NY State Senate Bill 2023-S1980

Senate Bill S1980

2023-2024 Legislative Session

Raises the tax rate on corporate income; increases the state conformity to federal taxation of corporate profit shifting; and imposes an additional tax on individual business income

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Current Bill Status - In Senate Committee Budget And Revenue 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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	Assembly Actions - Lowercase Senate Actions - UPPERCASE
Jan 03, 2024	referred to budget and revenue
Jan 18, 2023	referred to budget and revenue

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2023-S1980 (ACTIVE) - Details

See Assembly Version of this Bill:: A3690
Current Committee:: Senate Budget And Revenue
Law Section:: Tax Law
Laws Affected:: Amd §§208, 210, 210-A & 606, add §608, Tax L

2023-S1980 (ACTIVE) - Summary

Raises the tax rate on corporate income; increases the state conformity to federal taxation of corporate profit shifting; imposes an additional tax on individual business income in response to federal tax benefits for pass-through business income.

2023-S1980 (ACTIVE) - Sponsor Memo

                                 
BILL NUMBER: S1980

SPONSOR: HOYLMAN-SIGAL
 
TITLE OF BILL:

An act to amend the tax law, in relation to raising the tax rate on
corporate income; in relation to increasing the state conformity to
federal taxation of corporate profit shifting; and in relation to impos-
ing an additional tax on individual business income in response to
federal tax benefits for pass-through business income

 
PURPOSE:

To generate increased tax revenue for New York State by addressing the
federal under-taxation of corporate profits and pass-through business
income as a result of the 2017 Tax Cuts and Jobs Act.

 
SUMMARY OF SPECIFIC PROVISIONS:

Section 1 of the bill amends subdivision 6-A of section 208 of the Tax
Law to lower the "exempt CFC income" from 95% to 50% of the income
required to be included in a taxpayer's federal gross income.

Section 2 of the bill amends section 210 of the tax law to increase the
corporate tax rate as of January 1, 2024 to 8% on corporations with
income over $2.5 million, 12% on corporations with income over $10
million, and 14% on corporations with income over $20 million.

Section 3 of the bill amends section 210-A of the tax law to raise the
percentage of global intangible low-taxed income included in a corpo-
ration's taxable income from five to fifty percent.

Section 4 of the bill amends subsection kkk of section 606 of the tax
law to reduce the pass-through entity tax rebate to 75%, rather than
100%, of a pass-through business' share of an entity's federal income
tax deduction.

Section 5 of the bill adds section 608 to the tax law, creating an addi-
tional New York state income tax to offset the 20% deduction available
under section 199A of the 2017 tax legislation known as the Tax Cuts and
Jobs Act. Small business owners who benefit from the pass-through
deduction are not subject to this additional tax.

Section 6 is the effective date.

 
JUSTIFICATION:

New York is an exceptionally wealthy state. Treated as a separate coun-
try, it would have one of the world's largest economies. With such a
strong economy, all New Yorkers should have fundamental economic rights:
access to high-quality education, affordable healthcare, guaranteed
housing, and basic social services and social insurance. New York must
also finance investments in green energy, green jobs, and green infras-
tructure in order to mitigate the catastrophic risks of climate change.

New York is also the most unequal state in the nation, in part because
our tax system has not kept pace with changes in the economy, leaving
the many high-earning professionals and wealthy families in this state
undertaxed. Economic growth from recent decades has overwhelmingly bene-
fitted a small segment of elites, while inflation-adjusted wages have
stagnated for the vast majority of working people since the 1970s. The
state government, lacking adequate tax revenues, has been unable to
afford essential public investment and social spending, including
upgrading our infrastructure, repairing public housing, protecting
public education, and financing Medicaid.

