The New York Legislature Passes 2019-2020 Budget Bill
By John Bonk, Senior Manager, Tax & Business Services
The New York State 2019 budget bill was delivered to Governor Cuomo on April 1, 2019, and he is expected to sign it in short order. While many of the headline changes in the bill relate to non-tax issues, such as a ban on plastic bags, the bill includes numerous tax changes that will affect New York taxpayers. Some of the major tax-related highlights include the following:
PERSONAL INCOME TAX
For middle class taxpayers, individual rates will be lowered to 6.21% when fully phased in by 2025. For high net worth taxpayers, the the bill increases personal income tax rates to 8.82% starting in 2020 for single taxpayers with incomes over $1,077,550; head of household filers with incomes over $1,616,450; and married taxpayers with incomes over $2,155,350. The amounts noted increase in 2021 through 2024.
For taxable years beginning on or after January 1, 2018, the New York State itemized deduction for charitable contributions is the amount permitted for federal purposes, subject to certain limitations and modifications.
Gambling winnings in excess of $5,000 are now included in New York source income. The law further requires state tax withholding on gambling winnings that are subject to federal withholding requirements.
New York will now impose a 6% surcharge on car rentals state-wide. Previously, the surcharge only applied to New York City.
REAL ESTATE TAX
A 1% tax on real estate purchases over $1 million will apply, with a graduated scale maximizing at 4.15% for purchases over $25 million.
The budget imposes a 2% annual cap on property tax increases. It also provides for STAR tax breaks to be received by check, rather than as reductions on homeowners’ tax bills each year.
CORPORATE INCOME TAX
The budget bill requires GILTI (Global Intangible Low Taxed Income) to be included in the denominator of the apportionment fraction. This requirement applies to taxable years beginning on or after January 1, 2018.
QUALIFIED NEW YORK MANUFACTURER
The law changes the adjusted basis for a manufacturer’s property from the federal amount to the New York state amount, in determining whether the manufacturer is a qualified New York manufacturer.
TRUST & ESTATE TAX
The bill allows for trusts and estates to deduct taxes beyond the $10,000 federal limit and provides for additional itemized deductions.
New York State is installing a Marketplace Facilitator Law (also known as the Internet Fairness Conformity Tax) for sales tax effective June 1, 2019. New York’s adoption of a marketplace facilitator rule for sales tax collection is part of a growing trend among states. These rules shift the burden of sales tax collection from remote sellers on online platforms, such as Amazon and eBay, to the marketplace platform. Currently, remote sellers that use an Amazon-like platform to fulfill their orders are responsible for the sales tax in states where they have nexus. Due to the many locations of Amazon warehouses (for example), these taxpayers are responsible for sales tax collection in many states. This situation places a large burden on remote sellers. The new law helps reduce this burden.
Multiple tax credits will be increased or revised, such as:
- A new recovery tax credit program providing a credit to eligible certified employers that employ eligible individuals recovering from a substance abuse disorder. The credit is equal to the product of $1 and the number of hours that the eligible employee has worked, up to $2,000. The new credit applies to taxable years beginning on or after January 1, 2020.
- Employer-provided child care credit: For taxable years beginning on or after January 1, 2020, the law provides for a new credit against taxes for qualified employer-provided childcare expenditures up to $150,000.
- Rehabilitation of historic properties credit: The definition of a “qualified historic home” for the personal income tax credit is expanded to include cities (other than New York City) with a poverty rate higher than 15%.
- The Empire State film production credit is extended to 2024.
- The Workers with Disabilities Tax Credit program is extended to 2023.
- The bioheating fuel credit is extended to 2023.
Contact your Marcum tax professional for questions or further assistance.