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Extraordinary Session of the New York State Legislature Results in Tax Law Change

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On December 7, 2011, during an extraordinary session of the New York State Legislature, the Governor and other law makers agreed to the enactment of a tax law changes effecting businesses and individuals. The Bill was delivered to Governor Cuomo on December 8, and he signed it on December 9. This Bill is intended to help close a $3.5 billion projected deficit in next year’s budget. Here are some highlights:

2012 – 2014 Tax Rate Adjustments
As a result of these adjusted rates, all single taxpayers making more than $20,000 and all married filing joint taxpayers making more than $40,000 will be taxed at lower rates in 2012 than they were in 2011. Most middle-class taxpayers will see a tax reduction. However, because the top rate ( “millionaire’s surcharge”) was scheduled to expire at the end 2011, high income taxpayers are facing a tax increase.

Married Filing JointTax Rate

Income Range

2012

2011

0 - $16,000

4.00%

4.00%

$16,001 - $22,000

4.50%

4.50%

$22,001 - $26,000

5.25%

5.25%

$26,001 - $40,000

5.90%

5.90%

$40,001 - $150,000

6.45%

6.85%

$150,001 - $300,000

6.65%

6.85%

$300,001 - $500,000

6.85%

7.85%

$500,001 - $2,000,000

6.85%

8.97%

Over $2,000,000

8.82%

8.97%

SingleTax Rate

Income Range

2012

2011

0 - $8,000

4.00%

4.00%

$8,001 - $11,000

4.50%

4.50%

$11,001 - $13,000

5.25%

5.25%

$13,001 - $20,000

5.90%

5.90%

$20,001 - $75,000

6.45%

6.85%

$75,001 - $200,000

6.65%

6.85%

$200,001 - $1,000,000

6.85%

7.85%

Over $1,000,000

8.82%

8.97%

In addition to the above rate changes, the new Bill adds a provision subjecting the personal income tax and the standard deduction for resident individuals to COLAs.

Metropolitan Commuter Transportation Mobility Tax (“MCTMT”)
The new law greatly reduces the scope of the MCTMT. The term employer was amended to include only those employers with payroll expenses in excess of $312,500 in any calendar quarter. This will result in many taxpayers no longer having a filing obligation. In addition, the bill excludes many schools from the definition of an employer required to withhold. The MCTMT is now imposed at graduated rates, ranging from .11 to .23 to .34, depending on the size of the employer’s payroll expense. Previously, the tax was imposed at a single rate of .34 of the payroll expense. The tax imposed on the net earnings from self-employment of individuals that are attributable to the MCTD will remain at .34, though the base at which the tax kicks in has been increased from $10,000 to $50,000.

Franchise tax on New York Manufacturers
For taxable years 2012 through 2014, taxpayers which are eligible New York manufacturers will be subject to a tax rate of 3.25% of entire net income. Prior year’s rate was set at 6.25%. The new law also reduces the fixed dollar minimum tax in half for eligible qualified New York manufacturers.

New York Youth Works Tax Credit Program
The Bill established a new tax credit program for employers who employ “at risk” youth in part-time and full-time positions in 2012 and 2013. Employers, who must be certified to participate in the program, are eligible to receive a tax credit equal to $500 per month for up to 6 months for each qualified employee in a full-time job or $250 per month for up to six months for each qualified employee the employer employs in a part-time job of at least twenty hours per week. The employer can also claim $1,000 for each qualified employee who is employed for at least an additional six months. Eligible employees must begin by July 1, 2012 and must meet certain age and residence criteria.

Empire State Jobs Retention Program.
The Bill creates a new refundable tax credit program aimed at retaining jobs that could be at risk for leaving the state following an emergency. In order to participate, the taxpayer must operate in New York within specific designated industries and:

  1. be located in a county in which an emergency has been declared by the Governor on or after January 1, 2012,
  2. must demonstrate substantial physical damage and economic harm resulting from the event leading to the emergency declaration by the Governor, and
  3. must have had at least one hundred full-time equivalent jobs in the county in which an emergency was declared just prior to the emergency and must retain or exceed that number of jobs in New York State.

The amount of the credit is equal to the product of the gross wages paid for the impacted jobs and 6.85 percent. It is available for tax years beginning on or after January 1, 2012.

Infrastructure Investment Act
This Act allows certain state entities to enter into contracts to repair, modernize or otherwise improve the state’s infrastructure. The Act appears to alter the way contractors bid for and are awarded capital infrastructure projects.

Hurricane Irene and Tropical Storm Lee Assessment Relief Act
This Act is designed to provide property tax assessment relief to properties impacted by Hurricane Irene or Tropical Storm Lee. Assessment relief will be granted where a property was “catastrophically impacted” (i.e., more than 50% of its value was lost) by either Hurricane Irene or Tropical Storm Lee charts published within the new law.

In order to receive relief under this legislation, a property must have lost at least 50% of its value and be located in one of the counties that had been included in the federal disaster declarations for either Hurricane Irene or Tropical Storm Lee or both. Property owners must submit a written request to the assessor within 90 days following the date upon which the act was approved by the governor. Since the governor signed the legislation on December 9, property owners would have until March 8, 2012 to make such request.

Hurricane Irene-Tropical Storm Lee Flood Recovery Grant Program
Small businesses, farms, multiple dwellings and not-for-profit organizations that sustained direct physical flood-related damage as a result of Hurricane Irene or Tropical Storm Lee are eligible to apply for a grant from the state. The grants are capped at $20,000 and the money must be used for storm-related repairs and restoration.

Should you have any questions about the provisions of this recent enactment, please contact your Marcum LLP State and Local Tax Professional.

 
 
 
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