New York Governor Andrew Cuomo released his Fiscal Year 2021 budget and accompanying legislation on January 21, 2020 (the Budget Bill). Consistent with Governor Cuomo’s earlier promises, he has not proposed new taxes other than those related to the proposed legalization of cannabis. A brief summary follows:

• Abolition of the State Board of Real Property Tax Services – The Budget Bill proposes abolishing the State Board of Real Property Tax Services and transferring its powers to the Department of Taxation and Finance. 
• Technical Amendments to Telecommunications Ceiling Program – The Budget Bill proposes that the equalization rate to be used for telecommunications ceiling purposes is the prior year’s rate.

• Film Tax Credit Program Revisions – The Budget Bill proposes several changes to the Empire State Film Production Credit and Empire State Film Post Production Credit, including reductions to the credit rates and new limitations on productions qualifying for the credits.
• Enhanced Tax Credits for “Green Projects” – The Budget Bill proposes enhanced jobs credits, refundable investment tax credits, and research and development tax credits provided through the Excelsior Tax Credit Program for qualified “Green Projects” (i.e., a project deemed by the commissioner of the New York Department of Economic Development “to make products or develop technologies that are substantially aimed at reducing greenhouse gas emissions or supporting the use of clean energy”). 
• Tobacco Products Tax Definition of “Wholesale Price” – New York Tax Law imposes an excise tax on tobacco products at a rate of 75% of the “wholesale price.” The Budget Bill proposes that the definition of “wholesale price” be changed to mean the actual price for which tobacco products are sold to a New York registered distributor. The Governor has proposed this change to correct a perceived loophole that currently allows tobacco distributors to establish a different “wholesale price” on tobacco products that did not pass directly from the manufacturer to the distributor by demonstrating an “industry standard of markups relating to the purchase price.”
• Cigarette Tax Enforcement and Penalties – The Budget Bill proposes a variety of enhanced cigarette tax enforcement and licensing penalties against retail dealers who sell unstamped or unlawfully stamped cigarettes.

Cannabis Proposal 

Similar to the proposal in Governor Cuomo’s 2020 budget bill (see our previous Legal Alert), this year’s Budget Bill proposes the creation of a cannabis control law to regulate adult-use cannabis and create a structure to oversee the licensure, cultivation, production, distribution, sale, and taxation of cannabis within New York State. The Tax Law would be amended to add a new Article 20-C, Tax on Adult-Use of Cannabis Products, which would: (a) impose a tax on cannabis cultivation charged by the weight of certain products; and (b) impose two taxes totaling 22% on sales of cannabis to a retail dispensary.

Next Steps

New York’s budget process is extensive. The Governor is responsible for preparing a comprehensive budget proposal that the Legislature modifies and ultimately enacts into law. The Governor coordinates requests from agencies and submits a budget to the Legislature, along with appropriation bills and other related legislation. The Legislature analyzes the Governor’s budget, holds public hearings, and seeks further information from agencies. Following that review, both houses of the Legislature reach agreement on spending and revenue recommendations that may amend the Governor’s proposed appropriation bills and related legislation. The State’s fiscal year begins April 1, so the timeline for the Legislature to review the Budget Bill is compressed.