New York Legislative Tracker: Jan 14, 2021 Replace | Hodgson Russ LLP

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  New York Legislative Tracker: Jan 14, 2021 Update |  Hodgson Russ LLP

We’re back with another update on the recently introduced tax legislation. As discussed last week, invoices will continue to be introduced that expired at the end of the last session. Two of the more interesting proposals include a bill to tax savings income for investment management services and another proposing a new personal income supplement for high-income residents in New York City.

  • SB 999 – Tax treatment of transferred interest for investment management services

This bill, a reintroduction of SB 303 from last session, aims to close the so-called interest income gap in New York by treating certain income from hedge fund managers and private equity investors – called interest income – as normal income rather than normal income than the capital gain treatment it currently enjoys. Currently, this income is not subject to New York tax if received by a non-resident due to its capital gain treatment. However, this would change if the income were treated as ordinary income instead.

This bill also proposes a 19% “Interest Tax Fee” on income from certain investment management services.

Taxation of savings income at the state level has been a hot topic in recent years as states look for sources of income. When SB 999 becomes effective, its effective date is tied to the date Connecticut, Massachusetts and New Jersey pass similar laws that “have identical effects”.

  • SB 1194 – Personal Income Supplement for high-income NYC residents

This bill, a reintroduction of SB 3246 from last session, would authorize NYC to impose a personal income supplement on high-income residents to fund transit improvements and reduced tariffs for low-income residents. The explanatory memorandum explains that this legislation would provide a new, dedicated source of income to fund the projects critical to the operation of the MTA, and ensure that the MTA has the funds to take immediate remedial action and establish long-term financial stability.

The bill would add a 0.534% income tax surcharge on NYC residents income that exceeds the following thresholds, depending on enrollment status:

  • SB 1406 – Abolition of the reimbursement of the transfer tax

This bill, reintroducing SB 6203A, would remove the 100% transfer tax discount and use the estimated $ 13 billion in revenue for various government infrastructure action programs. New York currently collects stock transfer tax, but has offered a discount on the tax amount since 1979, effectively eliminating the tax. The transfer tax is a source of income that acts as an indirect tax rather than a direct tax like property or income. The tax would be levied as follows:

Cost per share chart

In addition, the transfer of shares or certificates other than through sale would have a tax rate of 2.50 cents. While the tax itself is quite small, it is estimated that the volume of trade could bring this source of income to at least $ 13 billion.

  • FROM 1612 – NYC Online Delivery Surcharge

That bill, a reintroduction of AB 6078B from last session, would add a $ 3 markup for online delivery transactions that end within New York City. The estimated US $ 300 million in revenue from this move would be used to fund operating costs for buses and subways in New York City.

The invoice defines a surcharge delivery transaction as “a transaction that results in the delivery of an item purchased online to the buyer”. The $ 3 surcharge would be imposed on the seller but would allow the cost of the surcharge to be passed on to the buyer and shown separately on the receipt. Specifically, the bill would exempt supplies of basic health care and food supplies in addition to SNAP and WIC supplies (nutritional supplementary program and special supplementary feeding program for women, infants and children).

  • SB 854 – Legalization of marijuana for adults

That law would pass the Marijuana Regulation and Taxation Act (“MRTA”), which builds on a similar plan introduced last year. The intent of this law is to regulate, control, and tax cannabis. The MRTA is expected to generate more than $ 463 million in new tax revenue for the state and an additional $ 336 million for New York City, among others.

On the tax side, the bill would add a new Article 20-C to the Tax Act, entitled “Adult Cannabis Product Tax,” which would impose an 18% excise duty on the wholesale and retail transfer of cannabis products. A tax of 1% would be levied for districts or cities with at least 1 million inhabitants and a tax of 3% for municipalities. The new Article 20-C would also require licensees to apply for a certificate of registration and keep complete and accurate tax records. Finally, the bill would amend the tax law to exempt adult cannabis products from sales tax.

The version of the Assembly’s draft law can be found here.

These nuances of this bill will continue to be explained by our hemp and medicinal cannabis practice and will be updated as more details become known.

  • SB 1183 – Authorization of mobile sports betting

This bill would give the state the power to regulate and tax traditional and mobile sports betting in New York. Under the requirements, the bill would require registration and reporting of licensees for mobile sports betting and a license fee of $ 12 million for each agent authorized to conduct mobile sports betting. In addition, the bill would require casinos to pay a state tax of 8.5% on gross income from traditional sports betting and a state tax of 12% on gross income from mobile sports betting.

  • SB 168 – Law in support of public relations for university graduates

This bill would enact the Graduate Outreach Assistance Law and exempt the first $ 250,000 four-year college graduates from state income tax, with a cap of $ 50,000 per year. In addition, the bill would exempt the first $ 150,000 two-year graduates from state income tax, with a cap of no more than $ 25,000 per year.

  • SB 535 – Limitation of sales tax on storage fees to government entities

The purpose of this invoice is to clarify the VAT rules for charges for the storage of tangible personal property. The invoice specifically states that sales tax will only be charged if the warehouse is in New York, regardless of where the stored items are received by the customer. This would be achieved by amending Section 1105 (c) (4) of the Tax Act as follows:

“[F]For the collection of sales tax according to this paragraph, the tax is only charged for the provision of a place for the storage of goods and / or material personal property, provided that the physical location of the warehouse itself in which the sales tax is paid. The storage of goods and / or tangible personal property is actually entirely within the physical boundaries of New York State. . . . ”

In the case of personal property moved from New York to an off-state warehouse, storage fees are not subject to New York sales tax.

  • SB 20 – Deduction for pension plan distributions for long-term care insurance

This bill, a reintroduction of SB 2684, would provide a personal income tax deduction for retirement plan distributions and exempt distributions from individual retirement accounts and individual retirement pensions from personal income tax when used to purchase long-term care insurance. In this way, the bill would allow tax-free withdrawals of IRA retirement pensions and retirement pensions for the purchase of the premiums for long-term care insurance.

If these new laws are passed, they could have a significant impact on New York taxpayers. We therefore plan to keep these bills on our radar and track their progress as the new legislative session moves forward.