Authorizes the creation of small business tax-deferred savings accounts

1 Co-sponsor

• David Carlucci

BILL NUMBER:S6310

Title of bill

An act to amend the economic development law, the tax law and the labor law, in relation to authorizing the creation of small business tax-deferred savings accounts

Purpose or general idea of bill

Allows any small business to deposit profits into a small business tax-deferred savings account. The monies in such account may be withdrawn tax free only when the State has declared an economic downturn. If a small business decides to withdraw funds from the account when an economic downturn has not been acknowledged than the funds must be taxed as income.

Summary of specific provisions

Section 1 amends economic development law by adding a new section 139 that creates the small business tax-deferred savings account, establishes that the funds may only be withdrawn tax free when the Commissioner of Labor declares an economic downturn and states that if money is withdrawn during a time when no economic downturn has been declared must be taxed as income under the tax law.

Section 2 amends section 209 of the tax law by adding a new subdivision 11 to create the tax exemption associated with the small business savings account.

Section 3 amends subsection (c) of section 612 of the tax law by adding a new paragraph 39 to modify federally adjusted gross income by subtracting any withdrawal of the account during an economic downturn.

Section 4 amends section 21 of the labor law by adding a new subdivision 14 that defines an economic downturn.

Section 5 Effective Date

Justification

During good economic times businesses can borrow at low rates and most small business can qualify for a bank loan. But when a recession hits, a "credit crunch" usually ensues, and most small businesses do not qualify as borrowers. As a result, these businesses have nowhere to turn to get a line of credit. to help carry them through this period. A tax-deferred small business account. can serve the purpose of easing an economic slow-down by providing a well-regulated stimulus to the small business economy through effective tax breaks.

The tax-deferred small business account will also provide an equality-oriented economic measure; that is because savings accounts are blind to skin color, ethnicity, or gender and therefore will be an effective way to reduce institutional bias in lending.

Prior legislative history

2011-2012 - A.10382

Fiscal implications

None to the State.

Effective date

Immediately.