NY State Senate Bill 2019-S4671A

Senate Bill S4671A

2019-2020 Legislative Session

Relates to pass-through manufacturers zero percent tax rate

download bill text pdf

Archive: Last Bill Status - In Senate Committee Finance Committee

Introduced
- In Committee Assembly
- In Committee Senate
- On Floor Calendar Assembly
- On Floor Calendar Senate
- Passed Assembly
- Passed Senate
Delivered to Governor
Signed By Governor

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Actions

View Actions

	Assembly Actions - Lowercase Senate Actions - UPPERCASE
Mar 03, 2020	reported and committed to finance
Jan 09, 2020	print number 4671a
Jan 09, 2020	amend and recommit to budget and revenue
Jan 08, 2020	referred to budget and revenue
Apr 30, 2019	reported and committed to finance
Mar 20, 2019	referred to budget and revenue

Votes

- Mar 3, 2020 - Budget And Revenue Committee Vote
  S4671A
  
  6
  
  Aye
  
  0
  
  Nay
  
  1
  
  Aye with Reservations
  
  0
  
  Absent
  
  0
  
  Excused
  
  0
  
  Abstained
  - - Budget And Revenue Committee Vote: Mar 3, 2020
      
      aye (6)
      
      Benjamin
      
      Borrello
      
      Felder
      
      Liu
      
      Martinez
      
      Tedisco
      
      aye wr (1)
      
      Krueger
  Apr 30, 2019 - Budget And Revenue Committee Vote
  S4671A
  
  6
  
  Aye
  
  0
  
  Nay
  
  1
  
  Aye with Reservations
  
  0
  
  Absent
  
  0
  
  Excused
  
  0
  
  Abstained
  - - Budget And Revenue Committee Vote: Apr 30, 2019
      
      aye (6)
      
      Antonacci
      
      Benjamin
      
      Kaminsky
      
      Liu
      
      Martinez
      
      Tedisco
      
      aye wr (1)
      
      Krueger

Bill Amendments

Original

A (Active)

2019-S4671 - Details

See Assembly Version of this Bill:: A636
Current Committee:: Senate Finance
Law Section:: Tax Law
Laws Affected:: Amd §§612, 606 & 210-B, Tax L
Versions Introduced in Other Legislative Sessions:: 2017-2018: A10121
2021-2022: S27, A3734
2023-2024: S4064, A4168

2019-S4671 - Summary

Relates to pass-through manufacturers zero percent tax rate.

2019-S4671 - Sponsor Memo

                                
 
BILL NUMBER: S4671

SPONSOR: KAPLAN
 
TITLE OF BILL:

An act to amend the tax law, in relation to pass-through manufacturers
zero percent tax rate

 
PURPOSE OR GENERAL IDEA OF BILL:

This legislation extends the zero percent franchise tax rate to all
manufactures in NY. Currently this tax rate is only extended to the
largest C Corps.

 
SUMMARY OF SPECIFIC PROVISIONS:

Section one:Amends subsection (b) of section 612 of the tax law, adding
a new paragraph 42, requiring an addition to NY income, for net loss of
a qualified NY pass-through manufacturer, where the loss is determined
in the same manner as net income from a pass-through manufacturer, as
provided in Section two.

Section two: Amends paragraph 39 of subsection (c) of section 612 of the
tax law, as added by section 1 of part Y of chapter 59 of the laws of
2013 and adds a new paragraph 43 to disallow qualified pass-through
manufacturers from also taking the small business tax exemption, by
excluding qualified pass-through manufacturers from the definition of a
small business for this purpose.

Adds new paragraph 43 of subsection (c) of section 612 of the tax law,
where subsection 43(A) allows a deduction from NY income, for net income
of a NY qualified pass-through manufacturer, where net income is
adjusted for NY deprecation (vs. Federal bonus deprecation), as well as
ensuring that the reasonable compensation of the owners is not included
in the deduction (is fully taxable).

Subsection 43(B) defines qualified pass-through manufacturers to be sole
proprietorships, partnerships, LLCs electing to be treated as a sole
proprietorship or partnership, or an S corporation.

Subsection 43(C) defines qualified pass-through manufacturers by refer-
ence to the definition of qualified NY manufacturer in the franchise tax
law: subparagraph (vi) of paragraph (a) of subdivision one of section
two hundred ten, and substitutes business receipts for gross receipts,
in qualifying as a NY manufacturer, reflecting the different tax report-
ing of pass-throughs.

