BILL NUMBER: S8831

SPONSOR: RANZENHOFER
 
TITLE OF BILL:

An act to amend the tax law, in relation to unrelated business taxable
income of a taxpayer

 
PURPOSE:

To correct an unintended new tax for unrelated business taxable income
which was inadvertently created by recent changes made in the Federal
Internal Revenue Code.

 
SUMMARY OF PROVISIONS:

Section 1 amends paragraph 4 of subdivision (a) of section 292 of the
Tax Law to subtract from the federal unrelated business taxable income
any amount which is included therein solely by reason of internal Reven-
ue Code section 512(a)(7).

              

Section 2 effective date.

 
EXISTING LAW:.

Tax Law 292(a) currently provides for an exclusion of income derived
from the application of IRC 501(m)(2)(A).

 
JUSTIFICATION:

Substantial amendments were made to the Internal Revenue Code which
became effective on January 1, 2018. One of these changes was to provide
for an unrelated business tax (UBIT) on any amount a non-profit employer
has paid or incurred for commuter benefits such as transit or parking.
New York law currently imposes a state tax of 9% of UBIT whenever feder-
al law does. As a result, without this legislation, New York will auto-
matically follow the new federal statute, imposing this additional 9%
tax on not-for-profits.  This unintended new tax could divert millions
of dollars from the nonprofit sector each year. This bill excludes the
payments for transportation costs such as mass transit, commuter and
parking fees paid to employees from this tax imposition. The revenue
that will be diverted to the state from nonprofits was unintentional,
and these funds were not considered in the SFY 2018-19 Budget. The work
performed by not-for-profit employees, and the compensation paid to
them, including transportation benefits, certainly advances the purposes
and mission of the not-for-profit. Should this new tax be enforced, it
is certain that not-for profits will have fewer funds to perform their
mission serving New Yorkers across the state, and some will undoubtedly
be forced to close.

 
LEGISLATIVE HISTORY:

New bill.

 
FISCAL IMPLICATIONS:

None. The tax that is addressed in this bill was not contemplated in the
State Budget process.

 
EFFECTIVE DATE:
Immediately, and shall apply to taxable years beginning on and after
January 1, 2018.