer’s profit percentage of the electing partnership or pro rata share of the electing S corporation;
• 92%; and
• the pass-through entity tax paid by the electing partnership or S corporation to such other state, political subdivision of such other state or the District of Columbia [Part C, section 1, adding Tax Law Article 24-A, section 620(b)(2)].

 

The credit will be allowed on tax paid only if:

• the state, political subdivision of such state, or the District of Columbia imposing such tax also imposes an income tax “substantially similar” to the New York pass-through entity tax; and
• in the case of taxes paid by an S corporation, such S corporation was treated as a New York S corporation [Part C, section 1, adding Tax Law Article 24-A, section 620(b)(3)].

 

Limitations

This credit may not exceed the percentage of the tax otherwise due, determined by dividing the portion of the taxpayer’s New York income subject to taxation by such other jurisdiction by the total amount of the taxpayer’s New York income [Part C, section 1, adding Tax Law Article 24-A, section 620(c)(1)].

The credit shall not reduce the tax otherwise due to an amount less than would have been due if the income subject to taxation by such other jurisdiction were excluded from the taxpayer’s New York income [Part C, section 1, adding Tax Law Article 24-A, section 620(c)(2)].

If a taxpayer elects to claim the foreign tax credit for federal income tax purposes, the credit for income tax imposed by a Canadian province will be allowed for the portion of the provincial tax not claimed for federal purposes for the taxable year or a preceding taxable year—provided that, to the extent the provincial tax is claimed for federal purposes for a succeeding taxable year, the credit is added back in such succeeding taxable year. The provincial tax will be deemed to be claimed last for federal income tax purposes and for purposes of this subsection [Part C, section 1, adding Tax Law Article 24-A, section 620(c)(3)].

For purposes of the pass-through entity tax, New York income is defined as:

• An individual’s NYAGI, or
• The income of an estate or trust, determined as if it were an individual computing its NYAGI under section 612 [Part C, section 1, adding Tax Law Article 24-A, section 620(d)].

 

Corporate Taxes
New York State Business Corporation Franchise Tax

Effective for taxable years beginning on or after January 1, 2021, the business corporation franchise tax will be 7.25% for any taxpayer with a business income base of more than $5 million dollars [Part HHH, section 1 amending Tax Law Article 9-A section 210(a)(1)].

Effective for taxable years beginning on or after January 1, 2021, and before January 1, 2024, the tax on the business capital base will be 18.75% [Part HHH, section 2 amending Tax Law Article 9-A, section 210(b)(1)(i)].

In the case of a cooperative housing corporation, the applicable rate is .04% of the business capital base for taxable years beginning on or after January 1, 2020, and 0% for taxable years beginning on or after January 1, 2021, and before January 1, 2024 [Part HHH, section 2 amending Tax Law Article 9-A, section 210(b)(1)(i)].

The definition of entire net income does not include any gain due to an investment in a qualified opportunity fund under IRC section 1400z-2(a)(1)(A) [Part DDD, section 1 adding Article 9-A, section 208.9(a)(21) and Tax Law Article 33, section 1503(b)(1)(W)]. Entire net income is determined without the exclusion, deduction, or credit in the amount of any gain excluded from federal gross income for the taxable year due to an investment in a qualified opportunity fund under IRC section 1400z-2(a)(1)(A) [Part DDD, section 2 adding Article 9-A, section 208.9(b)(27) and Tax Law Article 33 section 1503(b)(2)(Z)].

