Chat with us, powered by LiveChat 2.From the list of tax expenditures included in this report (see table 6) identify 3 that you believe could be eliminated (ie you would argue the item should be taxable and why). | Abc Paper
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2.From the list of tax expenditures included in this report (see table 6) identify 3 that you believe could be eliminated (ieyou would argue the item should be taxable and why).
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FY 2020
Annual report on
New York State Tax Expenditures
TABLE OF CONTENTS
I.
Introduction ………………………………………………………………………
1
II.
Use of this Report and Data Limitations ………………………………..
3
III.
Recent Legislation that has Affected Tax Expenditures …………..
7
IV.
Estimates of Tax Expenditures by Tax
a. Personal Income Tax ……………………………………………………..
9
b. Corporation Franchise Tax………………………………………………
35
c. Insurance Tax ……………………………………………………………….
53
d. Corporation Tax …………………………………………………………….
65
e. Sales and Use Tax …………………………………………………………
75
f. Petroleum Business Tax …………………………………………………
111
g. Real Estate Transfer Tax ………………………………………………..
125
V.
Cross-Article Tax Credits ……………………………………………………
131
VI
2019-20 Executive Budget Tax Expenditure Proposals …………..
165
VII.
Glossary …………………………………………………………………………..
173
VIII.
Appendix A……………………………………………………………………….
A-1
Appendix B……………………………………………………………………….
B-1
TABLES
Table 1
2019 New York State Personal Income Tax Expenditure
Estimates
14
Table 2
2019 New York State Article 9-A Tax Expenditure Estimates
39
Table 3
2019 New York State Insurance Tax Expenditure Estimates
56
Table 4
2019 New York State Corporation and Utilities (Article 9) Tax
Expenditure Estimates
68
2019 New York State Sales and Use Tax Expenditure
Estimates
77
Table 5
Table 6
2019 New York State Petroleum Business Tax Expenditure
Estimates
114
2019 New York State Real Estate Transfer Tax Expenditure
Estimates
126
Table 8
2019 New York State Cross-Article Tax Credits Estimates
133
Table 9
2019-20 Executive Budget Proposals Affecting Tax
Expenditures
165
Table 7
Table A-1 Pre-Reform Corporate Franchise Tax Expenditure Estimates
A-4
Table B-1 Pre-Reform Bank Tax Expenditure Estimates
B-3
INTRODUCTION
The twenty-seventh annual New York State Tax Expenditure Report has
been prepared by the Department of Taxation and Finance and the Division of the
Budget and is submitted in accordance with the provisions of Section 181 of the
Executive Law.1 The Executive Law defines tax expenditures as “features of the
Tax Law that by exemption, exclusion, deduction, allowance, credit, preferential
tax rate, deferral, or other statutory device, reduce the amount of taxpayers’
liabilities to the State by providing either economic incentives or tax relief to
particular classes of persons or entities, to achieve a public purpose.”
As required by statute, the Report includes:

An enumeration of the tax expenditures (Section VI) associated with the:







Personal Income Tax (Article 22 of the Tax Law)
Corporate Franchise Tax (Article 9-A of the Tax Law)
Insurance Tax (Article 33 of the Tax Law)
Corporation and Utility Taxes (Article 9 of the Tax Law)
Sales and Compensating Use Tax (Article 28 of the Tax Law)
Petroleum Business Tax (Article 13-A of the Tax Law)
Real Estate Transfer Tax (Article 31 of the Tax Law);

The provisions of law authorizing the tax expenditures, their effective dates,
and where applicable, the date that such tax expenditures expire or are
reduced (Section VI);

Estimates (if reliable data are available) of the costs of the tax expenditures
for the current taxable or calendar year and the five preceding years2
(Section VI);

An analysis of tax expenditure proposals included in the Governor’s 201920 Executive Budget (Section VIII); and

Cautionary or advisory notes regarding the use of the Report and data
limitations (Section II).
Section 181 of the Executive Law provides that any information relating to tax expenditures furnished by the
Commissioner of Taxation and Finance be furnished in accordance with the secrecy provisions of the Tax
Law.
1
1
INTRODUCTION
As provided in prior years, the report also includes information that summarizes:

Tax expenditures that appear in more than one Article of the Tax Law, i.e.,
“Cross-Article Tax Expenditures” (Section VII); and

State legislation enacted in recent years that resulted in the addition,
deletion, or modification of various tax expenditure provisions (Section V).
The report also includes the following additional information:

An illustration of the impact of tax expenditures on tax liability under the
Personal Income Tax (Section III);

A summary of tax expenditures by general policy area (Section IV);

A glossary of terms used in this report (Section IX).

