The 2014-15 New York State Budget became effective April 1, 2014.  Two very beneficial provisions for manufacturers are included in the NYS Budget.   Jaeckle Fleischmann’s tax attorneys have prepared a brief summary of the budget’s real property tax credit and the elimination of the corporate tax for manufacturers.

Real Property Tax Credit for Manufacturers.

The new law creates a new credit for qualified New York manufacturers equal to 20% of the real property taxes paid during the taxable year for real property owned by a manufacturer in New York and principally used for manufacturing.  The credit is also allowed for property taxes paid on real property leased from an unrelated third party if the taxes are paid pursuant to explicit requirements in a written lease and remitted directly to the taxing authority.  The corporate franchise tax credit can reduce tax to $25 while the personal tax credit is refundable.  The credit is effective for tax years beginning on or after January 1, 2014.

A taxpayer that claims the credit must add back to taxable income any amount of real property taxes deducted at the federal level.

Also, property taxes used as the basis for this credit may not be used for any other tax credit.

For purposes of the credit, a "manufacturer" is defined as a taxpayer principally engaged in the production of goods by manufacturing, processing, assembling, refining, mining, extracting, farming, agriculture, horticulture, floriculture, viticulture or commercial fishing.  (The generation and distribution of electricity, the distribution of natural gas, and the production of steam associated with the generation of electricity are not qualifying activities.)

In order to be a "qualified manufacturer", a manufacturer must also satisfy the existing receipts and property tests:

  • At least 50% of receipts must be from manufacturing; and
  • Either all or at least $1 million of manufacturing property is in New York.

A manufacturer that fails the receipts test may still qualify if it employs at least 2,500 people in manufacturing in New York and has $100 million in manufacturing property in the state.

Elimination of the Corporate Tax for Manufacturers.

The new law also reduces the business income base rate for qualified manufacturers to 0% for tax years beginning on or after January 1, 2014.  Note that this rate reduction only applies to taxpayers which are regular "C" corporations, and does not apply to "S" corporations or limited liability companies.