Under the New York City Business Corporation Tax and General Corporation Tax, entire net income is defined in the same fashion as under the New York State Business Corporation Franchise Tax. [Part DDD, section 9 adding NYC Administrative Code section 652.8(a)(16) and section 11-652(b)(23)]

 

Real Property Tax Relief Credit

Effective immediately, and applying to taxable years beginning on or after January 1, 2021, qualifying individual taxpayers are entitled to a credit against their New York State personal income tax. This credit is computed as follows:

• For taxpayers whose qualified gross income is $75,000 or less, the applicable percentage is 14%.
• For qualified taxpayers whose qualified gross income is greater than $75,000 but less than or equal to $150,000, the applicable percentage is the difference between—
• 14%, and
• 5% multiplied by a fraction, the numerator of which is the difference between the taxpayer’s qualified gross income and $75,000 and the denominator of which is $75,000.
• For taxpayers whose qualified gross income is greater than $150,000 but less than or equal to $250,000, the applicable percentage is the difference between—
• 9%, and
• 6% multiplied by a fraction, the numerator of which is the difference between the qualified taxpayer’s qualified gross income and $150,000,
• and the denominator of which is $100,000.
• No credit is available to taxpayers whose qualified gross income exceeds $250,000.
• No credit is available to a property owner unless the property is used for residential purposes and not more than 25% of the rental income, if any, from the property is from rental for nonresidential purposes; in addition, the property must be occupied as a residence in whole or in part by one or more of the owners [Part III, adding tax law section 606(e-2)].

 

Residence means a dwelling in New York State owned by the taxpayer and used by the taxpayer as his or her primary residence, and so much of the land abutting it (up to one acre) as is reasonably necessary for use of the dwelling as a home. It may consist of a part of a multi-dwelling or multi-purpose building, including a cooperative or condominium. Residence includes a trailer or mobile home used exclusively for residential purposes.

To qualify, a taxpayer must be a resident individual of the state who owned and primarily resided for six months or more of the taxable year in real property that either received the School Tax Relief (STAR) exemption or that qualified the taxpayer to receive the school tax relief credit.

Qualified gross income is defined as the NYAGI of the qualified taxpayer for the taxable year for federal income tax purposes. For taxable year 2021, this is computed without regard to the decoupling from any changes after March 1, 2020. In computing qualified gross income, the net amount of loss reported on federal Schedule C, D, E, or F may not exceed $3,000 per schedule. In addition, the net amount of any other separate category of loss may not exceed $3,000. The aggregate amount of all losses included in computing qualified gross income may not exceed $15,000.

Excess real property tax is defined as the excess of qualifying real property taxes greater than 6% of qualified gross income.

 

Empire State Film Production and Post-production Credits

The Empire State film production credit and the Empire State film post-production credit have been extended for one year, effective immediately, through 2026 (Part F, sections 1, 2, 3, and 4 amending Tax Law section 24). In addition, television pilots are now eligible for both credits [Part F, section 5, amending Tax Law section 24(b)(3)]. The credit is effective for applications filed with the governor’s office for motion picture and television development on or after April 1, 2021 (Part F, section 6).

 

Restaurant Return-to-Work Tax Credit

The restaurant return-to-work tax credit, effective immediately, is intended to provide financial incentives to economically harmed restaurants by offering financial relief, expediting their hiring efforts, and reducing the duration and severity of their current economic difficulties. This credit applies to businesses entities impacted by COVID-19 operating predominantly in the food services sector (Part PP, Subpart A, adding new Economic Development Law Article 25, section 471 and 472.7).

The COVID-19–impacted food services sector is defined as:

• independently owned establishments located inside New York City that have been subjected to a ban on indoor dining for over six months and are primarily organized to prepare and provide meals or beverages to customers for consumption, including for immediate indoor on-premises consumption, or
• independently owned establishments located outside New York City in an area which has been or remains designated by the Department of Health as an orange zone or red zone pursuant to Executive Order 202.68 that has resulted in additional restrictions on indoor dining for at least 30 consecutive days and are primarily organized to prepare and provide meals or beverages to customers for consumption, including for immediate indoor on-premises consumption, and which have
• experienced economic harm as a result of the COVID-19 emergency as evidenced by a year-to-year decrease of one or both of gross receipts or average full-time employment of at least 40% in New York State between either the second quarter of 2019 and the second quarter of 2020 or the third quarter of 2019 and the third quarter of 2020, and
• have demonstrated a net employee increase [Part PP, Subpart A, adding new Economic Development Law Article 25, section 472.9(a),(b),(d),(e)].