Appendices containing the following:


Historical tax expenditures for the pre-reform corporation franchise
tax (Appendix A)
Historical tax expenditures for the pre-reform bank tax (Appendix B)
2
USE OF THIS REPORT AND
DATA LIMITATIONS
As defined by the Executive Law,2 tax expenditures in this report are defined
as “features of the Tax Law that by exemption, exclusion, deduction, allowance,
credit, preferential tax rate, deferral, or other statutory device, reduce the amount
of taxpayers’ liabilities to the State by providing either economic incentives or tax
relief to particular classes of persons or entities, to achieve a public purpose.” This
definition is less subjective than an approach that defines tax expenditures by first
defining a normal tax structure because it avoids judgments about what constitutes
“normal.”
This report does not purport to offer an official list of tax expenditures.
Rather, it describes as many tax expenditures as possible and provides revenue
estimates for as many provisions as can be isolated and measured. Where
applicable data is available, tax expenditure estimates generally cover five
historical years. Forecasted estimates project the cost of a tax expenditure as
reflected in the Tax Law as it was in effect on January 1, 2019. The forecasted
estimates do not reflect changes proposed in the Executive Budget. A description
of the Executive Budget Tax Expenditure proposals is included in a separate
section of this report. As a result of new or improved information, the estimates
may differ from those published in previous reports. The estimates in the report
do not reflect the impact of the Metropolitan Transportation Authority (MTA)
surcharge, imposed on businesses operating in the Metropolitan Transportation
Commuter District (MCTD).
The “cost of a tax expenditure,”3 or the tax expenditure revenue estimate, is
the amount by which a tax expenditure reduces taxpayers’ liability to the State for
a taxable year or on a calendar year basis if a taxable year basis is not appropriate.
The reduction in taxpayer liability is the difference between tax liability under the
current Tax Law and tax liability if the particular expenditure did not exist. In the
case of certain tax credits, the cost also includes amounts refunded to taxpayers.
It is important to acknowledge that each tax expenditure estimate is measured
separately and independently of other tax provisions (i.e., other taxes are held
constant) and no changes in taxpayer behavior are assumed. Thus, the tax
expenditure estimates provided in this report are not equivalent to the impact on
the State’s Financial Plan if the expenditure were repealed or modified. In addition,
since the expenditure estimates are measured separately and independently,
individual tax expenditures cannot be summed.
2
3
Section 181(a).
Section 181(b).
3
USE OF THIS REPORT AND DATA LIMITATIONS
The following table lists the taxes included in this report and the years for
which tax expenditure estimates are provided.
Personal Income Tax
Corporate Franchise Tax*
Historical
2012, 2013, 2014, 2015, 2016
2011, 2012, 2013, 2014, 2015
Forecast
2019
2019
Insurance Tax*
Corporation and Utilities
Sales and Use Tax
Petroleum Business Tax
Real Estate Transfer Tax
2011, 2012, 2013, 2014, 2015
2011, 2012, 2013, 2014, 2015
2012, 2013, 2014, 2015, 2016
2012, 2013, 2014, 2015, 2016
2012-13, 2013-14, 2014-15, 2015-16
2019
2019
2019
2019
2019-20
*Tax year is year with liability period beginning in the respective calendar year.
Comprehensive Corporate Tax Reform
In 2014, New York enacted comprehensive corporate tax reform, which takes
effect for tax years beginning on or after January 1, 2015. This section discusses
the impact corporate reform has on the structure of the Tax Expenditure Report.
The most salient change is the merger of the Bank Tax (Article 32) into the
Corporate Franchise Tax (Article 9-A).
In keeping with the practice of the Tax Expenditure Report to reflect the law
as it is in effect in the year it is produced, 2019 in this instance, the main body of
the report contains a description of the new Article 9-A and each of its tax
expenditures. This is the first year estimates for the individual expenditures are
available, because the complete, verified study file that contains the 2015 tax
returns became available in 2018. Forecasting of tax expenditures under the new
9-A is now also possible because tax returns containing actual data for these
expenditure items have been filed.
Federal Exclusions
The personal income (Article 22), corporate franchise (Article 9-A), and
insurance (Article 33) taxes are all based, to some extent, on the Federal tax
structure. There are provisions in Federal law that reduce the base subject to New
York tax because the exclusion flows through to New York law. For example,
employer contributions for medical insurance and care are excluded from Federal
adjusted gross income. This exclusion flows through to New York which uses
Federal adjusted gross income as a starting point for determining New York
income. In most cases, New York policymakers have opted to conform to the
Federal base for these taxes.4 Conformity eases administration of the Tax Law
while at the same time promoting taxpayer compliance. These items do not
constitute tax expenditures in the same sense as provisions specifically designed
by New York policymakers to promote economic development or to provide
specific tax relief.
4
In 2018, New York State decoupled from several federal tax provisions amended by P.L. 115-97. See
“Impact of 2017 Federal Tax Cuts and Jobs Act on New York Personal Income Tax Expenditures on page 15.
4
USE OF THIS REPORT AND DATA LIMITATIONS
Reliability of the Estimates
Estimates of the cost of tax expenditures have different levels of reliability
based on the accuracy of both the data and the estimation procedure.