While the federal government could aid the states in providing essential
services through progressive tax and spending measures, it instead
continues to give tax benefits to corporate interests. In 2017, the
federal government enacted the tax legislation known as the "Tax Cuts
and Jobs Act" (the "TCJA"), which reduced the corporate tax rate from
35% to 21%. The TCJA also created a 20% deduction for business income
received from pass-through entities --- with additional benefits for the
real estate industry --- and added a global intangible low-taxed income
(GILTI) provision to target multinational corporations hiding profits in
overseas subsidiaries.

Big business, already adept at dodging taxes, hardly needed a tax cut.
Moreover, these tax cuts cost the federal government trillions of
dollars in tax revenues. Tax revenues from corporate income are now at a
historic low. Now, instead of funding desperately needed social services
and social insurance, these revenues have been diverted to artificially
boosting corporate earnings and inflating stock values.

New York can respond to regressive federal tax policy by imposing addi-
tional taxes that offset these cuts. The state is full of both large
corporations and pass-through business owners that were doing perfectly
well before these tax cuts in 2017.

This bill raises New York state corporate tax rate using a graduate rate
structure, where corporations with incomes over $2.5 million pay an 8%
corporate tax rate, corporations making over $10 million pay a 12%
corporate tax rate, and corporations making over $20 million in income
pay a 14% corporation tax rate. For the latter two tax brackets, only
the income over $10 million, and $20 million may be taxed at the 12% and
14% rates, respectively.

To address the 2017 20% federal pass-through entity deduction, this bill
also reduces the state pass-through entity tax rebate from 100% to 75%
of a partner's share of the federal pass-through entity tax.  The bill
increases the amount of GILTI included in a corporation's taxable income
for state corporate tax purposes.

 
LEGISLATIVE HISTORY:

New bill.

 
FISCAL IMPLICATIONS:

TBD.

 
EFFECTIVE DATE:
This act shall take effect immediately and shall apply to taxable years
commencing on and after such effective date.

2023-S1980 (ACTIVE) - Bill Text download pdf

                             
                     S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                   1980
 
                        2023-2024 Regular Sessions
 
                             I N  S E N A T E
 
                             January 18, 2023
                                ___________
 
 Introduced  by Sen. HOYLMAN-SIGAL -- 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  raising  the  tax  rate  on
   corporate  income;  in  relation to increasing the state conformity to
   federal taxation of corporate profit  shifting;  and  in  relation  to
   imposing  an  additional tax on individual business income in response
   to federal tax benefits for pass-through business income
 
   THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
 BLY, DO ENACT AS FOLLOWS:
 
   Section  1. Paragraph (b) of subdivision 6-a of section 208 of the tax
 law, as amended by section 1 of part I of chapter  39  of  the  laws  of
 2019, is amended to read as follows:
   (b)  "Exempt  CFC  income" means (i) except to the extent described in
 subparagraph (ii) of this paragraph, the income required to be  included
 in  the  taxpayer's  federal  gross income pursuant to subsection (a) of
 section 951 of the internal revenue code, received  from  a  corporation
 that  is  conducting  a  unitary  business  with the taxpayer but is not
 included in a combined  report  with  the  taxpayer,  (ii)  such  income
 required  to be included in the taxpayer's federal gross income pursuant
 to subsection (a) of such section 951 of the internal  revenue  code  by
 reason of subsection (a) of section 965 of the internal revenue code, as
 adjusted  by subsection (b) of section 965 of the internal revenue code,
 and without regard to subsection (c) of such section,  received  from  a
 corporation that is not included in a combined report with the taxpayer,
 and  (iii)  [ninety-five]  FIFTY  percent  of  the income required to be
 included in the taxpayer's federal gross income pursuant  to  subsection
 (a)  of section 951A of the internal revenue code, without regard to the
 deduction under section 250 of the internal revenue code, received  from
 a corporation that is not included in a combined report with the taxpay-
 er,  less,  (iv)  in  the  discretion  of the commissioner, any interest
 deductions directly or indirectly attributable to that income.  In  lieu
 
  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.
                                                            LBD04589-01-3

