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A04595 Summary:

BILL NOA04595
 
SAME ASSAME AS S02833
 
SPONSORKelles
 
COSPNSREpstein, Rosenthal L, Niou, Kim, Mamdani, Gallagher, De La Rosa, Reyes, Solages, Mitaynes, Carroll, Thiele, Burgos, Simon, Gottfried, Forrest, Anderson, Cruz, Davila, Seawright, Bichotte Hermelyn, Hunter, Gonzalez-Rojas, Pichardo, Fahy, Steck, Meeks, Walker, Sillitti, Clark, Jackson, McDonald, Dinowitz, Burke, Barnwell, Rodriguez, Frontus, Richardson, Zinerman
 
MLTSPNSR
 
Add §§209-N & 608, Tax L
 
Imposes additional tax on certain business income and on business income included in an individual's New York taxable income.
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A04595 Actions:

BILL NOA04595
 
02/04/2021referred to ways and means
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A04595 Memo:

NEW YORK STATE ASSEMBLY
MEMORANDUM IN SUPPORT OF LEGISLATION
submitted in accordance with Assembly Rule III, Sec 1(f)
 
BILL NUMBER: A4595
 
SPONSOR: Kelles
  TITLE OF BILL: An act to amend the tax law, in relation to the imposition of additional tax on certain business income and on business income included in an individual's New York taxable income   PURPOSE OR GENERAL IDEA OF BILL: To generate increased tax revenue for New York State by off-setting the federal under-taxation of corporate profits and pass-through business income as a result of the 2017 Tax Cuts and Jobs Act.   SUMMARY OF SPECIFIC PROVISIONS: Section 1 of the bill amends Article 9-A of the Tax Law ("Franchise Tax on Business Corporations") by adding a new section 209-N, calculating a tax on corporate income equal to the difference between the federal corporate income tax rate (currently 21%) and the progressive corporate income tax rate that applied prior to the enactment of the 2017 tax legislation, known as the Tax Cuts and Jobs Act (when the top progres- sive rate was 35%). Section 2 of the bill amends Article 22 of the Tax Law ("Personal Income Tax") by adding a new section 608, which taxes any amount deducted from an individual's pass-through business income for federal income tax purposes. This tax offsets the 20% deduction available under section 199A of the 2017 tax legislation known as the Tax Cuts and Jobs Act, and applies at the highest federal income tax rates that would otherwise apply to the taxpayer. Small business owners who benefit from the pass- through deduction are not subject to this additional tax. Section 3 is the effective date.   JUSTIFICATION: New York is an exceptionally wealthy state. Treated as a separate coun- try, it would have one of the world's largest economies. With such a strong economy, all New Yorkers should have fundamental economic rights: access to high-quality education, affordable healthcare, guaranteed housing, and basic social services and social insurance. New York must also finance investments in green energy, green jobs, and green infras- tructure in order to mitigate the catastrophic risks of climate change. New York is also the most unequal state in the nation, in part because our tax system has not kept pace with changes in the economy, leaving the many high-earning professionals and wealthy families in this state undertaxed. Economic growth from recent decades has overwhelmingly bene- fitted a small segment of elites, while inflation-adjusted wages have stagnated for the vast majority of working people since the 1970s. The state government, lacking adequate tax revenues, has been unable to afford essential public investment and social spending, including upgrading our infrastructure, repairing public housing, protecting public education, and financing Medicaid. While the Federal Government could aid the states in providing essential services through progressive tax and spending measures, it instead continues to give tax benefits to corporate interests. In 2017, the Federal Government enacted the tax legislation known as the "Tax Cuts and Jobs Act" (the "TCJA"). That Act replaced a progressive corporate tax structure that topped out at 35%, with a 21% flat tax. The TCJA also created a 20% deduction for business income received from pass- through entities, with additional benefits for the real estate industry. Big business, already adept at dodging taxes, hardly needed a tax cut. Moreover, these tax give-aways cost the Federal Government trillions of dollars in tax revenues. Tax revenues from corporate income are now at a historic all-time low. Now, instead of funding desperately needed social services and social insurance, these revenues have been diverted to artificially boosting corporate earnings and inflating stock values. New York can respond to regressive federal tax policy by offsetting these cuts. The state is full of both large corporations and pass- through business owners that were doing perfectly well before Congress changes the federal corporate tax structure in 2017. This bill re-es- tablishes the combined state and federal level of business taxation in 2017. Under this bill, the state corporate tax rate adjusts to whatever the current federal corporate tax rate is, so that the combined state and federal corporate tax rate is equal to what it was in 2017. If the Federal Government increases the corporate tax rate, the rate imposed by New York will adjust downwards. The tax on pass-through business income similarly adjusts to offset the federal deduction (currently 20% under 199A). An exemption is provided for small business owners who benefit from the pass-through deduction.   LEGISLATIVE HISTORY: New bill.   FISCAL IMPLICATIONS: The sponsors estimate the bill would generate an additional $9 billion in annual revenue for the state.   EFFECTIVE DATE: This act shall take effect immediately.
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A04595 Text:



 
                STATE OF NEW YORK
        ________________________________________________________________________
 
                                          4595
 
                               2021-2022 Regular Sessions
 
                   IN ASSEMBLY
 
                                    February 4, 2021
                                       ___________
 
        Introduced by M. of A. KELLES -- read once and referred to the Committee
          on Ways and Means
 
        AN ACT to amend the tax law, in relation to the imposition of additional
          tax  on  certain business income and on business income included in an
          individual's New York taxable income

          The People of the State of New York, represented in Senate and  Assem-
        bly, do enact as follows:
 
     1    Section 1. The tax law is amended by adding two new sections 209-N and
     2  608 to read as follows:
     3    §  209-N.  Additional  tax. 1. There is imposed an additional tax on a
     4  taxpayer's business income base, as defined in section two  hundred  ten
     5  of  this article, at a rate equal to the difference between (i) the rate
     6  of tax imposed in subparagraph (b) of paragraph one of section 11 of the
     7  Internal Revenue Code (26 U.S. Code § 11(1)(b)), as in  effect  for  the
     8  year  two  thousand sixteen, and (ii) the current rate of tax imposed in
     9  paragraph (b) of section 11 of the Internal Revenue Code (26 U.S. Code §
    10  11(1)(b)).
    11    2. The additional tax under this section shall  be  administered,  and
    12  penalties shall be imposed, under the same provisions of this article as
    13  the tax imposed under section two hundred nine of this article.
    14    §  608. Additional tax. 1. There is imposed an additional tax upon the
    15  amount of an individual's New York taxable income  that  corresponds  to
    16  any  deduction  taken  pursuant  to section 199A of the Internal Revenue
    17  Code (26 U.S. Code § 199A), or any  successor  provision  thereto.  This
    18  section  shall  not  apply  to  a taxpayer with a federal taxable income
    19  below the threshold amount, as defined in section 199A(e) of the  Inter-
    20  nal  Revenue  Code, plus fifty thousand dollars for single filers or one
    21  hundred thousand dollars in the case of a joint return.
    22    2. The rate of such additional tax  shall  be  equal  to  the  highest
    23  federal income tax rates in effect for the taxable year that would apply
    24  to  the  amount deducted under section 199A of the Internal Revenue Code
 
         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.
                                                                   LBD07723-01-1

        A. 4595                             2
 
     1  (26 U.S. Code § 199A), or any successor provision thereto, but  for  the
     2  application of such section.
     3    3.  The  amount of an individual's New York taxable income that corre-
     4  sponds to the amount of any deduction taken pursuant to section 199A  of
     5  the Internal Revenue Code (26 U.S. Code § 199A) is the amount that bears
     6  the same relationship to the taxpayer's total New York taxable income as
     7  the  amount deducted under section 199A of the Internal Revenue Code (26
     8  U.S. Code § 199A) bears to the taxpayer's total federal  taxable  income
     9  as determined without regard to such deduction.
    10    4.  The  additional  tax under this section shall be administered, and
    11  penalties shall be imposed, in  the  same  manner  as  the  other  taxes
    12  imposed by this article.
    13    §  2.  This  act  shall take effect immediately and shall apply to tax
    14  year 2021.
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