In his 2014 State of the State address, Governor Cuomo made several tax relief proposals aimed at increasing economic competiveness and tax fairness, two areas where New York has consistently ranked at the bottom in national studies. These proposals were selected from recommendations made by the New York State Tax Relief Commission which was convened by the Governor in late 2013 to identify ways to reduce New York property and business taxes by approximately $2B. Some of the corporate tax proposals identified by the Tax Relief Commission were taken from recommendations made by the Tax Reform and Fairness Commission which was convened to identify ways to make revenue-neutral structural changes to the State’s individual income, sales, and corporate income taxes to make the tax code more simple and fair.
Tax Relief for Manufacturers
Corporate Tax Reform
- Adopting a single sales factor apportionment formula using customer sourcing rules (both Committees appeared to support this proposal);
- Adopting mandatory water’s edge unitary combined reporting with an ownership test of more than 50%;
- Expanding nexus to include economic nexus;
- Revising exemptions for subsidiary and investment income (since both the bank tax and the corporate income tax have different rules for these types of income, it appears that a merging of the two taxes would have a significant impact on these exemptions);
- Broadening the tax base by eliminating certain special deductions and exemptions;
- For non-US corporations, using federal “effectively connected income” as the starting point for computing New York entire net income;
- Requiring combined reporting for all captive insurance companies;
- Repealing the tax treaty exception to the royalty add back provision;
- Providing for mandatory attribution of interest expense to exempt income with expanded direct tracing of interest expense in certain situations; and
- Providing credits to the alternative tax bases for taxes paid to other states to avoid constitutional challenges.