 S. 1980                             2
 
 of  subtracting  from its exempt CFC income the amount of those interest
 deductions, the taxpayer may make a revocable  election  to  reduce  its
 total  exempt  CFC  income  by forty percent. If the taxpayer makes this
 election,  the  taxpayer  must  also  make the elections provided for in
 paragraph (b) of subdivision six of this section and  paragraph  (c)  of
 this  subdivision.  If  the taxpayer subsequently revokes this election,
 the taxpayer must revoke the elections provided for in paragraph (b)  of
 subdivision six of this section and paragraph (c) of this subdivision. A
 taxpayer  which does not make this election because it has no exempt CFC
 income will not be precluded from  making  those  other  elections.  The
 income described in subparagraphs (ii) and (iii) of this paragraph shall
 not  constitute  investment income. The income described in subparagraph
 (iii) of this paragraph shall not constitute exempt unitary  corporation
 dividends.
   §  2.  The  opening  paragraph  of  paragraph  (a) of subdivision 1 of
 section 210 of the tax law, as amended by section 1 of part HHH of chap-
 ter 59 of the laws of 2021, is amended to read as follows:
   For  taxable  years  beginning  before  January  first,  two  thousand
 sixteen,  AND  BEFORE JANUARY FIRST, TWO THOUSAND TWENTY-ONE, the amount
 prescribed by this paragraph shall be computed at the rate of seven  and
 one-tenth  percent  of  the taxpayer's business income base. For taxable
 years beginning on or after January first,  two  thousand  sixteen,  the
 amount prescribed by this paragraph shall be six and one-half percent of
 the  taxpayer's  business income base. For taxable years beginning on or
 after January first, two thousand twenty-one and before  January  first,
 two  thousand  twenty-four  for any taxpayer with a business income base
 for the taxable year of more  than  five  million  dollars,  the  amount
 prescribed  by  this paragraph shall be seven and one-quarter percent of
 the taxpayer's business income base. FOR TAXABLE YEARS BEGINNING  ON  OR
 AFTER  JANUARY  FIRST,  TWO THOUSAND TWENTY-FOUR FOR ANY TAXPAYER WITH A
 BUSINESS INCOME BASE FOR THE TAXABLE YEAR OF MORE THAN TWO AND  ONE-HALF
 MILLION  DOLLARS, THE AMOUNT PRESCRIBED BY THIS PARAGRAPH SHALL BE EIGHT
 PERCENT OF THE TAXPAYER'S BUSINESS INCOME BASE; FOR ANY TAXPAYER WITH  A
 BUSINESS  INCOME  BASE  FOR  THE  TAXABLE  YEAR IN EXCESS OF TEN MILLION
 DOLLARS, THE AMOUNT PRESCRIBED BY THIS PARAGRAPH SHALL BE TWELVE PERCENT
 OF THE TAXPAYER'S BUSINESS INCOME BASE IN EXCESS OF TEN MILLION DOLLARS;
 FOR ANY TAXPAYER WITH A BUSINESS INCOME BASE FOR  THE  TAXABLE  YEAR  IN
 EXCESS  OF  TWENTY  MILLION DOLLARS, THE AMOUNT PRESCRIBED BY THIS PARA-
 GRAPH SHALL BE FOURTEEN PERCENT OF THE TAXPAYER'S BUSINESS  INCOME  BASE
 IN EXCESS OF TWENTY MILLION DOLLARS. The taxpayer's business income base
 shall  mean  the  portion  of the taxpayer's business income apportioned
 within the state as hereinafter provided. However,  in  the  case  of  a
 small  business  taxpayer,  as defined in paragraph (f) of this subdivi-
 sion, the amount prescribed by this paragraph shall be computed pursuant
 to subparagraph (iv) of this paragraph and in the case of a  manufactur-
 er,  as  defined  in  subparagraph  (vi)  of  this paragraph, the amount
 prescribed by this paragraph shall be computed pursuant to  subparagraph
 (vi)  of  this paragraph, and, in the case of a qualified emerging tech-
 nology company, as defined in subparagraph (vii) of this paragraph,  the
 amount  prescribed  by  this  paragraph  shall  be  computed pursuant to
 subparagraph (vii) of this paragraph.
   § 3. Paragraph (b) of subdivision 5-a of section 210-A of the tax law,
 as amended by section 3 of part I of chapter 39 of the laws of 2019,  is
 amended to read as follows:
   (b)  For  New  York C corporations, global intangible low-taxed income
 shall not be included in the numerator of  the  apportionment  fraction.
 S. 1980                             3
 
