April 12, 2022

New York Governor Signs 2022-2023 Budget

By Barry Halpern, Partner, Tax & Business Services & Lisa Haime, Senior Manager, Tax & Business Services

New York Governor Signs 2022-2023 Budget State & Local Tax

On April 11, 2022, New York Governor Kathy Hochul signed the state’s Fiscal Year 2022-23 budget bill.

Among its various provisions, the plan includes suspension of the state’s gas tax, personal income tax cuts for middle-class income earners, and an elective New York City pass-through entity tax. The plan also creates and extends various tax credits and incentives.

Below are some highlights of the bill:

Personal Income Tax

  • Accelerates to 2023 the phase-in of the middle-class income tax cuts originally scheduled to take effect in 2025:
    • For 2023, the tax rate for married filing joint taxpayers for income between $27,900 and $161,550 is 5.5%, and for income between $161,551 and $323,200 the rate is 6%.
    • Previously, the 2023 rates for those income ranges were 5.73% and 6.17%, respectively.
  • Increases the New York City earned income tax credit (EITC) to between 10% and 30% of the federal EITC.
  • Provides for supplemental payments of the EITC and Empire State Child Tax Credit.
  • Increases the small business subtraction modification and expands the modification to include limited liability companies, partnerships, and New York S-corporations.
  • Provides a homeowner tax rebate credit for eligible low and middle-income taxpayers in 2022.
  • Allows a subtraction modification for the amount of any student loan forgiveness awards from New York State that are included in federal adjusted gross income.

Pass-through Entity Tax

  • Amends the law to allow an eligible S-corporation to certify that it meets the requirements as a resident S-corporation for New York State’s Pass-through Entity Tax.
    • A resident S-corporation is an S-corporation that certifies at the time of the election that all of its shareholders are residents of New York State.
    • For an electing resident S-corporation, all income is subject to the Pass-through E Tax.
    • For 2022, the certification must be made by March 15th, 2023 (awaiting guidance from New York for the certification process).
  • Provides for an elective New York City tax on pass-through entities, applicable for taxable years beginning on or after January 1, 2023.
    • Available to city partnerships and city resident S-corporations.
    • The tax is 3.876% of the eligible entity’s taxable income.
    • Eligible partnerships or S-corporations must make an annual irrevocable election by the due date of the first estimated payment (generally by March 15).
    • A corresponding personal income tax credit is available.

Sales and Use Tax

  • Extends the sales tax exemption for certain food and drink sold through vending machines, from May 31, 2022, to May 31, 2023.

Gas Tax

  • Suspends the state excise tax on diesel and motor fuels, and state sales tax on motor fuels, from June 1, 2022, to December 31, 2022.

Credits and Incentives

The bill creates the following credits and incentives:

  • Capital cost tax credit for small business COVID-19-related expenses.
  • New York City childcare credit for childcare providers.
  • New York City property tax abatement for certain childcare centers.
  • Empire State digital gaming media production credit for certain entities engaged in qualified digital gaming media productions.
  • Heating oil conversion credit for certain taxpayers that incur expenses associated with the conversion of certain heating oil.
  • Geothermal energy systems credit for the purchase and installation of a geothermal energy system.

The bill also extends and expands the following credits and incentives:

  • New York City musical and theatrical production credit.
  • Hire a Vet credit.
  • Clean heating fuel credit.
  • Credit for companies that provide transportation to individuals with disabilities.
  • Empire film production tax credit.
  • New York youth jobs program tax credit.
  • Empire State apprenticeship tax credit.
  • Alternative fuels and electric vehicle recharging property credit.
  • Employment of persons with disabilities tax credits.
  • Investment tax credits for farmers.
  • Restaurant Return to Work Credit.

For additional information regarding the New York budget and how it may affect you or your business, please contact Barry Halpern at barry.halpern@marcumllp.com or your Marcum State and Local Tax professional.