S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                   4064
 
                        2023-2024 Regular Sessions
 
                             I N  S E N A T E
 
                             February 2, 2023
                                ___________
 
 Introduced  by  Sen. MANNION -- read twice and ordered printed, and when
   printed to be committed to the Committee on Budget and Revenue
 
 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 44 to read as follows:
   (44)  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-SEVEN OF SUBSECTION (C) OF THIS SECTION.
   §  2. Paragraph 39 of subsection (c) of section 612 of the tax law, as
 amended by section 1 of part C of chapter 59 of the  laws  of  2022,  is
 amended and a new paragraph 47 is added to read as follows:
   (39)  (A)  In  the  case  of  a  taxpayer who is a small business or a
 taxpayer who is a member, partner, or shareholder of a limited liability
 company, partnership, or New York S corporation, respectively, that is a
 small business, who or which has business income and/or farm  income  as
 defined  in  the  laws  of the United States, an amount equal to fifteen
 percent of the net items of income, gain, loss and  deduction  attribut-
 able  to  such  business  or  farm  entering into federal adjusted gross
 income, but not less than zero.
   (B) (i) For the purposes of this paragraph, the  term  small  business
 shall mean: (I) a sole proprietor who employs one or more persons during
 the  taxable  year and who has net business income or net farm income of
 greater than zero but less than two hundred fifty thousand dollars;

  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.
                                                            LBD02164-01-3
 S. 4064                             2
              

 
   (II) a limited liability company, partnership, or New  York  S  corpo-
 ration  that during the taxable year employs one or more persons and has
 net farm income attributable to a farm business  that  is  greater  than
 zero but less than two hundred fifty thousand dollars;[or]
   (III)  a  limited liability company, partnership, or New York S corpo-
 ration that during the taxable year employs one or more persons and  has
 New  York gross business income attributable to a non-farm business that
 is greater than zero but less than one  million  five  hundred  thousand
 dollars[.]; OR
   (IV) 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-SEVEN OF THIS SUBSECTION FOR THE CURRENT  TAX
 YEAR.
   (ii)  For purposes of this paragraph, the term New York gross business
 income shall mean: (I) in the case of a limited liability company  or  a
 partnership, New York source gross income as defined in subparagraph (B)
 of  paragraph three of subsection (c) of section six hundred fifty-eight
 of this article; and (II) in the case of a New York S  corporation,  New
 York  receipts  included  in  the  numerator of the apportionment factor
 determined under section two hundred ten-A of this chapter for the taxa-
 ble year.
   (C) To qualify for this modification in relation to a  non-farm  small
 business that is a limited liability company, partnership, or New York S
 corporation,  the  taxpayer's  income  attributable  to the net business
 income from its ownership interests in non-farm limited liability compa-
 nies, partnerships, or New York S corporations must  be  less  than  two
 hundred fifty thousand dollars.
   (47)  (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 DEPRECIATION 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
 S. 4064                             3
 
 THE USE OF THE PROPERTY IS BY A QUALIFIED PASS-THROUGH MANUFACTURER,  AS
 DEFINED  IN  PARAGRAPH  FORTY-SEVEN  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 47 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
 multiplied  by the following percentages: (a) for tax years beginning on
 or after January 1, 2025: forty percent; (b) for tax years beginning  on
 or  after  January 1, 2026: eighty percent; and (c) for tax years begin-
 ning on or after January 1, 2027: one hundred percent.
   § 6. This act shall take effect immediately and  shall  apply  to  tax
 years beginning on or after January 1, 2025.