On February 12, 2014, the New York State Department of Taxation and Finance (the “Tax Department”) issued a revised technical memorandum explaining recently enacted legislation which changes the way Industrial Development Agencies and Authorities (IDAs) provide and report sales tax exemption benefits. The legislative changes, effective March 28, 2013, include new recordkeeping and reporting requirements, new requirements related to the recapture of certain sales tax exemption benefits, and limitations on providing sales tax exemption benefits to certain retail sales projects. TSB-M-14(1.1)S
- An IDA must include the terms and conditions in GML section 875(3), including provisions regarding recapture of benefits, within each of its resolutions and project documents that establish a project or appoint an agent or project operator for a project.
- A letter must be sent to the Tax Department explaining why an agent’s appointment has been amended, revoked, or canceled or is no longer valid and include the effective date of the change.
- An IDA must prepare an annual compliance report detailing the terms and conditions of each of its projects, its activities and efforts to recapture any state sales tax exemption benefits due, and any other information required by the Commissioner of Taxation and Finance and the Commissioner of Economic Development. Failure to file this report may result in the revocation of the IDA’s authority to provide state sales tax exemption benefits.
- The benefits were not entitled or authorized to be taken;
- The benefits were in excess of the amounts authorized;
- The benefits were for unauthorized property or services; or
- The benefits were for property or services not used according to the terms of the agreement with the IDA.
- The project’s predominant purpose is to make available goods or services that are not readily accessible to residents of the municipality where the project is located; or
- The project is located in a “highly distressed” area.
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.