New York: Assembly and Senate Budget Proposals Would Adopts Broad Tax Increases

The New York Assembly and Senate recently issued their revised budget proposals for the upcoming fiscal year (Senate Bill 2509-B and Assembly Bill 3009-B). Both the Senate and the Assembly bills currently include major corporate and personal tax increases that exceed those proposed earlier this year by Governor Cuomo. Both bills would increase the highest tax rate currently imposed on individuals (8.82 percent) by creating three additional personal income tax brackets for individuals with income over $2.155 million. The new rates would be 9.85 percent, 10.85 percent and 11.85 percent. While the both bills adopt the same rates for the three new brackets, the income thresholds for each bracket vary between the two bills. For example, the Senate proposal would apply the highest tax rate of 11.85 percent to those with income above $50 million, while the Assembly budget bill would apply the 11.85 percent rate to those with income above $25 million. The new brackets and rates would be effective for tax years beginning in 2021. Both proposals would impose a one percent surcharge on certain individual’s capital gain, which generally means net capital gains as defined by federal law. Effective for tax years on or after January 1, 2021, the capital gains surcharge would be in addition to the general personal income tax rate imposed on individuals.

The Assembly bill proposes to impose an 18 percent surcharge on New York’s business and franchise taxes. The surcharge would apply to both the general corporate franchise tax, as well as the taxes imposed on specific industries including, but not limited to, transportation and transmission corporations, utility and telecommunication companies, and insurance corporations. Only corporations with income or receipts above a certain amount would be subject to the surcharge. For example, a corporation with over $1 million of entire net income would be subject to the surcharge, which would be effective for tax years beginning on or after January 1, 2021 and would sunset December 31, 2025. The Senate proposal would permanently increase the current 6.5 percent corporate franchise tax rate imposed on entire net income to 9.5 percent for taxpayers with business income over $5 million effective for taxable years beginning on or after January 1, 2021.  The Assembly Bill would reinstate the 0.15 percent capital base tax that had been repealed beginning in 2021.

In addition to income and corporate tax increases, Senate Bill 2509 and Assembly Bill 3009 would require the recording of any mezzanine debt or preferred equity investment related to real property upon which a mortgage instrument is filed. This would effectively make mezzanine debt or preferred equity investment subject to New York’s mortgage recording tax. Finally, the Assembly proposal would impose a surcharge on some individuals owning certain non-primary residence properties in a city with a population of at least 1 million. Please stay tuned to TWIST as the New York Budget legislation is finalized in the coming days.