Senate Bill S8152

2015-2016 Legislative Session

Relates to qualified financial instruments of RICS and REITS

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Archive: Last Bill Status - In Senate Committee Rules Committee

Introduced
- In Committee Assembly
- In Committee Senate
- On Floor Calendar Assembly
- On Floor Calendar Senate
- Passed Assembly
- Passed Senate
Delivered to Governor
Signed By Governor

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Date of Action	Assembly Actions - Lowercase Senate Actions - UPPERCASE
Jun 14, 2016	referred to rules

2015-S8152 (ACTIVE) - Details

Current Committee:: Senate Rules
Law Section:: Tax Law
Laws Affected:: Amd §§210 & 210-A, Tax L; amd §§11-654 & 11-654.2, NYC Ad Cd

2015-S8152 (ACTIVE) - Summary

Relates to qualified financial instruments of RICS and REITS.

2015-S8152 (ACTIVE) - Sponsor Memo

                                 BILL NUMBER:  S8152

 TITLE OF BILL :  An act to amend the tax law and the administrative
code of the city of New York, in relation to qualified financial
instruments of RICS and REITS

 PURPOSE :

To address unintended effects of tax amendments that resulted in
inappropriate treatment and overly burdensome administrative
requirements to certain entities.

 SUMMARY OF PROVISIONS :

Section 1 amends paragraph (a) of subdivision 5 of section 210-A, as
amended by section 4 of part P of chapter 60 of the laws of 2016, to
add definitions of qualified financial instruments in cases of RIC and
REITS.

Section 2 amends clause (D) of subparagraph 1 of paragraph (d) of
subdivision 1 of section 210 of the tax law, as amended by section 19
of part T of chapter 59 of the laws of 2015, to add reference to the
new clause D-1.

Section 3 amends subparagraph 1 of paragraph (d) of subdivision 1 of
section 210 of the tax law is amended by adding a new clause (D-1), to

add a separate minimum tax schedule for RICs and REITs.

Section 4 amends the opening paragraph of paragraph (a) of subdivision
5 of section 11-654.2 of the administrative code of the city of New
York, as amended by section 16 of part P of chapter 60 of the laws of
2016, to add definitions of qualified financial instruments in cases
of RIC and REITS in the New York City Tax Law.

Section 5 amends clause (iv) of subparagraph 1 of paragraph (e) of
subdivision 1 of section 11-654 of the administrative code of the city
of New York, as added by section 1 of part D of chapter 60 of the laws
of 2015, to add a separate minimum tax schedule for RICs and REITs.

Section 6 provides that the act shall take effect immediately, except
for sections 1, 2, and three, which shall be deemed to have been in
effect in the same time and manner as chapter 59 of the laws of 2014,
and sections four and five shall be deemed to have been in effect in
the same time and manner as part D of chapter 60 of the laws of 2015.

 JUSTIFICATION :

New York's recent corporate tax reforms had the unintended consequence
of dramatically increasing the difficulty of determining a RIC's
fixed-dollar minimum tax liability in New York. Recognizing that these
consequences were unintended and that the cost of these changes will
be borne solely by funds' shareholders - including tens of millions of
middle-income individuals, many of whom are New York residents - a
technical correction is appropriate and necessary.

The calculation of a RIC's fixed-dollar minimum tax liability under
the new rules requires a RIC to undertake a complex review of its
assets in order to determine its New York-sourced gross receipts.
RICs have reported that some of the information necessary to complete
this review may not be commercially available or, where available, may
be difficult to retrieve systematically.

Systemic difficulties in sourcing a RIC's very large number of assets
and transactions makes determining the fixed-dollar minimum tax
liability unduly burdensome on RICs and their shareholders. The high
costs associated with performing these administrative tasks far weighs
any fixed-dollar minimum tax that may actually be collected by New
York.

The technical corrections is also favorable to New York. New York's
budgeted revenues will be maintained, as a $500 ceiling captures what
we understand is the budgeted tax increase over the $300 fixed-dollar
minimum tax that most RICs paid under prior law. And additional
revenue is likely to accrue to New York because RICs that may not have
filing obligations are likely to view the certainty and ease of a $500
fixed payment to be preferable to the costs associated with
determining whether or not a filing obligation exists.

