Assembly Bill A7016

                             
                     S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                   7016
 
                        2025-2026 Regular Sessions
 
                           I N  A S S E M B L Y
 
                              March 18, 2025
                                ___________
 
 Introduced by M. of A. STIRPE -- read once and referred to the Committee
   on Ways and Means
 
 AN  ACT  to amend the tax law, in relation to expanding New York's manu-
   facturing incentive to S corporations
 
   THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
 BLY, DO ENACT AS FOLLOWS:

   Section  1.  Paragraph  22 of subsection (c) of section 612 of the tax
 law, as amended by chapter 606 of the laws of 1984, subparagraph (A)  as
 amended  by  chapter  28  of  the  laws of 1987, and subparagraph (B) as
 amended by chapter 190 of the laws  of  1990,  is  amended  to  read  as
 follows:
   (22)  In  the  case of a shareholder of an S corporation (A) where the
 election provided for in subsection (a) of section six hundred sixty  OF
 THIS  ARTICLE  has  not  been made with respect to such corporation, any
 item of income of the  corporation  included  in  federal  gross  income
 pursuant  to  section thirteen hundred sixty-six of the internal revenue
 code, [and]
   (B) in the case of a New York S termination year, subparagraph (A)  of
 this  paragraph  shall  apply  to the amounts of income determined under
 subsection (s) of this section, AND
   (C) IN THE CASE OF DISTRIBUTIONS AS DEFINED BY SECTIONS THREE  HUNDRED
 ONE  AND  THIRTEEN HUNDRED SIXTY-EIGHT OF THE INTERNAL REVENUE CODE FROM
 CORPORATIONS DESCRIBED IN SUBPARAGRAPH (A) OF THIS PARAGRAPH,  AND  THAT
 ARE  QUALIFIED NEW YORK MANUFACTURERS AS DEFINED BY SUBPARAGRAPH (VI) OF
 PARAGRAPH (A) OF SUBDIVISION ONE OF SECTION  TWO  HUNDRED  TEN  OF  THIS
 CHAPTER, RECEIVED DURING THE TAX YEAR OF THE SHAREHOLDER, THE LESSER OF:
   (1)  THE  SHAREHOLDER'S  COMBINED  SEPARATELY  STATED ITEMS OF INCOME,
 LOSS, OR DEDUCTION, DESCRIBED IN PARAGRAPH  TWO  OF  SUBSECTION  (A)  OF
 SECTION  THIRTEEN  HUNDRED  SIXTY-SIX  OF  THE INTERNAL REVENUE CODE AND
 REGULATIONS PROMULGATED THEREUNDER, THAT ARE INCLUDABLE IN,  OR  DEDUCT-
 IBLE  FROM,  A  SHAREHOLDER'S  FEDERAL TAXABLE INCOME, MULTIPLIED BY THE
 
  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.
                                                            LBD10131-01-5
              

 A. 7016                             2
 
 HIGHEST MARGINAL FEDERAL TAX RATE FOR INDIVIDUALS IN SECTION ONE OF  THE
 INTERNAL  REVENUE  CODE,  IN  EFFECT  FOR  THE  SHAREHOLDER'S  TAX YEAR,
 PROVIDED, HOWEVER, THAT IF THERE IS MORE THAN ONE SUCH  RATE  IN  EFFECT
 DURING  SUCH  YEAR, A BLENDED RATE, CONSIDERING EACH RATE AND THE NUMBER
 OF MONTHS IN EFFECT, SHALL BE USED, AND
   (2) THE AMOUNT OF ACTUAL DISTRIBUTIONS MADE TO THE SHAREHOLDER  DURING
 THE SHAREHOLDER'S TAX YEAR.
   §  2.  Paragraph 2 of subsection (e) of section 612 of the tax law, as
 amended by chapter 166 of the laws  of  1991,  is  amended  to  read  as
 follows:
   (2)  Shareholders of S corporations which are New York C corporations.
 In the case of a shareholder of an S corporation which is a New  York  C
 corporation,  (A)  the  modifications under this section which relate to
 the corporation's items of income, loss and deduction shall  not  apply,
 except  for  the  modifications  provided  under  paragraph  nineteen of
 subsection (b) and  paragraph  twenty-two  of  subsection  (c)  of  this
 section, AND
   (B) THE MODIFICATION FOR CORPORATE DISTRIBUTIONS DESCRIBED IN SUBPARA-
 GRAPH  (C)  OF  PARAGRAPH  TWENTY-TWO  OF SUBSECTION (C) OF THIS SECTION
 SHALL APPLY.
   § 3. Paragraph 2 of subsection (a) of section 631 of the tax  law,  as
 amended  by  chapter  170  of  the  laws  of 1994, is amended to read as
 follows:
   (2) The portion of the modifications described in subsections (b)  and
 (c) of section six hundred twelve OF THIS ARTICLE which relate to income
 derived  from New York sources (including any modifications attributable
 to [him] SUCH INDIVIDUAL as a partner or shareholder of  a  New  York  S
 corporation),   PROVIDED,  HOWEVER,  THAT  MODIFICATIONS  FOR  CORPORATE
 DISTRIBUTIONS DESCRIBED IN SUBPARAGRAPH (C) OF PARAGRAPH  TWENTY-TWO  OF
 SUBSECTION  (C)  OF  SECTION SIX HUNDRED TWELVE OF THIS ARTICLE SHALL BE
 LIMITED TO THE AMOUNT  OF  THE  DISTRIBUTIONS  WHICH  RELATE  TO  INCOME
 DERIVED  FROM NEW YORK SOURCES AND ARE INCLUDED IN THE SHAREHOLDER'S NEW
 YORK ADJUSTED GROSS INCOME.
   § 4. This act shall take effect on the first of January next  succeed-
 ing  the date on which it shall have become a law and shall apply to all
 tax years commencing on or after such date.