Also excludes a START-UP NY participant business from the definition of
a pass-through manufacturer.

Section three: Amends paragraph 2 of subsection (a) of section 606 of
the tax law by adding a new subparagraph (B-1) to disallow pass-through
manufacturers from taking the investment tax credit, by disqualifying
property placed in service during a tax year when they are a pass-though
manufacturer.

Section four: Amends subdivision 1 of section 210-B of the tax law by
adding a new paragraph (g) to disallow C-corporations from taking the

investment tax credit, by disqualifying property placed in service
during a tax year when they are a qualified NY manufacturer.

Section five: Provides for a three year phase-in of addition and
subtraction provided in Section one and two, as well as the disquali-
fication of investment tax creidt property. For tax years beginning on
or after January 1, 2020: 40%; for tax years beginning on or after Janu-
ary 1, 2021: 80%; and for tax years beginning on or before January 1,
2022: 100%

Section six - This act shall take effect immediately and shall apply to
tax years beginning on or after January 1, 2020.

 
JUSTIFICATION:

In 2014, a zero percent corporate franchise tax rate was enacted for
manufacturers organized as C corps. This accounted for only 25% of
manufacturers in New York State. While this was a significant help to
those manufacturers, it left 75% of manufactures still paying the higher
rate, putting them at a competitive disadvantage with manufacturers
located in states with no income tax.

This legislation would extend the zero percent Corporate Franchise Tax
rate to all manufacturers in New York State regardless of how they are
organized. The proposed changes lower the income tax rate to zero for NY
pass-through manufacturers by: creating a "NY modification" that
subtracts the income, or adds back a loss (if any); disallowing any
Investment Tax Credits for affected entities/taxpayers; disallowing the
existing 5% subtraction modification for small businesses (for affected
entities/taxpayers); and disallowing a resident credit for taxes payable
to another state (not applicable if.NY tax is zero).

According to a study conducted by The Beacon Hill Institute in November
2017, "the elimination of the PIT for pass-through manufacturers would
increase private sector jobs by 3,455 the first full-year and by 4,850
in 2022. The increase in economic activity sparked by extending the
zero-percent tax rate to income from pass-through manufacturers would
mitigate the loss of revenue to New York State and boost local tax
collections.

Enacting this proposal could catapult New York's ranking as a manufac-
turing friendly state from 49th to one of the top-ranked states, estab-
lishing New York as a safe haven for manufacturers. This would allow
existing manufacturers to continue.to invest in their operations and
workforce in New York as well as attract manufacturers from across the
country and worldwide.

 
PRIOR LEGISLATIVE HISTORY:

New Bill

 
FISCAL IMPLICATIONS:

Approximately $35 million.

 
EFFECTIVE DATE:
This act shall take effect immediately and shall apply to tax years
beginning on or after January 1, 2020.

2019-S4671 - Bill Text download pdf

                            
 
                     S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                   4671
 
                        2019-2020 Regular Sessions
 
                             I N  S E N A T E
 
                              March 20, 2019
                                ___________
 
 Introduced  by  Sen.  KAPLAN -- 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 42 to read as follows:
   (42)  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-THREE OF SUBSECTION (C) OF THIS SECTION.
   §  2. Paragraph 39 of subsection (c) of section 612 of the tax law, as
 added by section 1 of part Y of chapter 59  of  the  laws  of  2013,  is
 amended and a new paragraph 43 is added to read as follows:
   (39)  In  the case of a taxpayer who is a small business who has busi-
 ness income and/or farm income as defined in  the  laws  of  the  United
 States,  an  amount  equal  to three percent of the net items of income,
 gain, loss and deduction attributable to such business or farm  entering
 into  federal adjusted gross income, but not less than zero, for taxable
 years beginning after two thousand thirteen, an amount  equal  to  three
 and  three-quarters  percent  of the net items of income, gain, loss and
 deduction attributable to such business or farm  entering  into  federal
 adjusted  gross income, but not less than zero, for taxable years begin-
 ning after two thousand fourteen, and an amount equal to five percent of
 the net items of income, gain, loss and deduction attributable  to  such
 business  or  farm  entering into federal adjusted gross income, but not
 less than zero, for taxable years beginning after two thousand  fifteen.
 For the purposes of this paragraph, the term small business shall mean a
 sole  proprietor  or  a  farm  business  who employs one or more persons
 during the taxable year and who has net  business  income  or  net  farm

