Establishes corporate, business franchise, personal, insurance and banking tax credits for the provision of employee federal qualified transportation fringe benefits

Summary of provisions

Section 1 adds a new section 42 to the tax law. This section gives filers who file under articles nine, nine-A, twenty-two, thirty-two, or thirty-three of the tax law a credit against such taxes in tax year 2014. The credit is equal to $50 for each employee who elects to participate in a qualified fringe transportation benefit program offered by the employer, as defined by section 132(f) of the Internal Revenue Code. This credit can be claimed only by an employer who establishes such a program on the tax year they claimed the credit for without having offered such a program previously. The maximum credit any tax payer can claim is $50,000. The maximum amount which can be claimed for this credit by all filers is $5 million.

Section 2 adds a new section 187-t of the tax law to establish the credit explained above in article nine of the tax law.

Section 3 amends section 210 of the tax law by adding a new subdivision 50 to establish the credit explained above in article nine-A of the tax law.

Section 4 amends subparagraph (B) of paragraph 1 of subsection (i) of section 606 of the tax law by adding a new clause (xli) to establish the credit explained above to article 22 of the tax law.

Section 5 amends section 606 of the tax law by adding a new subsection (v) to add this credit to the list of credits that can be claimed under this section of the law.

Section 6 amends section 1456 of the tax law by adding a new subsection (aa) to establish the credit explained above to article thirty-two of the tax law.

Section 7 amends section 1511 of the tax law by adding a new subdivision (dd) to establish the credit explained above to article thirty-three of the tax law.

Section 8 establishes an immediate effective date.

Justification

Every day over 8.9 million New Yorkers work. Commuting costs can quickly add up and eat up an important chunk of an individual's annual budget. New York state is unique in the number of employees who commute using public transportation. According to the Bureau of Labor, in the 2011-2012 period the average expenditure in transportation in the New York Metropolitan statistical region was around $8,000 a year, with the expense on mass transit being an average of $1,142.

In order to help pay for commuting expenses, federal tax law allows employers to offer a benefit that sets aside pre-taxable income with which employees can pay for eligible commuting expenses. Each year the IRS sets the limit for how much income an employee can set aside to pay for qualifying transportation expenses. For tax year 2014, employees can set aside up to $250 a month in income to pay for qualifying parking expenses related to an individual's parking expenses at work, and up to $130 a month to pay for transit expenses like paying for mass transit or commuter van service. An employee may also receive a $20 a month for qualified bicycling expenses.

The income that is set aside each month is exempt from all taxation, including payroll taxes and federal, state, and local income taxes. This means that the employees tax bill is lowered by hundreds of dollars, with the specific savings determined by how much income is set aside and the income tax status of the employee. The employer also saves money, since the salary put side is exempted from the employer share of payroll taxes. Unfortunately, even though employers can save money as well, according to the Bureau of Labor survey of employee benefits only 8% of employees in the Northeast region have access to this benefit. This declines to only 3% of employers with under 100 employees offer this benefit.

Businesses provide this fringe benefit by working with third party program administrators who administrate the program. There are some minor administrative fees that employers pay, as well as paperwork to be filed in order to begin offering the benefit. While these administrative costs would be easily recouped in the vast majority of cases just from the tax benefit the employers get plus ancillary benefits such as improving employee satisfaction, they can lead to some employers choosing not to offer these benefits. The tax credit proposed is meant to give businesses an incentive to establish these programs and offer them to their employees by more than covering whatever up-front costs they would have to deal with in establishing the program. If employers in New York make full use of this credit, 100,000 workers in New York would gain access to this benefit, and see their commuting costs cut. Those businesses who establish these Programs would then reap the benefits in following years.

Legislative history

New bill.

Fiscal implications

The credit amount to be offered is capped at $5 million. Since the benefit allows employees to deduct income set aside income used for qualified expenses from taxes, there would be an additional associated cost to the state in the form of lost income tax revenue. If the program is fully utilized, we estimate there could be a concurrent loss of $14 million in income tax revenue to the state.

Effective date

This act shall take effect immediately.