Enacts the MEGA corporations act mandating worldwide combined reporting for large corporations that have more than one billion dollars in gross receipts.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A6629
SPONSOR: Lasher TITLE OF BILL:
An act to amend the tax law, in relation to enacting the MEGA corpo-
rations act mandating worldwide combined reporting for large corpo-
rations
PURPOSE OR GENERAL IDEA OF BILL:
The MEGA Corporations Act would ensure that large multinational corpo-
rations pay their fair share of New York State's corporate franchise
tax. The bill closes a significant gap in the way that this tax is
calculated, which currently allows multinationals to shift domestic
profits, including those derived from sales in New York, to foreign
affiliates.
SUMMARY OF SPECIFIC PROVISIONS:,
Section 1 titles the bill the "multinational earnings and global
accountability for (MEGA) corporations act."
Section 2 describes the legislative intent of the bill, which is to
ensure that multinational corporations pay their fair share of tax so
that New York-based businesses that cannot shift profits overseas are no
longer at a competitive disadvantage with large multinational companies
that can.
Section 3 amends section 210-c of Article 9-A of the tax law to repeal
the existing rule that alien (i.e. foreign) corporations cannot be
included in a combined tax return for the corporate franchise tax. The
repeal applies only where the combined annual gross receipts of the
corporation's unitary business exceeds one billion dollars.
Section 4 amends section 208 of the tax law to include worldwide income
in the definition of entire net income for alien corporations required
to file a combined report under the bill.
Section 5 amends section 210-a of the taw law to exclude global intangi-
ble low-taxed income from the denominator of the apportionment formula
for any corporation required to file a combined report Under the bill.
Section 6 provides that the commissioner of tax and finance shall
promulgate any rules or regulations necessary to administer the
provisions of this title, including but not limited to rules and regu-
lations necessary to prevent the double-taxation of income.
Section 7 provides that the bill shall apply to taxable years commencing
on or after January 1, 2026.
JUSTIFICATION:;
The MEGA Corporations Act would ensure that large multinational corpo-
rations pay their fair share of New York State's corporate franchise tax
(more commonly referred to as the corporate income tax). The bill closes
a significant gap in the way that this tax is calculated, which current-
ly allows multinationals to shift domestic profits, including those
deriving from sales in New York, to foreign affiliates, often located in
tax haven jurisdictions.
The State's corporate franchise tax generally operates by calculating
the fraction of a corporation's total sales that are made to purchasers
in New York. This is known as the "apportionment fraction." The appor-
tionment fraction is then applied to the corporation's total profits, in
order to calculate the share of those profits subject to tax by New
York.
When multiple corporations operate effectively as a single business, New
York requires them to file what is known as a "combined report," in
order to capture all profits. The combined report, however, only
includes (with some exceptions) domestic entities. This is known as
"water's edge" combined reporting, and it allows multinational corpo-
rations to reduce their New York State tax liability by shifting profits
overseas. This gives them a significant advantage over purely domestic
businesses that cannot engage in such tax avoidance, while depriving the
State of significant tax revenue to which it is reasonably entitled.
This is both a matter of basic fairness in taxation and one with signif-
icant fiscal implications. The institute on Taxation and Economic Policy
(ITEP) estimates that roughly 14% of state corporate income tax revenues
across the country - or nearly $20 billion annually - is being lost to
overseas profit-shifting under existing state tax laws. While the Biden
Administration made progress on international cooperation to reduce
global tax avoidance, an early Trump Administration Executive Order
withdrew from the agreement to establish a global minimum tax, known as
Pillar II.
In New York, every year, we arc losing more than $700 million in corpo-
rate franchise tax revenue. This money could be recovered by shifting
from water's edge combined reporting to worldwide combined reporting.
The MEGA Corporations Act would make this reform for multinationals that
have gross receipts in excess of $1 billion, in order to recoup most, if
not all, of this revenue.
Even as it accounts for worldwide sales and profits, this corporate
franchise tax would still only tax a share of profits that is propor-
tional to New York's share of a company's worldwide sales. A company
with significant foreign sales would see the denominator of its appor-
tionment fraction grow, making the fraction smaller. For a hypothetical
company that is not engaged in profit shifting, and for which profits
track sales, the reduction of the apportionment fraction would offset
the inclusion of foreign profits, and the company's tax liability would
not change. Along the same lines, a company with substantial foreign
losses might see their tax liability in New York decrease.
It is also important to note that a company's corporate franchise tax
liability is based on sales in New York, and not whether the company is
headquartered in New York or employs New Yorkers. As a result, shifting
from water's edge combined reporting to worldwide combined reporting,
and doing so only for large multinational corporations, should have
little effect on the state's business climate or economic competitive-
ness.
PRIOR LEGISLATIVE HISTORY:
None.
FISCAL IMPLICATIONS:
Significant additional revenue for the State of New York.
EFFECTIVE DATE:
This act shall take effect immediately.
STATE OF NEW YORK
________________________________________________________________________
6629
2025-2026 Regular Sessions
IN ASSEMBLY
March 6, 2025
___________
Introduced by M. of A. LASHER, BURDICK, R. CARROLL, COLTON, EPSTEIN,
LEVENBERG, MAMDANI, SCHIAVONI, SEPTIMO, TAPIA -- read once and
referred to the Committee on Ways and Means
AN ACT to amend the tax law, in relation to enacting the MEGA corpo-
rations act mandating worldwide combined reporting for large corpo-
rations
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. Short title. This act shall be known and may be cited as
2 the "multinational earnings and global accountability for (MEGA) corpo-
3 rations act".