 
  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.
                                                            LBD10804-01-9

 S. 4671                             2
 
 income  of  less  than  two  hundred  fifty  thousand dollars.   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-THREE OF THIS SUBSECTION FOR THE CURRENT TAX YEAR.
   (43)  (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 DEPRECATION 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
 THE USE OF THE PROPERTY IS BY A QUALIFIED PASS-THROUGH MANUFACTURER,  AS
 DEFINED  IN  PARAGRAPH  FORTY-THREE  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  43  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, 2020: forty percent; (b) for tax years beginning  on
 or  after  January 1, 2021: eighty percent; and (c) for tax years begin-
 ning on or after January 1, 2022: one hundred percent.
   § 6. This act shall take effect immediately and  shall  apply  to  tax
 years beginning on or after January 1, 2020.

co-Sponsors

2019-S4671A (ACTIVE) - Details

See Assembly Version of this Bill:: A636
Current Committee:: Senate Finance
Law Section:: Tax Law
Laws Affected:: Amd §§612, 606 & 210-B, Tax L
Versions Introduced in Other Legislative Sessions:: 2017-2018: A10121
2021-2022: S27, A3734
2023-2024: S4064, A4168

2019-S4671A (ACTIVE) - Summary

Relates to pass-through manufacturers zero percent tax rate.

2019-S4671A (ACTIVE) - Sponsor Memo

                                
 
BILL NUMBER: S4671A

SPONSOR: KAPLAN
 
PURPOSE OR GENERAL IDEA OF BILL:

This legislation extends the zero percent franchise tax rate to all
manufactures in NY. Currently this tax rate is only extended to the
largest C Corps.

 
SUMMARY OF SPECIFIC PROVISIONS:

Section one: Amends subsection (b) of section 612 of the tax law, adding
a new paragraph 42, requiring an addition to NY income, for net loss of
a qualified NY pass-through manufacturer, where the loss is determined
in the same manner as net income from a pass-through manufacturer, as
provided in Section two.

Section two: Amends paragraph 39 of subsection (c) of section 612 of the
tax law, as added by section 1 of part Y of chapter 59 of the laws of
2013 and adds a new paragraph 43 to disallow qualified pass-through
manufacturers from also taking the small business tax exemption, by
excluding qualified pass-through manufacturers from the definition of a

small business for this purpose.  Adds new paragraph 43 of subsection
(c) of section 612 of the tax law, where subsection 43(A) allows a
deduction from NY income, for net income of a NY qualified pass-through
manufacturer, where net income is adjusted for NY deprecation (vs.
Federal bonus deprecation), as well as ensuring that the reasonable
compensation of the owners is not included in the deduction (is fully
taxable).  Subsection 43(B) defines qualified pass-through manufacturers
to be sole proprietorships, partnerships, LLCs electing to be treated as
a sole proprietorship or partnership, or an S corporation.  Subsection
43(C) defines qualified pass-through manufacturers by reference to the
definition of qualified NY manufacturer in the franchise tax law:
subparagraph (vi) of paragraph (a) of subdivision one of section two
hundred ten, and substitutes business receipts for gross receipts, in
qualifying as a NY manufacturer, reflecting the different tax reporting
of pass-throughs.

Also excludes a START-UP NY participant business from the definition of
a pass-through manufacturer.

Section three: Amends paragraph 2 of subsection (a) of section 606 of
the tax law by adding a new subparagraph (B-1) to disallow pass-through
manufacturers from taking the investment tax credit, by disqualifying
property placed in service during a tax year when they are a pass-though
manufacturer.

Section four: Amends subdivision 1 of section 210-B of the tax law by
adding a new paragraph (g) to disallow C-corporations from taking the
Investment tax credit, by disqualifying property placed in service
during a tax year when they are a qualified NY manufacturer.

Section five: Provides for a three-year phase-in of addition and
subtraction provided in Section one and two, as well as the disquali-
fication of investment tax credit property. For tax years beginning on
or after January 1, 2021: 40%; for tax years beginning on or after Janu-
ary 1, 2022: 80%; and for tax years beginning on or before January 1,
2023: 100%

Section six - This act shall take effect immediately and shall apply to
tax years beginning on or after January 1, 2021.

