BILL NUMBER: S1545

SPONSOR: BENJAMIN
 
TITLE OF BILL:

An act to amend the tax law and the administrative code of the city of
New York, in relation to exclusions of the entire net income

 
PURPOSE OF THE BILL:

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

 
SUMMARY OF SPECIFIC PROVISIONS:

Section 1 amends paragraph (b) of subdivision 9 of section 208 of the
Tax Law by adding two new paragraphs, 25 and 26, which state that entire
net income shall be determined without the exclusion, deduction, or
credit of amounts disallow as a deduction under paragraph 1 of
subsection (j) of section 163 of the internal revenue code and any
amount deduction by reason of a carry forward of disallowed business
              

interest under paragraph 2 of subsection (j) of section 163 of the
internal revenue code.

Section 2 amends Subparagraph 21 of paragraph (b) of subdivision 8 of
section 11-652 of the Administrative Code of the City of New York by
adding two new paragraphs, 22 and 23, which state that entire net income
shall be determined without the exclusion, deduction, or credit of
amounts disallow as a deduction under paragraph 1 of subsection (j) of
section 163 of the internal revenue code and any amount deduction by
reason of a carry forward of disallowed business interest under para-
graph 2 of subsection (j) of section 163 of the internal revenue code.

Section 3 amends paragraph 1 of subdivision (b) of section 1503 of the
Tax Law by adding a new subparagraph (T) to include the amount disal-
lowed as a deduction pursuant to clause (1) of subsection (j) of section
163 of the internal revenue code.

Section 4 amends paragraph 2 of subdivision (b) of section 1503 of the
Tax Law by adding a new subparagraph (Y) to include any amount deducted
by reason of a carry forward of disallowed business interest pursuant to
section 163(jj)(2) of the internal revenue code.

Section 5 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 the deductibility of business interest expenses, by
capping the deduction of business interest expenses at 30 percent of
business income in exchange for a five year period where businesses
could expense capital investments. While New York is already decoupled
from Federal bonus depreciation, the interest deduction cap would result
in New York businesses facing a higher tax liability.

If the Federal government had not passed the Tax Cuts and Jobs Act of
2017, then businesses in New York would not be subject to a higher State
tax liability as a result of the interest deduction cap.

The passage of this bill would prevent an unintended state-level tax
increase, and would prevent New York State from receiving unintended
revenues 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:

2019-20: S7029/A5961
2017-18: S.9030-A

 
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:

This bill would have no fiscal impact, as it would preserve the New York
tax treatment of business interest 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 taxable years
beginning on or after January 1, 2018.