S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                    27
 
                        2021-2022 Regular Sessions
 
                             I N  S E N A T E
 
                                (PREFILED)
 
                              January 6, 2021
                                ___________
 
 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
 
  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.
                                                            LBD01016-01-1

 S. 27                               2
 
 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, 2023: forty percent; (b) for tax years beginning  on
 or  after  January 1, 2024: eighty percent; and (c) for tax years begin-
 ning on or after January 1, 2025: one hundred percent.
   § 6. This act shall take effect immediately and  shall  apply  to  tax
 years beginning on or after January 1, 2023.