 [Five]  FIFTY  percent  of  global  intangible low-taxed income shall be
 included in the denominator of the apportionment fraction.
   § 4. Paragraph 2 of subsection (kkk) of section 606 of the tax law, as
 added  by  section  2  of  part  C of chapter 59 of the laws of 2021, is
 amended to read as follows:
   (2) The credit shall be equal to SEVENTY-FIVE  PERCENT  OF  the  part-
 ner's, member's or shareholder's direct share of the pass-through entity
 tax.
   §  5.  The  tax  law is amended by adding a new section 608 to read as
 follows:
   § 608. ADDITIONAL TAX. (A) THERE IS IMPOSED AN ADDITIONAL TAX UPON THE
 AMOUNT OF AN INDIVIDUAL'S NEW YORK TAXABLE INCOME  THAT  CORRESPONDS  TO
 ANY  DEDUCTION  TAKEN  PURSUANT  TO SECTION 199A OF THE INTERNAL REVENUE
 CODE, OR ANY SUCCESSOR PROVISION THERETO. THIS SECTION SHALL  NOT  APPLY
 TO  A TAXPAYER WITH A FEDERAL TAXABLE INCOME BELOW THE THRESHOLD AMOUNT,
 AS DEFINED IN SECTION 199A(E) OF THE INTERNAL REVENUE CODE,  PLUS  FIFTY
 THOUSAND  DOLLARS  FOR  A  SINGLE FILER TAXPAYER OR ONE HUNDRED THOUSAND
 DOLLARS IN THE CASE OF A JOINT RETURN.
   (B) THE RATE OF THE ADDITIONAL TAX IMPOSED PURSUANT  TO  THIS  SECTION
 SHALL BE EQUAL TO THE HIGHEST FEDERAL INCOME TAX RATES IN EFFECT FOR THE
 TAXABLE  YEAR THAT WOULD APPLY TO THE AMOUNT DEDUCTED UNDER SECTION 199A
 OF THE INTERNAL REVENUE CODE, OR ANY SUCCESSOR  PROVISION  THERETO,  BUT
 FOR  THE  APPLICATION OF SUCH SECTION. THE AMOUNT OF AN INDIVIDUAL'S NEW
 YORK TAXABLE INCOME THAT CORRESPONDS TO  THE  AMOUNT  OF  ANY  DEDUCTION
 TAKEN  PURSUANT  TO  SECTION  199A  IS  THE  AMOUNT  THAT BEARS THE SAME
 RELATIONSHIP TO THE TAXPAYER'S TOTAL NEW  YORK  TAXABLE  INCOME  AS  THE
 AMOUNT DEDUCTED UNDER SECTION 199A BEARS TO THE TAXPAYER'S TOTAL FEDERAL
 TAXABLE INCOME AS DETERMINED WITHOUT REGARD TO SUCH DEDUCTION.
   (C)  THE  ADDITIONAL TAX UNDER THIS SECTION SHALL BE ADMINISTERED, AND
 PENALTIES SHALL BE IMPOSED, IN  THE  SAME  MANNER  AS  THE  OTHER  TAXES
 IMPOSED BY THIS ARTICLE.
   § 6. This act shall take effect immediately and shall apply to taxable
 years commencing on and after such effective date.

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