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.
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.
