With the start of New York’s new Legislative Session for the 2021-22 term, we are eagerly anticipating the introduction of new tax legislation and we plan to cover those developments here. We’ll be tracking all noteworthy legislative developments on a weekly or bi-weekly basis, and this is our first installment of 2021.
As expected, we are already seeing bills reintroduced that expired at the end of the last session. Given the uptick in working remotely due to COVID-19, one of the more interesting proposals addresses the tax treatment of telecommuting employees. While some of these efforts may fail, New York is experiencing multibillion-dollar revenue shortfalls and will be increasingly looking to businesses and high earners to ease the revenue shortfalls being faced due to the COVID-19 pandemic.
- S.B. 602 – Tax Treatment of COVID-19 Telecommuting Employees
This bill, a reintroduction of S.B. 8386 from the last session, would authorize businesses to designate work performed remotely due to COVID-19 as having been performed at its normal work location “for state and local tax purposes” which would presumably encompass employee wage allocation for personal income tax purposes. The bill also authorizes the Tax Department’s commissioner to promulgate “any rule or regulation necessary to effectuate this act.” Curiously, the bill does not appear to propose any amendments to the actual Tax Law and in light of that, it is unclear how the Commissioner could promulgate regulations to implement any new rules. A number of other questions come to mind as well but at this stage, we’ll wait and see how the bill progresses.
The stated reasoning and justification for the bill is to “remove unnecessary confusion and complexity [for businesses] filing their taxes.” If passed, the bill would apply retroactively beginning on March 7, 2020 and would last for the duration of the state disaster emergency declared by Governor Cuomo in Executive Order 202.
- S.B. 917 – Increasing Top State Income Tax Rate
A reintroduction of S.B. 8164 from last session that died in Committee, this bill would raise the personal income tax rate for individuals with New York taxable income over $5,000,000. Presently, the tax rate for the highest bracket tops out at 8.82%; however, this bill seeks to create new brackets with the highest bracket (income over $100 million) subject to a tax rate of 10.32%. According to the bill, the applicable tax rates would be increased as follows:
- S.B. 302 – Digital Advertising Tax
This bill would impose a sales tax on digital advertising and establish a digital advertising services tax revenue that would be used to fund a zero-interest education loan refinancing program. The bill defines “digital advertising services” as “advertisement services on a digital interface, including advertisements in the form of banner advertising, search engine advertising, interstitial advertising, and other comparable advertising services which markets or promotes a particular good, service, or political candidate or message.” According to a 2016 report by the New York State Comptroller, student loan debt has reached over $82 billion dollars. The justification explains that the estimated $330 billion in revenue generated annually from the proposed digital advertising tax would help students pay off their debt and lighten their financial burden.
- S.B. 83 – Tax on Vacant Ground Floor Commercial Premises
A reintroduction of S.B. 686 from last session, this bill would allow New York City to impose and collect the commercial vacancy tax, a tax on vacant ground floor commercial premises. The tax would be imposed on the owners of any ground floor commercial premises that has been vacant for six months or more. The bill would establish both a minimum period of vacancy (six months) before any premises would be subject to the tax and a maximum amount of tax ($2,000 per square foot annually). The applicable period of vacancy would not be deemed to have begun until at least thirty days after an owner of a ground floor commercial premises was required to register such premises in accordance with local vacancy registration requirements, subject to certain exemptions. The tax is intended to incentivize landlords with vacant space and options to lease the space to tenants to take advantage of those options in order to “restore vibrancy to the city’s streetscapes.”
If passed, these new pieces of legislation could have a significant impact on New York taxpayers, so we plan to keep these bills on our radar and track their progression as the new Legislative Session moves forward.