 PRIOR LEGISLATIVE HISTORY :

New Bill

 FISCAL IMPLICATIONS :

To be determined.

 EFFECTIVE DATE :
This act shall take effect immediately; provided however that sections
one, two and three of this act shall be deemed to have been in full
force and effect on the same date and in the same manner as part A of
chapter 59 of the laws of 2014, took effect; and provided further that
sections four and five of this act shall be deemed to have been in
full force and effect on the same date and in the same manner as part
D of chapter 60 of the laws of 2015, took effect.

2015-S8152 (ACTIVE) - Bill Text download pdf

                            
                    S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                  8152

                            I N  S E N A T E

                              June 14, 2016
                               ___________

Introduced  by  Sen.  YOUNG  -- read twice and ordered printed, and when
  printed to be committed to the Committee on Rules

AN ACT to amend the tax law and the administrative code of the  city  of
  New  York,  in relation to qualified financial instruments of RICS and
  REITS

  THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
BLY, DO ENACT AS FOLLOWS:

  Section  1. The opening paragraph of paragraph (a) of subdivision 5 of
section 210-A of the tax law, as amended by section 4 of part P of chap-
ter 60 of the laws of 2016, is amended to read as follows:
  A financial instrument is a "nonqualified financial instrument" if  it
is  not  a qualified financial instrument. A qualified financial instru-
ment means a financial instrument that is of a type described in any  of
clauses  (A), (B), (C), (D), (G), (H) or (I) of subparagraph two of this
paragraph and that has been marked to market in the taxable year by  the
taxpayer under section 475 or section 1256 of the internal revenue code.
Further,  if  the  taxpayer  has  in the taxable year marked to market a
financial instrument of the type described in any of  the  clauses  (A),
(B),  (C),  (D),  (G), (H) or (I) of subparagraph two of this paragraph,
then any financial instrument within that type described  in  the  above
specified  clause  or  clauses that has not been marked to market by the
taxpayer under section 475 or section 1256 of the internal revenue  code
is a qualified financial instrument in the taxable year. Notwithstanding
the  two  preceding sentences, (i) a loan secured by real property shall
not be a qualified financial instrument, (ii) if the only loans that are
marked to market by the taxpayer under section 475 or  section  1256  of
the  internal  revenue  code are loans secured by real property, then no
loans shall be qualified financial  instruments,  (iii)  stock  that  is
investment  capital  as  defined in paragraph (a) of subdivision five of
section two hundred eight of this  article  shall  not  be  a  qualified
financial  instrument, and (iv) stock that generates other exempt income
as defined in subdivision six-a of section two  hundred  eight  of  this
article  and  that  is not marked to market under section 475 or section
1256 of the internal revenue  code  shall  not  constitute  a  qualified

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.

                                                           LBD15892-01-6

S. 8152                             2

financial  instrument with respect to the income from that stock that is
described in such subdivision six-a. If a corporation is included  in  a
combined  report, the definition of qualified financial instrument shall
be  determined  on a combined basis. IN THE CASE OF A RIC OR A REIT THAT
IS NOT A CAPTIVE RIC OR A CAPTIVE REIT, A QUALIFIED FINANCIAL INSTRUMENT
MEANS A FINANCIAL INSTRUMENT THAT IS OF  A  TYPE  DESCRIBED  IN  ANY  OF
CLAUSES  (A), (B), (C), (D), (G), (H) OR (I) OF SUBPARAGRAPH TWO OF THIS
PARAGRAPH, OTHER THAN (I) A LOAN SECURED BY REAL  PROPERTY,  (II)  STOCK
THAT  IS  INVESTMENT  CAPITAL AS DEFINED IN PARAGRAPH (A) OF SUBDIVISION
FIVE OF SECTION TWO HUNDRED EIGHT OF THIS ARTICLE, AND (III) STOCK  THAT
GENERATES OTHER EXEMPT INCOME AS DEFINED IN SUBDIVISION SIX-A OF SECTION
TWO  HUNDRED  EIGHT OF THIS ARTICLE WITH RESPECT TO THE INCOME FROM THAT
STOCK THAT IS DESCRIBED IN SUCH SUBDIVISION SIX-A.
  S 2. Clause (D) of subparagraph 1 of paragraph (d) of subdivision 1 of
section 210 of the tax law, as amended by section 19 of part T of  chap-
ter 59 of the laws of 2015, is amended to read as follows:
  (D) Otherwise, for all other taxpayers not covered by clauses (A), (B)
[and], (C) AND (D-1) of this subparagraph, the amount prescribed by this
paragraph will be determined in accordance with the following table:

If New York receipts are:                The fixed dollar minimum tax is:
 not more than $100,000                               $   25
 more than $100,000 but not over $250,000             $   75
 more than $250,000 but not over $500,000             $  175
 more than $500,000 but not over $1,000,000           $  500
 more than $1,000,000 but not over $5,000,000         $1,500
 more than $5,000,000 but not over $25,000,000        $3,500
 more than $25,000,000 but not over $50,000,000       $5,000
 more than $50,000,000 but not over $100,000,000      $10,000
 more than $100,000,000 but not over $250,000,000     $20,000
 more than $250,000,000 but not over $500,000,000     $50,000
 more than $500,000,000 but not over $1,000,000,000   $100,000
 Over $1,000,000,000                                  $200,000

  S  3.  Subparagraph 1 of paragraph (d) of subdivision 1 of section 210
of the tax law is amended by adding  a  new  clause  (D-1)  to  read  as
follows:
  (D-1)  IN  THE  CASE  OF A REIT OR A RIC THAT IS NOT A CAPTIVE REIT OR
CAPTIVE RIC, THE AMOUNT PRESCRIBED BY THIS PARAGRAPH WILL BE  DETERMINED
IN ACCORDANCE WITH THE FOLLOWING TABLE:

IF NEW YORK RECEIPTS ARE:                THE FIXED DOLLAR MINIMUM TAX IS:
 NOT MORE THAN $100,000                               $   25
 MORE THAN $100,000 BUT NOT OVER $250,000             $   75
 MORE THAN $250,000 BUT NOT OVER $500,000             $  175
 MORE THAN $500,000                                   $  500

  S  4.  The  opening  paragraph  of  paragraph  (a) of subdivision 5 of
section 11-654.2 of the administrative code of the city of New York,  as
amended  by  section  16 of part P of chapter 60 of the laws of 2016, is
amended to read as follows:
  A financial instrument is a "nonqualified financial instrument" if  it
is  not  a qualified financial instrument. A qualified financial instru-
ment means a financial instrument that is of a type described in any  of
[clause]  CLAUSES  (i),  (ii),  (iii),  (iv),  (vii),  (viii) or (ix) of
subparagraph two of this paragraph and that has been marked to market in

