We’re back with another update on the recently introduced tax legislation. As discussed last week, invoices will continue to be introduced that expired at the end of the last session. Two of the more interesting proposals include the repeal of the New York estate tax and another so-called “millionaires tax”. We have also followed the proposed tax changes in the governor’s budget proposal published earlier this week (see here, here and here) and next week we will devote our update to a general summary of the budget proposals.
- SB 1434 – Circuit breaker tax – Property tax relief
This bill, reintroducing SB 3982A from the previous session, would create the tax credit for mid-range breakers. The bill would provide a personal income tax credit for certain taxpayers. If it did exist, the credit would be introduced gradually over a period of four years.
- SB 1476 – Employer deduction for stock options
This bill, a reintroduction of SB 2725 from the last session, would amend Section 208 of the Tax Act regarding the deduction of stock options for corporate tax purposes. Under the proposal, the employer’s deduction amount would be based on the share price at the time the option was issued to the employee rather than the price at the time of sale. The change would apply to tax years beginning on and after January 1, 2022.
- SB 1513 – Millionaire’s Tax and Economic Equality Act
This bill, a reintroduction of SB 7677 from the last session, would create the Millionaire’s Taxes and Economic Justice Act of 2021. This bill would increase the income tax rate for those with taxable income in New York above $ 1 million. Currently, the tax rate for the highest bracket is 8.82%; However, this bill aims to create new parentheses with the highest parenthesis (income over $ 100 million) subject to a tax rate of 11.82%. According to the bill, the applicable tax rates would be increased as follows:
In a previous post, we highlighted SB 917, a similar bill that would also increase the income tax rate for those with higher incomes. However, SB 1513 suggests higher rates that would start at lower brackets. Next week we will explain the budget proposal that millionaires receive temporary bonuses instead of tax increases.
This bill, reintroducing SB 1157 from last session, would repeal the New York estate tax. The stated purpose of the law is to encourage New York residents to continue living and doing business in the state. This proposal seems particularly timely, given recent events and the reported mass exodus of New York in favor of better weather and friendlier tax jurisdiction. The bill would take effect immediately.
This draft law, a reintroduction of SB 7029 from the previous session, would decouple itself from certain provisions of the Federal Law on Tax Reductions and Employment (“TCJA”). If so, New York would de-couple from the 30% federal limit for corporate interest deduction under IRC Section 163 (j) for corporate taxpayers. Basically, the purpose of the bill is to maintain the pre-TCJA tax treatment of business interests in New York.
The TCJA has limited the deduction of business interest expenses to 30% of business income in exchange for a period of five years during which companies could immediately spend 100% of capital investments under IRC § 163 (k) (“Bonus Amortization”). The business interest deduction and bonus depreciation work together. Since New York is already decoupled from bonus depreciation, decoupling from the upper limit for interest deductions would be a logical next step. But New York seems to be heading in a different and less logical direction. In last year’s budget, New York doubled in size by decoupling from the Coronavirus Aid, Aid and Economic Security (“CARES”) Act to temporarily ease the TCJA’s restrictions on business interest deduction.
This bill, a reintroduction of SB 1659 from the previous session, would impose an additional annual tax on certain companies if their CEO receives compensation a percentage higher than the median wages of all their employees (the “wage gap”). The bill would add a 10% surcharge on the company’s property tax liability if the company reports a wage gap of 100x to 250x. The tax rate would increase to a 25% surcharge on the company’s property tax liability if the company reports a wage gap of 250x or more. The tax would be imposed on companies that are subject to reporting requirements by the US Securities and Exchange Commission.
- SB 1910 – Additional sales tax on luxury goods
This bill, reintroducing SB 7634A from the previous session, would impose an additional 2% sales tax on certain sales of luxury goods. For example, the additional tax would be levied on sales of certain automobiles over $ 70,000 (excluding commercial and electric vehicles), jewelry over $ 5,000, and clothing, shoes, handbags, and certain personal items over $ 1,000.