4 § 2. Legislative intent. The legislature finds that multinational
5 corporations who profit from sales in New York often engage in practices
6 that shift profits outside the United States to reduce their tax liabil-
7 ity. To ensure a level playing field with New York-based businesses and
8 that multinationals pay their fair share, this act mandates worldwide
9 combined reporting for multinational corporations with gross receipts
10 exceeding one billion dollars, requiring them to report all profits,
11 international and domestic, against which the corporate franchise tax
12 can be levied based on the portion of sales made in New York.
13 § 3. Paragraphs (b) and (c) of subdivision 2 of section 210-C of the
14 tax law, as added by section 18 of part A of chapter 59 of the laws of
15 2014, are amended to read as follows:
16 (b) A corporation required to make a combined report within the mean-
17 ing of this section shall also include (i) a captive REIT and a captive
18 RIC if the captive REIT or captive RIC is not required to be included in
19 a combined report under article thirty-three of this chapter; (ii) a
20 combinable captive insurance company; and (iii) an alien corporation
21 that satisfies the conditions in paragraph (a) of this subdivision if
22 (I) under any provision of the internal revenue code, that corporation
23 is treated as a "domestic corporation" as defined in section seven thou-
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD04124-04-5
A. 6629 2
1 sand seven hundred one of the internal revenue code, [or] (II) it has
2 effectively connected income for the taxable year pursuant to clause
3 (iv) of the opening paragraph of subdivision nine of section two hundred
4 eight of this article, or (III) it is engaged in a unitary business with
5 any taxpayer and the combined annual gross receipts of the unitary busi-
6 ness including both taxpayers and nontaxpayers exceeds one billion
7 dollars.
8 (c) A corporation required or permitted to make a combined report
9 under this section does not include (i) a corporation that is taxable
10 under a franchise tax imposed by article nine or article thirty-three of
11 this chapter or would be taxable under a franchise tax imposed by arti-
12 cle nine or thirty-three of this chapter if subject to tax; (ii) a REIT
13 that is not a captive REIT, and a RIC that is not a captive RIC; (iii) a
14 New York S corporation; or (iv) an alien corporation that under any
15 provision of the internal revenue code is not treated as a "domestic
16 corporation" as defined in section seven thousand seven hundred one of
17 such code, is not engaged with any taxpayer in a unitary business with
18 combined annual gross receipts including both taxpayers and nontaxpayers
19 in excess of one billion dollars, and has no effectively connected
20 income for the taxable year pursuant to clause (iv) of the opening para-
21 graph of subdivision nine of section two hundred eight of this article.
22 If a corporation is subject to tax under this article solely as a result
23 of its ownership of a limited partner interest in a limited partnership
24 that is doing business, employing capital, owning or leasing property,
25 maintaining an office in this state, or deriving receipts from activity
26 in this state, and none of the corporation's related corporations are
27 subject to tax under this article, such corporation shall not be
28 required or permitted to file a combined report under this section with
29 such related corporations.
30 § 4. Paragraph (iv) of the opening paragraph of subdivision 9 of
31 section 208 of the tax law, as amended by section 4 of part A of chapter
32 59 of the laws of 2014, is amended and a new paragraph (v) is added to
33 read as follows:
34 (iv) except as provided in paragraph (v) of this paragraph, in the
35 case of an alien corporation that under any provision of the internal
36 revenue code is not treated as a "domestic corporation" as defined in
37 section seven thousand seven hundred one of such code is effectively
38 connected with the conduct of a trade or business within the United
39 States as determined under section 882 of the Internal Revenue Code[.];
40 or
41 (v) in the case of an alien corporation required to be included in a
42 combined report pursuant to paragraph (b) of subdivision two of section
43 two hundred ten-C of this article, the corporation's worldwide income
44 computed as if such corporation were subject to tax.
45 § 5. Paragraph (a) of subdivision 5-a of section 210-A of the tax law,
46 as amended by section 3 of part I of chapter 39 of the laws of 2019, is
47 amended to read as follows:
48 (a) Notwithstanding any other provision of this section, global intan-
49 gible low-taxed income shall be included in the apportionment fraction
50 as provided in this subdivision, except for a corporation required to
51 file a combined report within the meaning of subparagraph (III) of para-
52 graph (b) of subdivision two of section two hundred ten-C of this arti-
53 cle, because they are engaged in a unitary business with any taxpayer
54 and the combined annual gross receipts of the unitary business including
55 both taxpayers and nontaxpayers exceeds one billion dollars, which shall
A. 6629 3
1 not include global intangible low-taxed income in the denominator of the
2 apportionment fraction.
3 § 6. The commissioner of taxation and finance is authorized to repeal
4 or make any necessary additions or amendments to any applicable rules or
5 regulations in order to administer the provisions of this act, includ-
6 ing, but not limited to, those necessary to prevent the double-taxation
7 of income.
8 § 7. This act shall take effect immediately and shall apply to taxable
9 years commencing on or after January 1, 2026.