For all of the taxes, with the exception of the Sales and Compensating Use
Tax, the Department of Taxation and Finance assigns the highest category
of reliability, Level 1, to estimates based on information from actual tax
returns that were verified for accuracy.

It assigns Level 2 to estimates based on data files containing unverified or
incomplete information from actual tax returns. Neither of these return data
sources is augmented with audit information.

In Level 3 estimates, average marginal tax rates are applied to aggregate
data. This sometimes includes Federal tax return data from the Internal
Revenue Service’s Statistics of Income.

Level 4 estimates are based on national tax expenditure estimates made by
the Federal Joint Committee on Taxation (JCT) or the Office of
Management and Budget (OMB) or are estimates derived from non-tax data
sources. Estimates for most of the Sales Tax expenditures are derived from
non-tax data sources. Therefore, a somewhat different reliability scheme is
employed with all estimates given the fourth level of reliability. Within this
fourth level, the report further categorizes estimates based on the accuracy
and suitability of the data sources. Category A estimates use both
New York State and industry-specific data. Category B estimates use either
New York-specific data that is not industry specific or national data derived
from direct industry information such as industry associations. Category C
estimates use data other than state or industry-specific data.

The last level of estimates, Level 5, includes those items for which no
reliable data source currently exists.
In some cases the reliability of estimates can change from year to year. This
is especially the case for base year and forecast estimates versus historical
estimates. For example, provisions previously estimated with either less reliable
tax return data or Federal tax information might become Level 1 (highest reliability)
if added directly to tax returns and verified for accuracy. This could cause current
and projected estimates to differ from historical estimates.
Regardless of data source, the reliability of estimates for the budget year is
of distinctly lower quality than that of the historical numbers. The hazards of
forecasting generally are exacerbated when point estimates of the value of
particular provisions of law are involved. Changes in taxpayer behavior, business
organization, and other factors can all have profound implications for the estimates
of particular provisions in the budget year.
5
RECENT LEGISLATION THAT HAS
AFFECTED TAX EXPENDITURES
State legislation enacted in recent years has resulted in the addition, deletion,
or modification of various provisions in the report this year. The changes are as
follows:
Additions:

Receipts from the sale of certain tangible personal property manufactured and
sold by a veteran for the benefit of the veteran’s service organization is exempt
from sales and use tax. This amendment is effective March 1, 2017.

A sales and use tax exemption is available for drugs or medicine for use on
livestock or poultry used in farm production, effective June 1, 2018. Previously,
only a refund or credit of the tax paid on such drugs or medicines was available.

Tax expenditure estimates for Section 186-f Public Safety Communications
Surcharge have been added to the Corporation Tax Section of the report.
Modifications:

The New York Youth Jobs Program tax credit was enhanced increasing the
credit amounts by fifty percent. The credit for full-time employees increases
from $500 per month for the first six months to $750 per month; $1,000 for an
additional six months to $1,500; and $1,000 for the entire year after the
employee’s initial year of employment to $1,500. Credit for part-time
employees increases from $250 per month for the first six months to $375 per
month; $500 for an additional six months to $750; and $500 for the entire year
after the employee’s initial year of employment to $750. The increase applies
to tax years beginning on or after January 1, 2018.