 

“Average full-time employment” is defined as the average number of full-time equivalent positions employed by a business entity in an eligible industry during a given period (Part PP, Subpart A, adding Economic Development Law Article 25, section 472.1).

“Average starting full-time employment“ is calculated as the average number of full-time equivalent positions employed by a business entity in an eligible industry between January 1, 2021, and March 31, 2021 (Economic Development Law Article 25, section 472.2).

“Average ending full-time employment” is calculated as the average number of full-time equivalent positions employed by a business entity in an eligible industry between April 1, 2021, and either August 31, 2021, or December 31, 2021, whichever date the entity chooses to use (Economic Development Law Article 25, section 472.3).

“Net employee increase” is an increase of at least one full-time equivalent employee between the average starting full-time employment and the average ending full-time employment of a business entity (Economic Development Law Article 25, section 472.8).

A business entity is eligible for a credit of $5,000 per each full-time equivalent net employee increase, up to a maximum of $50,000 in tax credits under this program (Part PP, Subpart A, adding new Economic Development Law Article 25, section 475.1, 475.2).

The total amount of credits issued under this program is limited to $35,000,000 (Economic Development Law Article 25, section 479).

 

New York City Musical and Theatrical Production Tax Credit

Effective for taxable years beginning on or after January 1, 2021, but before January 1, 2024. A taxpayer that is a qualified New York City musical and theatrical production company (or is a sole proprietor of or a member of a partnership that is a qualified New York City musical and theatrical production company) that is subject to tax under article 9-A or 22, can receive a credit against such tax [Part PP, Subpart B, section 1, adding Tax Law section 24-c(1)(a)(1)].

The amount of the credit is equal to the product (or pro rata share of the product, in the case of a member of a partnership) of 25% and the sum of the qualified production expenditures paid for during the qualified New York City musical and theatrical production’s credit period. The amount of the credit cannot exceed $3,000,000 per qualified New York City musical and theatrical production for productions whose first performance is during the first year in which applications are accepted. For productions whose first performance is during the second year in which applications are accepted, the cap decreases to $1,500,000 per qualified production, unless the New York City tourism economy has not sufficiently recovered, as determined by the Department of Economic Development in consultation with the Division of the Budget [Part PP, Subpart B, section 1, adding Tax Law section 24-c(1)(a)(2)].

Qualified production expenditures used by a taxpayer as either the basis for the allowance of the credit provided pursuant to this New York City musical and theatrical production tax credit or in the calculation of the New York City musical and theatrical production tax credit may not be used to claim any other credit [Part PP, Subpart B, section 1, adding new Tax Law section 24-c(1)(a)(3)].

A qualified New York City musical and theatrical production company is a corporation, partnership, limited partnership, or other entity or individual which is principally engaged in the production of a qualified musical or theatrical production that is to be performed in a qualified New York City production facility [Part PP, Subpart B, section 1, adding new Tax Law section 24-c(1)(b)(4)].

A qualified company must claim the credit in the year in which its credit period ends [Part PP, Subpart B, section 1, adding new Tax Law section 24-c(1)(c)]. The credit period of a qualified New York City musical and theatrical production company is the period starting on the production start date and ending on the earlier of the date the qualified production has expended sufficient qualified production expenditures to reach its credit cap, the date the production closes, or March 31, 2023. The production start date is the date that is up to 12 weeks prior to the first performance of the qualified production [Part PP, Subpart B, section 1, adding new Tax Law section 24-c(1)(b)(5)(i),(ii)].

A qualified musical and theatrical production means a for-profit, live, dramatic stage presentation that, in its original or adaptive version, is performed in a qualified New York City production facility, whether or not such production was performed in a qualified New York City production facility prior to the state disaster emergency pursuant to executive order 202 of 2020 [Part PP, Subpart B, section 1, adding Tax Law section 24-c(1)(b)(1)].

A qualified New York City production facility means a facility located within New York City:

• in which live theatrical productions are or are intended to be primarily presented,
• that contains at least one stage, a seating capacity of 500 or more seats, and dressing rooms, storage areas, and other ancillary amenities necessary for the qualified musical and theatrical production, and
• for which receipts attributable to ticket sales constitute 75% or more of the facility’s gross receipts [Part PP, Subpart B, section 1, adding Tax Law section 24-c(1)(b)(3)].