S. 8152                             3

the taxable year by the taxpayer under section 475 or  section  1256  of
the  internal  revenue code. Further, if the taxpayer has in the taxable
year marked to market a financial instrument of the  type  described  in
any of [clause] CLAUSES (i), (ii), (iii), (iv), (vii), (viii) or (ix) of
subparagraph two of this paragraph, then any financial instrument within
that  type  described  in the above specified clause or clauses that has
not been marked to market by the taxpayer under section 475  or  section
1256 of the internal revenue code is a qualified financial instrument in
the  taxable  year.  Notwithstanding  the two preceding sentences, (i) a
loan secured by real property shall not be a qualified financial instru-
ment, (ii) if the only loans that are marked to market by  the  taxpayer
under section 475 or section 1256 of the internal revenue code are loans
secured  by  real  property,  then no loans shall be qualified financial
instruments, (iii) stock that is investment capital as defined in  para-
graph (a) of subdivision four of section 11-652 of this subchapter shall
not  be  a qualified financial instrument, and (iv) stock that generates
other exempt income as defined in subdivision five-a of  section  11-652
of this subchapter and that is not marked to market under section 475 or
section  1256 of the internal revenue code shall not constitute a quali-
fied financial instrument with respect to the  income  from  that  stock
that  is  described  in  such  subdivision  five-a.  If a corporation is
included in a combined report, the  definition  of  qualified  financial
instrument  shall  be  determined on a combined basis.  IN THE CASE OF A
RIC OR A REIT THAT IS NOT A CAPTIVE RIC OR A CAPTIVE REIT,  A  QUALIFIED
FINANCIAL  INSTRUMENT  MEANS  A  FINANCIAL  INSTRUMENT THAT IS OF A TYPE
DESCRIBED IN ANY OF CLAUSES (I), (II), (III),  (IV),  (VII),  (VIII)  OR
(IX)  OF  SUBPARAGRAPH  TWO  OF  THIS  PARAGRAPH,  OTHER THAN (I) A LOAN
SECURED BY REAL PROPERTY, (II)  STOCK  THAT  IS  INVESTMENT  CAPITAL  AS
DEFINED  IN  PARAGRAPH (A) OF SUBDIVISION FOUR OF SECTION 11-652 OF THIS
SUBCHAPTER, AND (III)  STOCK  THAT  GENERATES  OTHER  EXEMPT  INCOME  AS
DEFINED  IN SUBDIVISION FIVE-A OF SECTION 11-652 OF THIS SUBCHAPTER WITH
RESPECT TO THE INCOME FROM THAT STOCK THAT IS DESCRIBED IN SUCH SUBDIVI-
SION FIVE-A.
  S 5. Clause (iv) of subparagraph 1 of paragraph (e) of  subdivision  1
of section 11-654 of the administrative code of the city of New York, as
added  by  section  1  of  part  D of chapter 60 of the laws of 2015, is
amended to read as follows:
  (iv) If New York city receipts are:                  Fixed dollar minimum
                                                       tax is:
Not more than $100,000                                 $25
More than $100,000 but not over $250,000               $75
More than $250,000 but not over $500,000               $175
More than $500,000 but not over $1,000,000             $500
More than $1,000,000 but not over $5,000,000           $1,500
More than $5,000,000 but not over $25,000,000          $3,500
More than $25,000,000 but not over $50,000,000         $5,000
More than $50,000,000 but not over $100,000,000        $10,000
More than $100,000,000 but not over $250,000,000       $20,000
More than $250,000,000 but not over $500,000,000       $50,000
More than $500,000,000 but not over $1,000,000,000     $100,000
Over $1,000,000,000                                    $200,000
  For purposes of this clause, New York city receipts are  the  receipts
computed  in accordance with section 11-654.2 of this subchapter for the
taxable year. If the taxable year is less than twelve months, the amount
prescribed by this clause shall be reduced by twenty-five percent if the
period for which the taxpayer is subject to tax is more than six  months

S. 8152                             4

but  not  more  than  nine months and by fifty percent if the period for
which the taxpayer is subject to tax is not more than six months. If the
taxable year is less than twelve months, the amount  of  New  York  city
receipts  for  purposes  of  this  clause  is determined by dividing the
amount of the receipts for the taxable year by the number of  months  in
the taxable year and multiplying the result by twelve.
PROVIDED  HOWEVER,  IN  THE  CASE OF A REIT OR RIC THAT IS NOT A CAPTIVE
REIT OR A CAPTIVE RIC, THE FOLLOWING SCHEDULE SHALL APPLY:

IF NEW YORK CITY RECEIPTS ARE:                         FIXED DOLLAR MINIMUM
                                                       TAX IS:
NOT MORE THAN $100,000                                 $25
MORE THAN $100,000 BUT NOT OVER $250,000               $75
MORE THAN $250,000 BUT NOT OVER $500,000               $175
MORE THAN $500,000                                     $500
  S 6. This act shall take effect  immediately;  provided  however  that
sections  one, two and three of this act shall be deemed to have been in
full force and effect on the same date and in the same manner as part  A
of  chapter  59  of  the laws of 2014, took effect; and provided further
that sections four and five of this act shall be deemed to have been  in
full  force and effect on the same date and in the same manner as part D
of chapter 60 of the laws of 2015, took effect.

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Senate Bill S8152

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Archive: Last Bill Status - In Senate Committee Rules Committee

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2015-S8152 (ACTIVE) - Details

2015-S8152 (ACTIVE) - Summary

2015-S8152 (ACTIVE) - Sponsor Memo

2015-S8152 (ACTIVE) - Bill Text download pdf

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Sponsored By

Catharine Young

Archive: Last Bill Status - In Senate Committee Rules Committee

Actions

2015-S8152 (ACTIVE) - Details

2015-S8152 (ACTIVE) - Summary

2015-S8152 (ACTIVE) - Sponsor Memo

2015-S8152 (ACTIVE) - Bill Text download pdf

Comments