The expiration date of the hire a veteran credit was extended from January 1,
2019 to January 1, 2021.

The expiration date of the rehabilitation of historic properties credit was
extended from December 31, 2019 to December 31, 2024.

The rehabilitation of historic properties credit was amended to allow taxpayers
to claim the entire amount of the credit in one year instead of ratably over five
7
RECENT LEGISLATION
years as required as a result of the federal Tax Cuts and Jobs Act of 2017. The
amendment is effective for taxable years beginning on or after January 1, 2018.

The Public Housing Law was amended to allow a one-time transfer of the New
York State low-income housing credit to a person or entity without regard to the
allocation of the federal low-income housing credit and notwithstanding that the
recipient may have no ownership interest in the building. Effective for buildings
that receive an allocation of low-income housing credit on or after January 1,
2019.

The expiration date of the musical and theatrical production credit was
extended from March 31, 2018 to March 31, 2022.

Effective for tax years beginning on or after January 1, 2017, the IRC § 965(a)
inclusion amount (mandatory deemed repatriation income pursuant to P.L.
115-97, the Tax Cuts and Jobs Act) is exempt from tax under Article 9-A and
33.
Deletions:

A refund or credit for sales taxes paid by a veterinarian or farmer on drugs or
medicine used on livestock or poultry in farm production was repealed and
replaced with an upfront exemption, effective June 1, 2018.
8
PERSONAL INCOME TAX
This section provides revenue estimates of tax expenditures for the 2019 New
York State Personal Income Tax. Tax expenditures are first estimated for the 2016
tax year (the latest year for which historical tax data are available) and then
projected to the 2019 tax year. This section also provides historical estimates from
2012 through 2016 for comparison. Table 2 lists the income tax provisions for
which estimates exist, and the estimates themselves. To provide some
perspective, it also shows total Personal Income Tax liability for the 2016 tax year.
The data used to generate the estimates do not include late filed returns, audited
returns, or fiduciary returns because no contemporaneous data exist to make the
estimates.
Description of Tax
The computation of the New York State Personal Income Tax starts with the
Federal definition of adjusted gross income as included in the Internal Revenue
Code (IRC). The IRC permits certain exclusions and adjustments in arriving at
Federal adjusted gross income.
New York allows several subtraction
modifications and requires certain addition modifications in arriving at New York
adjusted gross income (NYAGI). Taxpayers can then reduce their NYAGI by
subtracting the higher of the New York standard deduction or New York itemized
deductions. New York itemized deductions generally conform to Federal itemized
deductions as they existed prior to enactment of Public Law 115-97; however,
certain modifications, such as an add-back for income taxes, apply. In addition,
an overall New York State deduction limitation applies to upper-income taxpayers.
New York taxpayers may also subtract from NYAGI a $1,000 exemption for each
dependent, not including the taxpayer and spouse. The above computation
determines taxable income. After computing taxable income, taxpayers apply a
marginal tax rate schedule to compute their tax.
9
PERSONAL INCOME TAX
10
PERSONAL INCOME TAX
Major features of the New York State income tax rates since 2012 are as follows:

In 2012, the top rate was 8.82 percent on taxable incomes over $1,000,000
for single individuals, $1,500,000 for head of household, and $2,000,000 for
married couples filing jointly.

For tax years 2013 through 2017, the tax brackets were indexed by a cost
of living percentage adjustment. Tax bracket values are no longer indexed
after 2017.

In 2018 and 2019, the top rate remains 8.82 percent on taxable incomes
over $1,077,550 for single individuals, $1,616,450 for head of household,
and $2,155,350 for married couples filing jointly.

If New York adjusted gross income exceeds $107,650, then taxpayers must
also compute a supplemental tax that recaptures the tax benefit that results
from income being taxed at less than the top marginal rate.

Taxpayers may then subtract certain credits in arriving at their actual tax
liability.
Many of the effective dates for the income tax items occurred in 1960. The
State Personal Income Tax was originally enacted in 1919, but the present system
of Federal conformity with respect to income and deductions did not begin until
1960. Therefore, the report uses 1960 as the effective date for the provisions
existing since the reorganization of the State’s income tax. Many provisions have …
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