BILL NUMBER: S8230

SPONSOR: RAMOS
 
TITLE OF BILL:

An act to amend the tax law, in relation to prohibiting federal corpo-
rate bailout recipients who engage in stock buybacks from receiving New
York state tax credits

 
PURPOSE OR GENERAL IDEA OF BILL:

To prevent a corporation that receives federal bailout assistance from
receiving New York state tax credits within three years of buying back
its own shares and to allow the attorney general to impose a civil
penalty if found in violation of this bill.

 
SUMMARY OF PROVISIONS:

Section 1 amends the tax law by adding a new section 212 that prohibits
federal emergency economic assistance recipients from applying for or
receiving any New York state tax credit within three years of any
              

purchase, redemption, or other reacquisition of its own shares. It also
subjects any recipient in violation of this section to a penalty amount-
ing to three times such tax credit, which may be imposed by the attorney
general. This section also defines "federal emergency economic assist-
ance recipient."

Section 2 states the effective date.

 
DIFFERENCE BETWEEN ORIGINAL AND AMENDED VERSION (IF APPLICABLE:

 
JUSTIFICATION:

As the COVID-19 pandemic creates the need for corporations to seek
federal bailout assistance, companies need to be prevented from using
such funds for their own gain by buying back their own stock.

Often, when companies have a surplus cash on their balance sheets, they
may repurchase their own company's stock to reduce the number of shares
in the open market. This method of reducing outstanding shares could
potentially raise the value of the stock, often raising stock prices.
Such an increase in value also means an increase in earnings per share
(EPS), which is a threshold by which many senior executives' pay are
measured. As a result, many such executives will then receive an
increase in bonuses.

In times of emergency, funds provided in the form of federal bailout
assistance should be used to assist companies' employees with paid sick
leave and salary compensation. This bill would create penalties for
corporations that buy back their own shares within three years of
receiving federal assistance-a large step towards guaranteeing that
workers are protected during an emergency instead of the federal bailout
being used to enrich executives.

 
PRIOR LEGISLATIVE HISTORY:

 
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:

None.
 
EFFECTIVE DATE:
This act shall take effect immediately.