Governor Cuomo’s recently released Executive Budget may not be well received amongst those planning on redeveloping urban areas, restoring historic structures, remediating contaminated real property or proposing affordable housing developments. Part S of Revenue Article VIII of the FY 2019 Executive Budget provides that a taxpayer’s ability to claim certain tax credits is deferred for tax years 2018, 2019 and 2020, to the extent that those credits exceed $2 million per tax year.
The 34 tax credits proposed to be affected by Part S include:
Numerous others tax credits are included. Not subject to Part S are tax credits relating to the film/movie production industry and the Excelsior Program.
The proposed tax credit deferral set forth in Part S is substantially similar to what was enacted in 2010. The 2010 deferral was the subject of litigation in state and federal court based upon arguments of taking and unconstitutionality but those arguments failed. See Empire Gen Holdings, Inc. v. Governor of New York, 40 Misc. 3d 984 (Sup. Ct., Albany County, 2013); Empire Gen Holdings, Inc. v. Governor of New York, No. 11-CV-1509, 2012 U.S. Dist. LEXIS 96023 (N.D.N.Y. July 11,2012).
Part S of the Executive Budget provides that refundable credits (such as historic tax credits, low income housing tax credits and brownfield credits) are capped at $2 million per year per taxpayer with the deferred portion paid out over three years beginning in 2021 as follows: 2021 – 50% of the amount accumulated; 2022 – 75% of the balance of the amount accumulated; and 2023 – the remaining balance. With respect to nonrefundable credits the taxpayer may begin claiming the accumulated and deferred credit in 2021.
It must be emphasized that Part S is merely the Governor’s proposal. Budget negotiations have not begun in earnest and some in Albany may argue that the budget gap is not as large as portrayed, that personal income tax revenues may be better than anticipated and thus the “benefit” of the proposed tax credit deferral is outweighed by the “cost” of suspended and terminated projects that are redeveloping urban areas, restoring historic structures, remediating contaminated real property and constructing affordable housing units.