The New York State Senate

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

                                  3163

                       2019-2020 Regular Sessions

                            I N  S E N A T E

                            February 4, 2019
                               ___________

Introduced by Sens. KAPLAN, BOYLE -- read twice and ordered printed, and
  when  printed  to  be committed to the Committee on Investigations and
  Government Operations

AN ACT to amend the tax law, in relation to establishing small  business
  savings accounts

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

  Section 1. Short title. This act shall be known and may  be  cited  as
the "savings accounts for a variable economy (SAVE) for small businesses
act".
  §  2.  The  tax  law  is amended by adding a new section 44 to read as
follows:
  § 44. SMALL BUSINESS SAVINGS ACCOUNTS. (A) GENERAL.  (1)  THE  COMMIS-
SIONER  SHALL ESTABLISH   A PROGRAM TO ADMINISTER SMALL BUSINESS SAVINGS
ACCOUNTS UNDER THIS SECTION.
  (2) THE COMMISSIONER SHALL ESTABLISH MINIMUM STANDARDS FOR SMALL BUSI-
NESS SAVINGS ACCOUNTS AND SHALL ESTABLISH ACCOUNTS, OR ENTER INTO AGREE-
MENTS THAT MEET THESE STANDARDS TO ADMINISTER SUCH ACCOUNTS.  IN  ESTAB-
LISHING  SUCH  STANDARDS  AND  MAKING  SUCH  AGREEMENTS THE COMMISSIONER
SHALL, TO THE EXTENT PRACTICABLE, SEEK TO MINIMIZE FEES,  MINIMIZE  RISK
OF  LOSS  OF  PRINCIPAL,  AND  ENSURE A RANGE OF INVESTMENT RISK OPTIONS
AVAILABLE TO ACCOUNT BENEFICIARIES.  ANY  ELIGIBLE  SMALL  BUSINESS  MAY
ESTABLISH A SMALL BUSINESS SAVINGS ACCOUNT WITH RESPECT TO SUCH BUSINESS
UNDER TERMS WHICH MEET THE REQUIREMENTS OF THIS SECTION.
  (B)  DEFINITION.  FOR  THE  PURPOSES  OF THIS SECTION, THE TERM "SMALL
BUSINESS SAVINGS ACCOUNT" MEANS A TAX PREFERRED SAVINGS ACCOUNT WHICH IS
DESIGNATED AT THE TIME OF ESTABLISHMENT OF THE PLAN AS A SMALL  BUSINESS
SAVINGS  ACCOUNT.  SUCH  DESIGNATION SHALL BE MADE IN SUCH MANNER AS THE
COMMISSIONER MAY BY REGULATION PRESCRIBE.

