BILL NUMBER: S3330

SPONSOR: COONEY
 
TITLE OF BILL:

An act to amend the tax law, in relation to taxpayers, and combined
groups including members, engaged in providing professional employer
organization services

 
SUMMARY OF PROVISIONS:

Section 1 amends paragraph (a) of subdivision 10 of section 210-A of the
tax law, to clarify that for professional employer organization
services, amounts received with respect to wages, benefits, and other
employee expense disbursed to or for the benefit of a client's worksite
employees and the related employment taxes shall be included for
purposes of this paragraph.

Section 2 is the effective date.

 
JUSTIFICATION:

              

The language in the current statute (Tax Law § 210-A.1) states that:
"(t)he apportionment factor is a fraction, determined by including only
those receipts, net income, net gains, and other items described in this
section that are included in the computation of the taxpayer's business
income (determined without regard to the modification provided in
subparagraph nineteen of paragraph (a) of subdivision nine of section
two hundred eight of this article) for the taxable year" reflects the
intention of the Legislature that all revenue, net gain, etc. items used
to compute business income also be included in the calculation of the
apportionment factor. This obvious intention notwithstanding, the
Department of Taxation and Finance has promulgated regulations requiring
that certain client payments received by Professional Employer Organiza-
tions ("PEOs") and included in the computation of business income be
excluded from the calculation of the apportionment fraction on the basis
that they are "reimbursements" of wages and other amounts paid by the
PEOs for the employees performing services for the PEOs' clients.

For federal income tax purposes, some reimbursements (like those of
PEOs) are included in the calculation of federal taxable income, which
is the foundation for determining the business income of corporations
taxable under Article 9-A. In other instances (e.g., repayments of trav-
el expenses, refunds of deposits) the reimbursements are excluded from
the computation of business income.

The proposed legislation will promote sound tax policy by clarifying the
Legislature's original intent that the apportionment fraction includes
representation of all items of revenue, net gain, etc.  entering into
the computation of a PEO's taxable business income.

In those limited instances in which the proposal, if adopted, might lead
to an apportionment factor that the Department considers distortive,
existing Tax Law § 210-A.11 permits the Department to assert that a
discretionary adjustment to the apportionment factor is necessary to
cure the distortion.

 
LEGISLATIVE HISTORY:

2023-24: S.8528

 
FISCAL IMPLICATIONS:

To be determined.

 
EFFECTIVE DATE:
This act shall take effect immediately and shall apply to all open tax
years beginning on and after January 1, 2015.