Extends transitional provisions relating to the federal Gramm-Leach-Bliley act

1 Co-sponsor

• Darryl Towns

BILL NUMBER:A10096

Title of bill

An act to amend the tax law and the administrative code of the city of New York, in relation to extending transitional provisions relating to the federal Gramm-Leach-Bliley act

Purpose of bill

To extend for one year the transitional provisions of the Gramm-Leach-Bliley provisions.

Summary of provisions

The bill would extend the transitional provisions in the State and City bank taxes relating to the GLBA (which eliminated many of the prohibitions against the affiliation of banks, insurance companies, and securities firms) for one year to taxable years beginning before January 1, 2011.

Justification

Starting in 2000, transitional provisions relating to the GLBA, which removed the prohibition against the affiliation of banks, securities firms, and insurance companies, were added to both the Tax Law and the New York City Administrative Code. The current GLBA transitional provision, which is set forth in Tax Law section I452(m), expires in 2010. The GLBA provisions were first enacted to provide banks and securities firms with certainty about their taxable status under the State and City taxes when the firms exercised the expanded powers authorized by the Federal law while the possible consolidation of the bank tax and the general corporation tax was studied. The initial study did not result in any legislation, and the transitional provisions have been extended for ten years..But the present system of taxation, which treats banks and securities firms differently, is outdated. These busi- nesses are now often affiliated as part of a single large financial organization. In addition, banks and securities firms today are compet- ing against each other more and more. Separate systems of taxation also encourage tax planning strategies that result in substantially different tax liabilities for businesses conducting the same or comparable activ- ities. Recognizing these inherent problems, the Department of Taxation and Finance has undertaken a project to eliminate the separate tax on banking corporations, and reform the current taxation of general busi- ness corporations. The goal of the project is structure a tax that treats general business corporations and financial institutions in the same manner under a tax system that promotes the principles of equity, economic efficiency, simplicity, ease of compliance and administration, reliability and stability, and economic competitiveness. As part of this project, the Department of Taxation and Finance is consulting with, and receiving input from, the New York general business, securities broker- dealer, and banking communities. The project is expected to be completed during 2010. To facilitate the transition to this unified tax system and eliminate any uncertainty about tax status in the interim, this addi- tional extension of the bank tax provisions and the temporary Gramm- Leach-Bliley transitional provisions is warranted.

Legislative history

Transitional provisions have been extended for ten years.

Fiscal implications

This bill preserves current Financial Plan reven- ue.

Effective date

This bill would take effect immediately.