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD09440-01-9

S. 3163                             2

  (C) CONTRIBUTIONS. (1) THERE SHALL BE ALLOWED AS A DEDUCTION AN AMOUNT
EQUAL TO THE CONTRIBUTIONS TO A SMALL BUSINESS SAVINGS ACCOUNT  FOR  THE
TAXABLE YEAR.
  (2)  THE AGGREGATE AMOUNT OF CONTRIBUTIONS FOR ANY TAXABLE YEAR TO ALL
SMALL BUSINESS SAVINGS ACCOUNTS MAINTAINED FOR THE BENEFIT OF AN  ELIGI-
BLE  SMALL  BUSINESS  SHALL NOT EXCEED AN AMOUNT EQUAL TO TEN PERCENT OF
THE GROSS PROFITS OF THE BUSINESS FOR THE PRECEDING TAXABLE YEAR.
  (D) DISTRIBUTIONS. (1) ANY QUALIFIED DISTRIBUTION FROM A  SMALL  BUSI-
NESS SAVINGS ACCOUNT SHALL NOT BE INCLUDIBLE IN GROSS INCOME.
  (2)  ANY  AMOUNTS  DISTRIBUTED OUT OF A SMALL BUSINESS SAVINGS ACCOUNT
THAT ARE NOT QUALIFIED DISTRIBUTIONS SHALL BE INCLUDED IN  GROSS  INCOME
FOR THE TAXABLE YEAR OF THE DISTRIBUTION.
  (3) FOR PURPOSES OF THIS SECTION:
  (A) THE TERM "QUALIFIED DISTRIBUTION" MEANS ANY AMOUNT:
  (I)  DISTRIBUTED FROM A SMALL BUSINESS SAVINGS ACCOUNT DURING A SPECI-
FIED PERIOD OF ECONOMIC HARDSHIP; AND
  (II) THE DISTRIBUTION OF WHICH IS CERTIFIED BY THE TAXPAYER AS PART OF
A PLAN WHICH PROVIDES FOR THE REINVESTMENT OF SUCH DISTRIBUTION FOR  THE
FUNDING  OF WORKER HIRING OR FINANCIAL STABILIZATION FOR THE PURPOSES OF
JOB RETENTION OR CREATION.
  (B) THE TERM "SPECIFIED PERIOD OF ECONOMIC HARDSHIP" MEANS:
  (I) ANY ONE-YEAR PERIOD BEGINNING IMMEDIATELY AFTER THE END OF ANY TWO
CONSECUTIVE QUARTERS DURING WHICH THE ANNUAL RATE OF REAL GROSS DOMESTIC
PRODUCT (AS DETERMINED BY THE BUREAU OF ECONOMIC ANALYSIS OF THE DEPART-
MENT OF COMMERCE) DECREASES, OR
  (II) ANY PERIOD, IN NO EVENT SHORTER THAN ONE YEAR, SPECIFIED  BY  THE
COMMISSIONER FOR PURPOSES OF THIS SECTION.
  (C) THE COMMISSIONER MAY SPECIFY A PERIOD UNDER CLAUSE (II) OF SUBPAR-
AGRAPH  (B)  OF  THIS  PARAGRAPH WITH RESPECT TO A SPECIFIED AREA IN THE
CASE OF AN AREA DETERMINED BY THE GOVERNOR TO  WARRANT  ASSISTANCE  FROM
THE  FEDERAL GOVERNMENT UNDER THE ROBERT T. STAFFORD DISASTER RELIEF AND
EMERGENCY ASSISTANCE ACT.
  (D) THE COMMISSIONER SHALL, FOR  EACH  SPECIFIED  PERIOD  OF  ECONOMIC
HARDSHIP ESTABLISH A DISTRIBUTION LIMITATION FOR QUALIFIED DISTRIBUTIONS
FROM  ELIGIBLE  SMALL BUSINESS ACCOUNTS WITH RESPECT TO SUCH PERIOD. THE
AGGREGATE QUALIFIED DISTRIBUTIONS FOR ANY SUCH PERIOD FROM ALL  ACCOUNTS
WITH RESPECT TO AN ELIGIBLE SMALL BUSINESS SHALL NOT EXCEED SUCH LIMITA-
TION.
  (E)  ANY  DISTRIBUTION NOT USED IN THE MANNER CERTIFIED UNDER SUBPARA-
GRAPH (A) OF THIS PARAGRAPH SHALL BE TREATED  AS  A  DISTRIBUTION  OTHER
THAN A QUALIFIED DISTRIBUTION IN THE TAXABLE YEAR OF SUCH DISTRIBUTION.
  (F)  ANY  AMOUNT  CONTRIBUTED TO A SMALL BUSINESS SAVINGS ACCOUNT (AND
ANY EARNINGS ATTRIBUTABLE  THERETO),  ONCE  DISTRIBUTED,  SHALL  NOT  BE
TREATED AS A QUALIFIED DISTRIBUTION UNLESS SUCH DISTRIBUTION IS MADE NOT
LATER THAN EIGHT YEARS AFTER THE DATE OF SUCH CONTRIBUTION. FOR PURPOSES
OF  THIS  SUBPARAGRAPH,  AMOUNTS (AND THE EARNINGS ATTRIBUTABLE THERETO)
SHALL BE TREATED AS DISTRIBUTED ON A FIRST-IN FIRST-OUT BASIS.
  (E) ELIGIBLE SMALL BUSINESS. FOR PURPOSES OF THIS SECTION:
  (1) THE TERM "ELIGIBLE SMALL BUSINESS"  MEANS,  WITH  RESPECT  TO  ANY
CALENDAR  YEAR,  ANY  PERSON  IF  THE ANNUAL AVERAGE NUMBER OF FULL-TIME
EMPLOYEES EMPLOYED BY SUCH PERSON DURING THE PRECEDING CALENDAR YEAR WAS
FIFTY OR FEWER. FOR PURPOSES OF THIS  PARAGRAPH,  A  PRECEDING  CALENDAR
YEAR  MAY  BE  TAKEN  INTO  ACCOUNT  ONLY IF THE PERSON WAS IN EXISTENCE
THROUGHOUT THE YEAR.