 

Qualified production expenditures are defined as any costs for tangible property used and services performed directly and predominantly in the production of a qualified musical and theatrical production within the state of New York, including:

• expenditures for design, construction, and operation, including sets, special and visual effects, costumes, wardrobes, make-up, accessories, and costs associated with sound, lighting, and staging,
• all salaries, wages, fees, and other compensation, including related benefits for services performed (totaling no more than $200,000 per week); and
• technical and crew production costs, such as expenditures for a qualified production facility, or any part thereof, props, make-up, wardrobe, costumes, equipment used for special and visual effects, sound recording, set construction, and lighting [Part PP, Subpart B, section 1, adding new Tax Law section 24-c(1)(b)(2)].

 

Qualified production expenditures do not include any costs incurred prior to the credit period.

 

Certified Historic Structure Tax Credit

Effective immediately, and for taxable years beginning on and after January 1, 2022, taxpayers may receive a credit against the personal income tax under Article 22, the franchise tax on business corporations tax under Article 9-A, and the franchise tax on insurance companies up to 150% of the federal credit allowed (and totaling $2,500,000 or less) with respect to a certified historic structure (Part CCC, sections 1, 2, and 3).

 

Pass-through Entity Tax

Eligible partnerships and S corporations may elect to pay a new voluntary pass-through entity tax designed to mitigate the impact of the $10,000 cap on state and local tax (SALT) deductions enacted in the Tax Cuts and Jobs Act of 2017. Pass-through entities can deduct this tax at the federal level, thereby allowing partners and shareholders to receive the benefit of a full deduction for SALT paid before income is passed through to them. A credit against regular New York State income tax is available to offset the new pass-through entity tax. This pass-through entity tax enables individuals affected by the SALT cap to use IRS-allowed business deductibility to mitigate its impacts (Part C, section 1, adding new Tax Law Article 24-A).

An eligible partnership is defined as any business entity treated as a partnership for federal income tax purposes that consists solely of partners who are individuals. An eligible S corporation is defined as any New York S corporation that consists solely of shareholders who are individuals. An eligible S corporation includes any limited liability company treated as an S corporation for federal income tax purposes. An electing partnership is defined as any eligible partnership that made a valid, timely election. An electing S corporation is defined as any eligible S corporation that made a valid, timely election. A taxpayer includes any electing partnership or electing S corporation [Part C, section 1, adding new Tax Law Article 24-A, sections 860(a)–(e)].

Pass-through adjusted net income is defined as:

• In the case of an electing partnership, the sum of:
• federal taxable income (not less than zero), to the extent earned directly;
• pass-through taxes paid or incurred during the taxable year to the extent deducted in computing federal taxable income;
• taxes substantially similar to the tax imposed or incurred during the taxable year to another state of the United States, a political subdivision of such state, or the District of Columbia, to the extent deducted in computing federal taxable income; and
• guaranteed payments paid by the partnership to its partners per IRC section 707(c) [Part C, section 1, adding Tax Law Article 24-A, section 860(g)(1)].
• In the case of an electing S corporation, the sum of:
• federal non-separately computed income (not less than zero), whether earned by such S corporation or by a partnership of which the S corporation is a partner;
• taxes paid or incurred during the taxable year by an S corporation to the extent deducted in computing federal ordinary income; and
• taxes substantially similar to the tax imposed or incurred during the taxable year to another state of the United States, a political subdivision of such state, or the District of Columbia, to the extent deducted in computing federal taxable income [Part C, section 1, adding Tax Law Article 24-A, section 860(g)(2)].

 

Partnership taxable income of an electing partnership is defined as the sum of:

• the electing partnership’s pass-through adjusted net income (not less than zero), allocated to New York State; and
• the electing partnership’s proportionate share of any pass-through adjusted net income (not less than zero) from a partnership of which it is a partner, to the extent it was sourced to New York by such partnership [Part C, section 1, adding Tax Law Article 24-A, section 860(h)].

