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A05701 Summary:

BILL NOA05701
 
SAME ASSAME AS S01195
 
SPONSORDinowitz
 
COSPNSRSeawright, Glick, Cahill, Gottfried, Cruz, Epstein, Reyes, Thiele, Hevesi, O'Donnell, Paulin, Rosenthal L, Simon, Steck, Abinanti, Solages, Kim, Darling, Fahy, Perry, Fernandez, Englebright, Mitaynes, Gallagher, Burdick, Septimo, Kelles, Mamdani, Forrest
 
MLTSPNSR
 
Amd §208, Tax L; amd §11-652, NYC Ad Cd
 
Relates to investment income and capital gains on investments deferred or excluded under 26 U.S.C. section 1400-z-2.
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A05701 Actions:

BILL NOA05701
 
02/24/2021referred to ways and means
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A05701 Memo:

NEW YORK STATE ASSEMBLY
MEMORANDUM IN SUPPORT OF LEGISLATION
submitted in accordance with Assembly Rule III, Sec 1(f)
 
BILL NUMBER: A5701
 
SPONSOR: Dinowitz
  TITLE OF BILL: An act to amend the tax law and the administrative code of the city of New York, in relation to investment income   PURPOSE:   SUMMARY OF PROVISIONS: Section 1 is the title of the act. Section 2 amends paragraph (a) of subdivision 6 of section 208 of the tax law to include capital gains on investments deferred or excluded under 26 U.S.C. Section 1400z-2 Section 3 amends paragraph (a) of subdivision 5 of section 11-652 of the administrative code of the city of New York to include capital gains on investments deferred or excluded under 26 U.S.C. Section 1400z-2 Section 4 sets the effective date.   EXISTING LAW:   JUSTIFICATION: The federal tax overhaul passed in 2017 included a provision aimed at incentivizing investment in economically distressed areas. These areas, "qualified opportunity zones" were designated by states in 2018. Inves- tors who create opportunity funds to invest in these census tracts are able to defer large capital gains on their federal taxes. Though a laudable goal, the vague standards for states to designate opportunity zones have allowed Empire State Development to designate many areas with booming, over-developed real estate markets as opportu- nity zones. These include New York City census tracts in Long Island City, Astoria, East Village, and Harlem. Where in many places the program can be used to incentivize investment where it would not other- wise exist, it is simply being used as another giveaway to wealthy investors. Investors are set to benefit on their federal taxes for years to come. However, since much of New York's tax code is linked to the federal tax code, the law would currently allow for huge state tax bene- fits as well. In order to prevent another giveaway to the wealthy, New York must de-link this section of federal law from our tax code.   LEGISLATIVE HISTORY: 2019-2020 - Referred to ways and means.   FISCAL IMPLICATIONS: The bill will prevent a loss in tax revenue to the state.   LOCAL FISCAL IMPLICATIONS:   EFFECTIVE DATE: Immediately and shall apply to taxable years beginning on and after January 1, 2021.
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A05701 Text:



 
                STATE OF NEW YORK
        ________________________________________________________________________
 
                                          5701
 
                               2021-2022 Regular Sessions
 
                   IN ASSEMBLY
 
                                    February 24, 2021
                                       ___________
 
        Introduced  by  M.  of A. DINOWITZ, SEAWRIGHT, GLICK, CAHILL, GOTTFRIED,
          CRUZ, EPSTEIN, REYES, THIELE, HEVESI, O'DONNELL, PAULIN, L. ROSENTHAL,
          SIMON, STECK, ABINANTI, SOLAGES, KIM, DARLING, FAHY, PERRY, FERNANDEZ,
          ENGLEBRIGHT -- read once and referred to the  Committee  on  Ways  and
          Means

        AN  ACT  to amend the tax law and the administrative code of the city of
          New York, in relation to investment income
 
          The People of the State of New York, represented in Senate and  Assem-
        bly, do enact as follows:
 
     1    Section  1.  This act shall be known and may be cited as the "opportu-
     2  nity zone tax break elimination act".
     3    § 2. Paragraph (a) of subdivision 6 of section 208 of the tax law,  as
     4  amended  by  section  5  of part T of chapter 59 of the laws of 2015, is
     5  amended to read as follows:
     6    (a) (i) The term "investment income" means income,  including  capital
     7  gains  in  excess  of  capital  losses,  from investment capital, to the
     8  extent included in  computing  entire  net  income,  less,  (A)  in  the
     9  discretion  of  the  commissioner,  any interest deductions allowable in
    10  computing entire net income which are directly or  indirectly  attribut-
    11  able  to  investment capital or investment income, (B) any capital gains
    12  deferred or excluded under 26 U.S.C. §1400-z-2, provided, however,  that
    13  in no case shall investment income exceed entire net income. (ii) If the
    14  amount  of interest deductions subtracted under subparagraph (i) of this
    15  paragraph exceeds investment income, the  excess  of  such  amount  over
    16  investment  income must be added back to entire net income. (iii) If the
    17  taxpayer's investment income determined without regard to  the  interest
    18  deductions subtracted under subparagraph (i) of this paragraph comprises
    19  more  than eight percent of the taxpayer's entire net income, investment
    20  income determined without regard  to  such  interest  deductions  cannot
    21  exceed eight percent of the taxpayer's entire net income.

         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.
                                                                   LBD03332-01-1

        A. 5701                             2
 
     1    §  3. Paragraph (a) of subdivision 5 of section 11-652 of the adminis-
     2  trative code of the city of New York, as added by section 1 of part D of
     3  chapter 60 of the laws of 2015, is amended to read as follows:
     4    (a)  (i)  The term "investment income" means income, including capital
     5  gains in excess of capital  losses,  from  investment  capital,  to  the
     6  extent  included  in  computing  entire  net  income,  less,  (A) in the
     7  discretion of the  commissioner  of  finance,  any  interest  deductions
     8  allowable in computing entire net income which are directly or indirect-
     9  ly  attributable  to  investment  capital  or investment income, (B) any
    10  capital gains deferred or excluded under 26 U.S.C  §1400-z-2,  provided,
    11  however,  that  in  no  case  shall  investment income exceed entire net
    12  income.
    13    (ii) If the amount of interest deductions  subtracted  under  subpara-
    14  graph  (i)  of  this  paragraph exceeds investment income, the excess of
    15  such amount over investment income must be  added  back  to  entire  net
    16  income.
    17    (iii) If the taxpayer's investment income determined without regard to
    18  the  interest deductions subtracted under subparagraph (i) of this para-
    19  graph comprises more than eight percent of  the  taxpayer's  entire  net
    20  income,  investment  income  determined  without regard to such interest
    21  deductions cannot exceed eight percent  of  the  taxpayer's  entire  net
    22  income.
    23    § 4. This act shall take effect immediately and shall apply to taxable
    24  years beginning on and after January 1, 2021.
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