On March 31, 2019, the New York Legislature approved budget legislation for the Fiscal Year 2020 (the “Budget Bill”). Among other things, the Budget Bill codifies the position of the New York State Department of Taxation and Finance (the “Department”) with respect to global intangible low-taxed income (GILTI), extends certain favorable tax credits to qualifying business, and imposes a sales tax collection obligation on “marketplace providers.” Following is a summary of some of the more significant provisions:

Corporate Taxes

  • GILTI – The Budget Bill codifies the GILTI apportionment rule that the Department previously announced in the instructions to the State’s Corporation Franchise Tax returns. See our prior Legal Alert. A taxpayer’s net GILTI amount is included in the denominator of the taxpayer’s apportionment factor but not in the numerator. The same apportionment methodology applies for New York City corporate tax purposes.
  • Qualified Manufacturer’s Rate – The Budget Bill amends the requirements for “qualified manufacturer” eligibility under New York Tax Law §§ 210(1)(a)(vi) and (b)(2) for purposes of determining whether a taxpayer owned sufficient property in New York State to be a qualified manufacturer. A taxpayer will now determine its eligibility as a qualified manufacturer (and for the reduced rate—currently 0%) by referencing the State tax, not the federal tax, adjusted basis. The Budget Bill also makes a similar adjustment to the New York City qualified manufacturer’s regime.
  • Exclusion of Certain Contributions to Capital – The Budget Bill restores the New York State and City non-taxable treatment of contributions by a government entity or civic group to the capital of a corporation in federal gross income under the Tax Cuts and Jobs Act, IRC § 118.

Sales, Use and Excise Taxes

  • Marketplace Providers – The Budget Bill expands the definition of “persons required to collect tax” to include marketplace providers that meet a statutory nexus threshold. A “marketplace provider” provides a forum where sales may take place and collects payments from customers on these sales.
  • Sales Tax Exemption Under Dodd-Frank – The Budget Bill extends for two years the exemption from sales and use tax for some transactions between financial institutions and their subsidiaries pursuant to the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
  • Auto Rental Surcharge – The Budget Bill expands the supplemental auto rental surcharge on auto rentals, previously limited to the Metropolitan Commuter Transportation District, to the remainder of the State. In an amendment to Governor Cuomo’s initial budget proposal, the now-statewide surcharge has been increased from 5% to 6%.
  • Seller’s Assumption of Sales Tax Liability – The Budget Bill permits a seller to pay sales tax otherwise required to be collected from the purchaser. Sales tax must be separately stated on the bill or receipt, which must indicate that the tax will be paid by the seller. The purchaser is relieved of tax liability if he or she accepts such bill or receipt in good faith.

Other Provisions

  • Empire State Film Production Credit – The Budget Bill extends the credit for qualified film production costs incurred in the State by an additional two years, through 2024.
  • Opioids Excise Tax – The Budget Bill imposes an excise tax on the sale of opioids. The excise tax replaces a previous opioids surcharge that was recently struck down as unconstitutional by a federal district court judge.
  • Real Estate Transfer Tax – The Budget Bill increases the existing New York State and City real estate transfer taxes on New York City real property sales of $2 million or more (presumably in lieu of a “pied-à-terre” tax on high-value New York City residential property owned by non-City residents, which was considered during the budget negotiation process).