Provides that receipts from other services and other business receipts, taxpayers, and combined groups including members, engaged in providing professional employer organization services shall include with such receipts amounts received with respect to wages, benefits, and other employee expenses disbursed to or for the benefit of a client's worksite employees and the related employment taxes if the amounts received are included in the calculation of the business income base or the combined business income base, respectively.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A9234
SPONSOR: Lunsford TITLE OF BILL:
An act to amend the tax law, in relation to taxpayers, and combined
groups including members, engaged in providing professional employer
organization services
PURPOSE:
To clarify the calculation of taxable business income of professional
employer organization services providers
SUMMARY OF PROVISIONS:
Section 1 amends paragraph (a) of subdivision 10 of section 210-A of the
tax law, to clarify that "For purposes of this paragraph, taxpayers, and
combined groups including members, engaged in providing professional
employer organization services shall include with such receipts amounts
received with respect to wages, benefits, and other employee expenses
disbursed to or for the benefit of a client's worksite employees and the
related employment taxes if the amounts received are included in the
calculation of the business income base or the combined business income
base, respectively."
Section 2 is the effective date.
JUSTIFICATION:
The language in the current statute (Tax Law § 210-A.1) states that:
"Nile apportionment factor is a fraction, determined by including only
those receipts, net income, net gains, and other items described in this
section that are included in the computation of the taxpayer's business
income (determined without regard to the modification provided in
subparagraph nineteen of paragraph (a) of subdivision nine of section
two hundred eight of this article) for the taxable year." This reflects
the intention of the Legislature that all revenue, net gain, and other
items used to compute business income must also be included in the
calculation of the apportionment factor. This obvious intention notwith-
standing, the Department of Taxation and Finance has promulgated regu-
lations requiring that certain client payments received by Professional
Employer Organizations ("PEOs") and included in the computation of busi-
ness income now must be excluded from the calculation of the apportion-
ment fraction on the basis that they are "reimbursements" of wages and
other amounts paid by the PEOs for the employees performing services for
the PEOs' clients.
For federal income tax purposes, some reimbursements (like those of
PEOs) are included in the calculation of federal taxable income, which
is the foundation for determining the business income of corporations
taxable under Article 9-A. In other instances (e.g., repayments of trav-
el expenses, refunds of deposits), the reimbursements are excluded from
the computation of business income. The proposed legislation will
promote sound tax policy by clarifying the Legislature's original intent
that the apportionment fraction includes representation of all items of
revenue, net gain, and other items for purposes of computing a PEO's
taxable business income.
In those limited instances in which the proposal, if adopted, might lead
to an apportionment factor that the Department considers distortive,
existing Tax Law § 210-A.11 permits the Department to assert that a
discretionary adjustment to the apportionment factor is necessary to
cure the distortion.
LEGISLATIVE HISTORY:
New bill
FISCAL IMPLICATIONS:
To be determined
EFFECTIVE DATE:
This act shall take effect immediately and shall apply to all open tax
years beginning on and after January 1, 2015.
STATE OF NEW YORK
________________________________________________________________________
9234
IN ASSEMBLY
February 22, 2024
___________
Introduced by M. of A. LUNSFORD -- read once and referred to the Commit-
tee on Ways and Means
AN ACT to amend the tax law, in relation to taxpayers, and combined
groups including members, engaged in providing professional employer
organization services
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. Paragraph (a) of subdivision 10 of section 210-A of the tax
2 law, as added by section 16 of part A of chapter 59 of the laws of 2014,
3 is amended to read as follows:
4 (a) Receipts from other services and other business receipts.
5 Receipts from services not addressed in subdivisions one through nine of
6 this section and other business receipts not addressed in such subdivi-
7 sions shall be included in the numerator of the apportionment fraction
8 if the location of the customer is within the state. Such receipts from
9 customers within and without the state are included in the denominator
10 of the apportionment fraction. For purposes of this paragraph, taxpay-
11 ers, and combined groups including members, engaged in providing profes-
12 sional employer organization services shall include with such receipts
13 amounts received with respect to wages, benefits, and other employee
14 expenses disbursed to or for the benefit of a client's worksite employ-
15 ees and the related employment taxes if the amounts received are
16 included in the calculation of the business income base or the combined
17 business income base, respectively. Whether the receipts are included in
18 the numerator of the apportionment fraction is determined according to
19 the hierarchy of method set forth in paragraph (b) of this subdivision.
20 The taxpayer must exercise due diligence under each method described in
21 such paragraph (b) before rejecting it and proceeding to the next method
22 in the hierarchy, and must base its determination on information known
23 to the taxpayer or information that would be known to the taxpayer upon
24 reasonable inquiry.
25 § 2. This act shall take effect immediately and shall apply to all
26 open tax years beginning on and after January 1, 2015.
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD14477-01-4