S. 3163                             3

  (2)(A) THE TERM "FULL-TIME EMPLOYEE" MEANS, WITH RESPECT TO ANY  YEAR,
AN  EMPLOYEE  WHO IS EMPLOYED ON AVERAGE AT LEAST FORTY HOURS OF SERVICE
PER WEEK.
  (B)  THE  COMMISSIONER  SHALL  PRESCRIBE  SUCH REGULATIONS, RULES, AND
GUIDANCE AS MAY BE NECESSARY TO DETERMINE THE HOURS  OF  SERVICE  OF  AN
EMPLOYEE,  INCLUDING  RULES  FOR  THE APPLICATION OF THIS SUBDIVISION TO
EMPLOYEES WHO ARE NOT COMPENSATED ON AN HOURLY BASIS.
  (F) EFFECT OF PLEDGING ACCOUNT AS SECURITY.  IF,  DURING  ANY  TAXABLE
YEAR  OF  THE  ELIGIBLE  SMALL  BUSINESS FOR WHOSE BENEFIT AN ACCOUNT IS
ESTABLISHED, THE ACCOUNT OR ANY PORTION THEREOF IS PLEDGED  AS  SECURITY
FOR  A LOAN, THE PORTION SO PLEDGED SHALL BE TREATED AS DISTRIBUTED IN A
DISTRIBUTION OTHER THAN A QUALIFIED DISTRIBUTION.
  § 3. Section 209 of the tax law is amended by adding a new subdivision
13 to read as follows:
  13. FOR ANY TAXABLE YEAR BEGINNING ON  OR  AFTER  JANUARY  FIRST,  TWO
THOUSAND  NINETEEN, ANY ELIGIBLE SMALL BUSINESS, AS SUCH TERM IS DEFINED
PURSUANT TO SECTION FORTY-FOUR OF THIS CHAPTER, SHALL BE EXEMPT FROM ALL
TAXES IMPOSED PURSUANT TO THIS ARTICLE FOR ANY CONTRIBUTION TO AND QUAL-
IFIED DISTRIBUTION FROM A SMALL  BUSINESS  SAVINGS  ACCOUNT  ESTABLISHED
PURSUANT  TO  SECTION  FORTY-FOUR OF THIS CHAPTER, SUBJECT TO THE LIMITS
SET FORTH IN SUCH SECTION. IF A  TAXPAYER  FILES  FOR  AND  RECEIVES  AN
EXEMPTION  FROM  THE  TAX  IMPOSED  UNDER  THIS  SECTION PURSUANT TO THE
PROVISIONS OF THIS SUBDIVISION AND THE FUNDS WITHDRAWN, OR  ANY  PORTION
THEREOF,  ARE  NOT  EXPENDED  FOR  A  QUALIFYING PURPOSE AS SET FORTH IN
SECTION FORTY-FOUR OF THIS CHAPTER, THEN THE AMOUNT  OF  SUCH  EXEMPTION
CLAIMED  BY THE TAXPAYER SHALL BE ADDED BACK TO TAX IN THE NEXT SUCCEED-
ING TAXABLE YEAR OR IN THE YEAR IN WHICH THE EXEMPTION IS DISALLOWED.
  § 4. Subsection (c) of section 612 of the tax law is amended by adding
a new paragraph 44 to read as follows:
  (44) ANY QUALIFIED CONTRIBUTION TO AND ANY QUALIFIED DISTRIBUTION FROM
A SMALL BUSINESS SAVINGS ACCOUNT ESTABLISHED PURSUANT TO SECTION  FORTY-
FOUR OF THIS CHAPTER.  IF A TAXPAYER FILES FOR AND RECEIVES AN EXEMPTION
FROM  THE  TAX  IMPOSED UNDER THIS SECTION PURSUANT TO THE PROVISIONS OF
THIS PARAGRAPH AND ARE NOT A QUALIFYING CONTRIBUTION OR DISTRIBUTION  AS
SET  FORTH IN SECTION FORTY-FOUR OF THIS CHAPTER, THEN THE AMOUNT OF ANY
SUCH EXEMPTION CLAIMED BY THE TAXPAYER SHALL BE ADDED BACK TO TAX IN THE
NEXT SUCCEEDING TAXABLE YEAR.
  § 5. This act shall take effect immediately and shall apply to taxable
years beginning after such date.