 
JUSTIFICATION:

In 2014, a zero percent corporate franchise tax rate was enacted for
manufacturers organized as C corps. This accounted for only 25% of
manufacturers in New York State. While this was a significant help to
those manufacturers, it left 75% of manufactures still paying the higher
rate, putting them at a competitive disadvantage with manufacturers
located in states with no income tax.

This legislation would extend the zero percent Corporate Franchise Tax
rate to all manufacturers in New York State regardless of how they are
organized. The proposed changes lower the income tax rate to zero for NY
pass-through manufacturers by: creating a "NY modification" that
subtracts the income, or adds back a loss (if any); disallowing any
Investment Tax Credits for affected entities/taxpayers; disallowing the
existing 5% subtraction modification for small businesses (for affected
entities/taxpayers); and disallowing a resident credit for taxes payable
to another state (not applicable if.NY tax is zero).

According to a study conducted by The Beacon Hill Institute in November
2017, "the elimination of the PIT for pass-through manufacturers would
Increase private sector jobs by 3,455 the first full-year and by 4,850
in 2022. The increase in economic activity sparked by extending the
zero-percent tax rate to income from pass-through manufacturers would
mitigate the loss of revenue to New York State and boost local tax
collections.

Enacting this proposal could catapult New York's ranking as a manufac-
turing friendly state from 49th to one of the top-ranked states, estab-
lishing New York as a safe haven for manufacturers. This would allow
existing manufacturers to continue.to invest in their operations and
workforce in New York as well as attract manufacturers from across the
country and worldwide.

 
PRIOR LEGISLATIVE HISTORY:

New Bill

 
FISCAL IMPLICATIONS:

Approximately $35 million.

 
EFFECTIVE DATE:
This act shall take effect immediately and shall apply to tax years
beginning on or after January 1, 2021.

2019-S4671A (ACTIVE) - Bill Text download pdf

                            
 
                     S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                  4671--A
 
                        2019-2020 Regular Sessions
 
                             I N  S E N A T E
 
                              March 20, 2019
                                ___________
 
 Introduced  by  Sen.  KAPLAN -- read twice and ordered printed, and when
   printed to be committed to the Committee  on  Budget  and  Revenue  --
   recommitted  to the Committee on Budget and Revenue in accordance with
   Senate Rule 6, sec. 8 -- committee discharged, bill  amended,  ordered
   reprinted as amended and recommitted to said committee

 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 42 to read as follows:
   (42) 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-THREE OF SUBSECTION (C) OF THIS SECTION.
   § 2. Paragraph 39 of subsection (c) of section 612 of the tax law,  as
 added  by  section  1  of  part  Y of chapter 59 of the laws of 2013, is
 amended and a new paragraph 43 is added to read as follows:
   (39) In the case of a taxpayer who is a small business who  has  busi-
 ness  income  and/or  farm  income  as defined in the laws of the United
 States, an amount equal to three percent of the  net  items  of  income,
 gain,  loss and deduction attributable to such business or farm entering
 into federal adjusted gross income, but not less than zero, for  taxable
 years  beginning  after  two thousand thirteen, an amount equal to three
 and three-quarters percent of the net items of income,  gain,  loss  and
 deduction  attributable  to  such business or farm entering into federal
 adjusted gross income, but not less than zero, for taxable years  begin-
 ning after two thousand fourteen, and an amount equal to five percent of
 
  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.

                                                            LBD10804-02-9

 S. 4671--A                          2
 
 the  net  items of income, gain, loss and deduction attributable to such
 business or farm entering into federal adjusted gross  income,  but  not
 less  than zero, for taxable years beginning after two thousand fifteen.
 For the purposes of this paragraph, the term small business shall mean a
 sole  proprietor  or  a  farm  business  who employs one or more persons
 during the taxable year and who has net  business  income  or  net  farm
 income  of  less  than  two  hundred  fifty  thousand dollars.   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-THREE OF THIS SUBSECTION FOR THE CURRENT TAX YEAR.
   (43) (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  DEPRECATION 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
 THE  USE OF THE PROPERTY IS BY A QUALIFIED PASS-THROUGH MANUFACTURER, AS
 DEFINED IN PARAGRAPH  FORTY-THREE  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 43 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, 2021: forty percent; (b) for tax years beginning  on

 S. 4671--A                          3
 
 or  after  January 1, 2022: eighty percent; and (c) for tax years begin-
 ning on or after January 1, 2023: one hundred percent.
   §  6.  This  act  shall take effect immediately and shall apply to tax
 years beginning on or after January 1, 2021.

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