United States

New York: Governor Proposed Budget Amendments Would Provide Relief from the Repeal of the Uncapped SALT Deduction

Feb 19, 2018
From KPMG TaxWatch

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Governor Andrew Cuomo of New York recently announced certain so-called 30-day amendments to his proposed Executive Budget that are intended to address the repeal at the federal level of the uncapped state and local tax deduction and provide relief to New York residents adversely affected by the federal changes. The amendments build on suggestions outlined in the preliminary report to the Governor addressing the impact of federal tax reform that was released by the Department of Taxation and Finance in January. One of the amendments would, if enacted, allow employers to opt into a new “employer compensation expense tax” (ECET) system beginning in 2019. Under this system, employers would be subject to a five percent tax on all annual payroll expenses in excess of $40,000 per employee. The tax would be phased in over three years and would be deductible at the federal level for the employer. The phase-in of the tax appears to be designed to allow the increased wage cost to the employer to be factored into future wage increases for the employee, which would alleviate the need to reduce employee wages to avoid an adverse impact on employers. A new state tax credit corresponding in value to the ECET would reduce employees’ personal income taxes. The proposal is designed to be revenue neutral for the state while giving employers the opportunity to reduce their employees' taxes without increasing payroll costs. A new tax credit would also be available to employers to offset administrative costs of the new ECET system. Another amendment would create two new state-operated charitable contribution funds. State taxpayers who itemize deductions could make contributions to these funds, deduct the contributions as charitable deductions, and then claim a New York tax credit equal to 85 percent of the donation amount. The amendment would also allow localities to create similar funds to provide credits against property tax payments. Finally, other proposed amendments would decouple New York State from some of the federal individual income tax changes. Notably, the Governor proposes to decouple from the $10,000 SALT deduction cap so New York taxpayers are not subjected to a $441 million State tax increase from the flow through of this cap to New York income tax returns. Please stay tuned to TWIST for further updates on New York’s 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.