 

S corporation taxable income of an electing S corporation is defined as the electing S corporation’s pass-through adjusted net income (not less than zero) allocated to New York State.

 

Election and Termination

Any eligible partnership or S corporation doing business in New York State may make an annual election to be subject to the pass-through entity tax. If the entity is an S corporation, the annual election must be signed by any officer, manager, or shareholder who is authorized under the law of the state of incorporation or under the organizational documents to make the election and who represents to having such authorization under penalty of perjury. If the entity is not an S corporation, the election must be made by any member, partner, owner, or other individual with authority to bind the entity or sign returns [Part C, section 1, adding Tax Law Article 24-A, section 861(a),(b)].

Calendar-year taxpayers must file the annual pass-through entity tax election by December 1 of the prior year [Part C, section 1, adding Tax Law Article 24-A, section 861(c)].

Fiscal-year taxpayers must file the annual pass-through entity tax election 1st day of the last full month prior to the start of the fiscal year to take effect for the succeeding fiscal year. If an election is made after such date, it will first take effect in the second succeeding fiscal year [Part C, section 1, adding Tax Law Article 24-A, section 861(d)].

The election is terminated whenever, at any time during the taxable year, the taxpayer ceases to be an eligible partnership or eligible S corporation. The termination of an election is effective immediately upon the taxpayer ceasing to be an eligible partnership or eligible S corporation and when no pass-through entity tax is due for the taxable year [Part C, section 1, adding Tax Law Article 24-A, section 861(e)(1),(2)].

If a termination is due solely to the death of a partner, member, or shareholder of an otherwise eligible partnership or eligible S corporation during the taxable year when the successor to the decedent’s interest in the partnership or S corporation is not an individual, no penalty for underpayment of estimated personal income tax addition to tax will be imposed solely as a result of the termination of the election [Part C, section 1, adding new Tax Law Article 24-A, section 861(e)(3)].

If an election is terminated during the taxable year, the electing partnership or S corporation must file a return notifying the commissioner. Such notification will be considered a claim for a credit or refund of an overpayment of pass-through entity tax of any estimated payments for the taxable year containing the date of termination [Part C, section 1, adding Tax Law Article 24-A, section 865(c)].

 

Rate of Tax and Allocation

A tax is imposed for each taxable year on the partnership taxable income of every electing partnership doing business in New York State and on the S corporation taxable income of every electing S corporation doing business in New York State. This tax is in addition to any other taxes imposed and is levied at the rate of 6.85% for each taxable year beginning on or after January 1, 2022 [Part C, section 1, adding new Tax Law Article 24-A, section 862(a)].

The taxable income of an electing partnership is allocated to New York pursuant to the principles of Tax Law Article 22. The taxable income of an electing S corporation is allocated to New York by multiplying the adjusted net income of the electing S corporation by the business apportionment factor of the electing S corporation as calculated pursuant to Tax Law Article 9-A section 210-A [Part C, section 1, adding new Tax Law Article 24-A, section 862(b),(c)].

 

Pass-through Entity Tax Credit

An individual subject to New York personal income tax that is a partner or member in an electing partnership or a shareholder of an electing S corporation subject to the pass-through entity tax is allowed a credit against their personal income tax [Part C, section 1, adding new Tax Law Article 24-A, section 863].

 

Filing and Certification

The return is due on or before the 15th day of the 3rd month following the end of the taxable year [Part C, section 1, adding new Tax Law Article 24-A, section 865(a)].

Every pass-through entity tax return must include a certification by an individual authorized to act on behalf of the electing partnership or electing S corporation that the taxpayer:

• made a timely, valid election to be subject to pass-through entity tax;
• was at all times during the taxable year eligible to make the election, unless such return includes a notification of termination; and
• that all statements contained in the return are true [Part C, section 1, adding Tax Law Article 24-A, section 865(b)].

