S T A T E O F N E W Y O R K
________________________________________________________________________
636--B
2019-2020 Regular Sessions
I N A S S E M B L Y
(PREFILED)
January 9, 2019
___________
Introduced by M. of A. STIRPE, PALMESANO, SCHIMMINGER, WOERNER, McDO-
NALD, WALLACE -- Multi-Sponsored by -- M. of A. MANKTELOW -- read once
and referred to the Committee on Ways and Means -- committee
discharged, bill amended, ordered reprinted as amended and recommitted
to said committee -- again reported from said committee with amend-
ments, ordered reprinted as amended and recommitted to said committee
AN ACT to amend the tax law, in relation to pass-through manufacturers
zero percent tax rate
THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:
Section 1. Subsection (b) of section 612 of the tax law is amended by
adding a new paragraph 42 to read as follows:
(42) ANY INCOME, GAIN, LOSS AND DEDUCTION, TO THE EXTENT IT IS
INCLUDED IN FEDERAL ADJUSTED GROSS INCOME AND IS, WHEN COMBINED AND
COMBINED WITH ADDITIONS FOR FEDERAL DEPRECATION REQUIRED BY PARAGRAPH
EIGHT OF THIS SUBSECTION AND SUBTRACTIONS FOR NEW YORK ALLOWED BY
SUBSECTION (K) OF THIS SECTION, LESS THAN ZERO, OF AN INDIVIDUAL OR
TRUST FROM A QUALIFIED PASS-THROUGH MANUFACTURER, AS DEFINED IN PARA-
GRAPH FORTY-THREE OF SUBSECTION (C) OF THIS SECTION.
§ 2. Paragraph 39 of subsection (c) of section 612 of the tax law, as
added by section 1 of part Y of chapter 59 of the laws of 2013, is
amended and a new paragraph 43 is added to read as follows:
(39) In the case of a taxpayer who is a small business who has busi-
ness income and/or farm income as defined in the laws of the United
States, an amount equal to three percent of the net items of income,
gain, loss and deduction attributable to such business or farm entering
into federal adjusted gross income, but not less than zero, for taxable
years beginning after two thousand thirteen, an amount equal to three
and three-quarters percent of the net items of income, gain, loss and
deduction attributable to such business or farm entering into federal
EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD00656-03-9
A. 636--B 2
adjusted gross income, but not less than zero, for taxable years begin-
ning after two thousand fourteen, and an amount equal to five percent of
the net items of income, gain, loss and deduction attributable to such
business or farm entering into federal adjusted gross income, but not
less than zero, for taxable years beginning after two thousand fifteen.
For the purposes of this paragraph, the term small business shall mean a
sole proprietor or a farm business who employs one or more persons
during the taxable year and who has net business income or net farm
income of less than two hundred fifty thousand dollars. FOR THE
PURPOSES OF THIS PARAGRAPH, THE TERM SMALL BUSINESS SHALL EXCLUDE ANY
BUSINESS THAT IS A QUALIFIED PASS-THROUGH MANUFACTURER, AS DEFINED IN
PARAGRAPH FORTY-THREE OF THIS SUBSECTION FOR THE CURRENT TAX YEAR.
(43) (A) ANY INCOME, GAIN, LOSS AND DEDUCTION, TO THE EXTENT INCLUDED
IN FEDERAL ADJUSTED GROSS INCOME AND IS, WHEN COMBINED AND COMBINED WITH
ADDITIONS FOR FEDERAL DEPRECATION REQUIRED BY PARAGRAPH EIGHT OF THIS
SUBSECTION AND SUBTRACTIONS FOR NEW YORK ALLOWED BY SUBSECTION (K) OF
THIS SECTION, GREATER THAN ZERO, OF AN INDIVIDUAL OR TRUST FROM A QUALI-
FIED PASS-THROUGH MANUFACTURER. INCOME FROM A QUALIFIED PASS-THROUGH
MANUFACTURER SHALL INCLUDE WAGES OF AN INDIVIDUAL CONTROLLING TEN
PERCENT OR MORE OF THE QUALIFIED BUSINESS OR ENTITY. INCOME OR LOSS FROM
A QUALIFIED PASS-THROUGH MANUFACTURER SHALL NOT INCLUDE AN AMOUNT
REPRESENTING REASONABLE COMPENSATION FOR PERSONAL SERVICES, AS DEFINED
IN THE INTERNAL REVENUE CODE SECTION ONE HUNDRED SIXTY-TWO REGULATIONS,
FOR AN INDIVIDUAL CONTROLLING TEN PERCENT OR MORE OF THE QUALIFIED BUSI-
NESS OR ENTITY.
