Senate Bill S9024

                                
 
BILL NUMBER: S9024

SPONSOR: FLANAGAN
 
TITLE OF BILL:  An act to amend the tax law, in relation to decoupling
from federal transition tax for partnerships

 
PURPOSE:

This legislation would prevent an unintended tax increase on partner-
ships resulting from the passage of the Federal Tax Cuts and Jobs Act of
2017.

 
SUMMARY OF PROVISIONS:

Section 1 amends subsection (b) of section 612 of the tax law by adding
a new paragraph 43 to add to federal adjusted gross income distributions
from earnings previously subject to federal income tax under subsection
(a) of section 965 of the internal revenue code.

Section 2 amends subsection (c) of section 612 of the tax law by adding
a new paragraph 44 to subtract from federal adjusted gross income any
              

amount included in federal adjusted gross income under subsection n(a)
of section 965 after any deductions allowed under subsection (c) of
section 965 of the internal revenue code.

Section 3 is the effective date.

 
JUSTIFICATION:

As a result of the passage of the Federal Tax Cuts and Jobs Act of 2017,
changes were made to tax treatment of earnings in foreign companies that
are owned directly or indirectly by US taxpayers, in an effort to repa-
triate those funds. The one time deemed reparation is referred to as the
transition tax. This transition tax will negatively impact partners,
especially in large accounting firms with thousands of partners, by
subjecting their share of the partnership to New York State taxation
prior to the income being distributed to the partner. However, this bill
ensures that once the income is realized, the partner's distribution to
will be subject to New York taxation.

If the Federal government had not passed the Tax Cuts and Jobs Act of
2017, then partnerships would not be subject to New York State taxation
until the income distribution is realized. This bill is merely seeking
to return to the same treatment of partnerships that had been in place
in New York for decades.

The passage of this bill would prevent an unintended tax increase, and
would prevent New York State from receiving a windfall as a result of
Federal tax changes, which is consistent with actions approved in a
bipartisan fashion as part of the passage of the FY 2019 Enacted Budget.

 
PRIOR LEGISLATIVE HISTORY:

This is a new bill.

 
FISCAL IMPLICATIONS:



This bill would have no fiscal impact, as it would preserve the New York
tax treatment of partnerships that was in effect prior to the enactment
of the Federal Tax Cuts and Jobs Act of 2017.

 
EFFECTIVE DATE:
This bill shall take effect immediately, and apply to tax years begin-
ning on or after January 1, 2018.