 

Information Reporting

Each electing partnership and electing S corporation must report the following on their return:

• The balance of any tax shown that was not previously paid as installments of estimated tax must be paid with the return;
• All partners, members, and shareholders eligible to receive a credit and those partners’, members’, and shareholders’ distributive or pro rata share of the pass-through entity tax imposed on the electing partnership or S corporation but be identified; and
• Any other information as required by the commissioner [Part C, section 1, adding Tax Law Article 24-A, section 865(d)].

 

Each electing partnership subject to tax must report to each partner or member their distributive share of:

• the partnership taxable income of the electing partnership;
• the pass-through entity tax imposed on the electing partnership; and
• any other information as required by the commissioner [Part C, section 1, adding Tax Law Article 24-A, section 865(e)].

 

Each electing S corporation subject to tax must report to each shareholder their pro rata share of:

• the S corporation taxable income of the electing S corporation;
• the pass-through entity tax imposed on the electing S corporation; and
• any other information as required by the commissioner [Part C, section 1, adding Tax Law Article 24-A, section 865(f)].

 

Payment of Estimated Tax

Estimated tax refers to the amount that an electing partnership or electing S corporation estimates will be due for the current tax year [Part C, section 1, adding Tax Law Article 24-A, section 864(a)].

The estimated tax must paid as follows for an electing partnership or an electing S corporation. The estimated tax must be paid in four equal installments of 25% of the projected pass-through entity tax on the 15th day of the 3rd, 6th, 9th, and 12th months of the tax year [Part C, section 1, adding Tax Law Article 24-A, section 864(b)(1),(2)].

In order to avoid any underpayment penalty, the required annual payment is the lesser of:

• 90% of the tax shown on the return for the taxable year; or
• 100% of the tax shown on the return of the electing partnership or electing S corporation for the preceding taxable year [Part C, section 1, adding Tax Law Article 24-A, section 864(b)(1)].

 

Sales Tax Provisions

Breast pump replacement parts and breast pump collection and supplies sold to individual purchasers for home use are exempt from sales and compensating use taxes [Budget Act, Part MM, section 1, adding Tax Law section 1115(a)(46)].

Effective immediately, the exemption from sales tax for food and drink when sold for $1.50 or less through any vending machine that accepts coin or currency only, or when sold for $2.00 or less through any vending machine that accepts any form of payment other than coin or currency (whether or not it also accepts coin or currency) is extended through 2022 [Part SS, amending Tax Law section 1115(a)(i)(B)].

 

Other Business Tax Provisions

Effective for taxable years beginning on or after January 1, 2021, corporations classified as “taxicab” or “omnibus” are no longer subject to tax if they meet certain conditions. Such corporations are those—

• which are organized, incorporated, or formed under the laws of any other state, country, or sovereignty, and
• which neither own nor lease property in New York State in a corporate or organized capacity, nor
• which maintain an office in this state in a corporate or organized capacity, but
• which is doing business or employing capital in New York State by conducting at least one but fewer than 12 trips into the state during the calendar year [Part C, section 1, amending Tax Law Article 9, section 184(2)(b)].

 

Administrative Provisions

The penalty for the failure of an employer to provide complete and correct employee information has been increased from $50 to $100 per employee per calendar quarter. The maximum penalty imposed for any calendar quarter is increased from $10,000 to $20,000 [Budget Act, Part F, section 1, amending Tax Law section 685(v)(3)]. Effective for returns filed on or after June 1, 2021 (Part F, section 2).

Effective immediately, the minimum amount of personal and corporate tax overpayment on which interest is allowed or is paid has been increased from $1.00 to $5.00. No interest shall be allowed or paid if the amount thereof is less than $5.00 (Budget Act, Part QQ).

Given the complexity of these tax provisions, CPAs need to understand how these changes impact their clients or employers. Indeed, given the increases in tax rates for high earners and corporations, we would expect more individuals and businesses to evaluate whether they should continue to reside or operate within New York State. Additionally, pass-through entities will also need to determine if the newly enacted Pass-through Entity Tax should be elected and its impact on the entity’s partners or shareholders.