(B) THE QUALIFIED PASS-THROUGH MANUFACTURER MAY BE ORGANIZED AS A SOLE
PROPRIETORSHIP, A PARTNERSHIP, A LIMITED LIABILITY COMPANY ELECTING TO
BE TREATED AS A PARTNERSHIP OR SOLE PROPRIETORSHIP, OR AN S CORPORATION.
(C) FOR THE PURPOSES OF THIS SUBSECTION, THE TERM QUALIFIED PASS-
THROUGH MANUFACTURER SHALL MEAN A BUSINESS THAT IS A QUALIFIED NEW YORK
MANUFACTURER, AS DEFINED BY SUBPARAGRAPH (VI) OF PARAGRAPH (A) OF SUBDI-
VISION ONE OF SECTION TWO HUNDRED TEN OF THIS CHAPTER, EXCEPT THAT THE
TERM "GROSS RECEIPTS" SHALL BE REPLACED BY "BUSINESS RECEIPTS" IN DETER-
MINING WHETHER THE BUSINESS IS "PRINCIPALLY ENGAGED" IN MANUFACTURING. A
QUALIFIED PASS-THROUGH MANUFACTURER SHALL NOT INCLUDE A BUSINESS THAT IS
CURRENTLY PARTICIPATING IN THE START-UP NY PROGRAM.
§ 3. Paragraph 2 of subsection (a) of section 606 of the tax law is
amended by adding a new subparagraph (B-1) to read as follows:
(B-1) PROPERTY PLACED IN SERVICE DURING THE TAX YEAR THAT IS OTHERWISE
ELIGIBLE FOR THE INVESTMENT TAX CREDIT DESCRIBED IN SUBPARAGRAPH (A) OF
THIS PARAGRAPH, WILL NOT BE ELIGIBLE FOR THE INVESTMENT TAX CREDIT IF
THE USE OF THE PROPERTY IS BY A QUALIFIED PASS-THROUGH MANUFACTURER, AS
DEFINED IN PARAGRAPH FORTY-THREE OF SUBSECTION (C) OF SECTION SIX
HUNDRED TWELVE OF THIS ARTICLE FOR THE CURRENT TAX YEAR.
§ 4. Subdivision 1 of section 210-B of the tax law is amended by
adding a new paragraph (g) to read as follows:
(G) PROPERTY PLACED IN SERVICE DURING THE TAX YEAR THAT IS OTHERWISE
ELIGIBLE FOR THE INVESTMENT TAX CREDIT DESCRIBED IN THIS SUBDIVISION,
WILL NOT BE ELIGIBLE FOR THE INVESTMENT TAX CREDIT IF THE USE OF THE
PROPERTY IS BY A QUALIFIED NEW YORK MANUFACTURER, AS DEFINED IN SUBPARA-
GRAPH (VI) OF PARAGRAPH (A) OF SUBSECTION ONE OF SECTION TWO HUNDRED TEN
OF THIS ARTICLE FOR THE CURRENT TAX YEAR.
§ 5. For purposes of determining the modifications of paragraphs 39
and 43 of subsection (c) of section 612 of the tax law and the invest-
ment tax credit disallowance of subparagraph (B-1) of paragraph 2 of
subsection (a) of section 606 of the tax law, the amounts shall be
A. 636--B 3
multiplied by the following percentages: (a) for tax years beginning on
or after January 1, 2021: forty percent; (b) for tax years beginning on
or after January 1, 2022: eighty percent; and (c) for tax years begin-
ning on or after January 1, 2023: one hundred percent.
§ 6. This act shall take effect immediately and shall apply to tax
years beginning on or after January 1, 2021.