Extends the provisions relating to the franchise tax on banking

1 Co-sponsor

• Hugh T. Farley

BILL NUMBER:S3754

Title of bill

An act to amend chapter 298 of the laws of 1985, amending the tax law relating to the franchise tax on banking corporations imposed by the tax law, authorized to be imposed by any city having a population of one million or more by chapter 772 of the laws of 1966 and imposed by the administrative code of the city of New York and relating to other provisions of the tax law, chapter 883 of the laws of 1975 and the administrative code of the city of New York which relates to such franchise tax, to amend chapter 817 of the laws of 1987, amending the tax law and the environmental conservation law, constituting the business tax reform and rate reduction act of 1987, and to amend chapter 525 of the laws of 1988, amending the tax law and the administrative code of the city of New York relating to the imposition of taxes in the city of New York, in relation to the effectiveness of certain provisions of such chapters

Purpose

This bill would make permanent the current bank tax statute. The provisions of the current bank tax are scheduled to expire for taxable years beginning on or after January 1, 2011. This bill would extend them permanently.

Summary of provisions

This bill would amend Section 51 of Chapter 298 of the Laws of 1985 by deleting the sunset provisions which were contained in that law's effective date. The law currently provides that the amendments enacted by Chapter 298 shall not apply to taxable years beginning on or after January 1, 2011.

The bill also amend Section 110 of Chapter 817 of the Laws of 1987 by deleting the sunset provisions relating to certain amendments regarding the bad debt deduction for commercial banks. The law currently provides that the amendments enacted by Chapter 817 shall not apply to taxable years beginning on or after January 1, 2011.

Justification

The State tax on the banking industry was significantly restructured by Chapter 298 of the Laws of 1985. The intent of this law was to make the franchise tax on banking corporations more similar to the franchise tax on general business corporations. It also sought to treat commercial banks and thrift institutions in a more similar manner. Another purpose was to make it easier to more accurately calculate the amount of the required tax.

Because of the extensive changes made in the Tax Law, and the uncertain impact of these amendments, the provisions of Chapter 298 were only temporarily authorized. The impermanent nature of the Bank Tax has, however, caused uncertainty in the industry about the future tax liability of banking corporations. This has complicated tax

calculation, record keeping and efforts to plan for the future. The current Bank Tax has been in effect for fifteen taxable years. This has provided sufficient time to analyze and evaluate the impact of Chapter 298 of the Laws of 1985. The 1985 law resolved many of the problems that had existed regarding the taxation of banks. The provisions of Chapter 298 of 1985 and Chapter 67 of 2010 should therefore be made permanent.

Legislative history

This is a new bill.

Fiscal implications

Enactment of this bill is necessary to implement the 2011-2012 Executive Budget as it preserves current revenue.

Effective date

This bill takes effect immediately.