United States

New York: Governor Cuomo Issues Proposed Fiscal Year 2019 Executive Budget

Jan 22, 2018
From KPMG TaxWatch

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Recently, Governor Cuomo issued his fiscal year 2019 Executive Budget, which “takes the first step in protecting taxpayers from the devastating impacts of Federal tax reform, continues the phase‐in of the middle class tax cuts, and advances efforts to improve New York’s business climate, simplify the tax code, and improve the fairness of the tax system.” The Budget notes that the Department of Taxation and Finance is preparing a preliminary report to outline options for state tax reform in response to the Federal legislation. In addition to setting the stage for future changes to New York’s law in response to tax reform, the Budget also proposes many tax changes affecting business and individuals.

One of those changes would be to treat carried interest as ordinary income for New York State tax purposes and impose a fairness fee on carried interest to eliminate the benefit from preferential tax rates that exist at the Federal level. To prevent New York from being placed at a competitive disadvantage, this change would take effect only when functionally identical legislation is enacted in Connecticut, Massachusetts, Pennsylvania, and New Jersey.

The Executive Budget would also make a few changes to expand sales and use tax revenue collections. Notably, the Budget would impose an “Internet Fairness Conformity Tax” by requiring marketplace providers to collect sales tax when they facilitate a third-party sale to residents, whether the seller is located within, or outside of, New York. Another change proposed is eliminating the sales tax exemption on the non‐residential transmission and distribution of gas or electricity when purchased from an Energy Service Company (ESCO).

On the income tax side, businesses would be required to defer use of most business tax credits for tax years 2018 through 2020 where such credits exceed $2 million. They would be able to use deferred nonrefundable credits again in full starting in 2021, and may use 50 percent of refundable credits in 2021, 75 percent of the remainder in 2022, and the remainder in 2023.

Other changes of interest to taxpayers include allowing the Commissioner of the Department of Taxation and Finance to appeal adverse Tax Appeals Tribunal decisions. Currently, the Commissioner must accept the decision of the Tribunal. The Budget would also reduce “refund abuse” by extending the statute of limitations to three years after the filing date of an amended return, rather than three years after the original return filing date. Currently, taxpayers can file an amended return containing a refund request close to three years after the due date of their initial return, which the Budget notes hampers the possibility of an audit and assessment. Please stay tuned to TWIST for updates on New York’s Executive Budget.

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The following information is not intended to be "written advice concerning one or more federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.