Public Hearing: Review Existing Tax Policy and Discuss Reform Initiatives

1 JOINT HEARING BEFORE THE NEW YORK STATE

SENATE STANDING COMMITTEE ON FINANCE 2 AND

SENATE STANDING COMMITTEE ON INVESTIGATIONS AND 3 GOVERNMENT OPERATIONS

----------------------------------------------------- 4

PUBLIC HEARING:5

REVIEW EXISTING TAX POLICY AND 6 DISCUSS REFORM INITIATIVES 7 ----------------------------------------------------- 8 Legislative & Executive Chamber

Nassau County Office Building 9 1550 Franklin Avenue

Mineola, New York 11501 10

October 3, 2013 11 10:00 a.m. to 2:00 p.m. 12 13

PRESIDING:14

Senator John A. DeFrancisco 15 Chairman

NYS Senate Standing Committee on Finance 16

Senator Carl L. Marcellino 17 Chairman

NYS Senate Standing Committee on 18 Investigations and Government Operations 19

PRESENT:20

Senator John J. Flanagan 21

Senator Jack M. Martins 22

Senator David J. Valesky 23

Assemblyman Michael A. Montesano 24 25 1

SPEAKERS:PAGE QUESTIONS 2

Matthew Cohen 7 17 3 Vice President of Legislative Affairs

Long Island Association 4

Randy Kaplan 29 40 5 Director of Government Affairs

Long Island Board of Realtors 6

Mitch Pally 29 40 7 Chief Executive Officer

Long Island Builders Institute 8

Dr. Lisa Predmore 56 67 9 President

Syosset Woodbury Chamber of Commerce 10

Brian J. Yudewitz, Esq. 56 67 11 Vice Chairman of the Board of Directors

Huntington Township Chamber of Commerce 12

Richard McGrath 73 98 13 CPA 99

Thomson Reuters Tax and Accounting, Inc. 14

Frank Degen 73 98 15 Past President 99

New York State Society of 16 Enrolled Agents, the New York

affiliate of the National 17 Association of Enrolled Agents 18

Damon J. Hemmerdinger 103 110 19 Co-President

ATCO 20 21 ---oOo--- 22 23 24 25 1 SENATOR MARCELLINO: My name is 2 Senator Carl Marcellino. 3 I Chair the Committee on Investigations and 4 Government Operations. 5 To my left is Senator John DeFrancisco, who 6 is the Chairman of the all but powerful 7 Finance Committee of the New York State Senate. 8 We are here today on a joint meeting and a 9 joint hearing on tax policy, and we're trying to do 10 some reform of the tax policy for New York State. 11 We are, as everybody knows, the highest-taxed 12 state in the nation, if not the highest, one of 13 them, and which is not exactly the position you want 14 to be in, and it's a position I'd rather be last 15 than first, if possible. 16 So we're looking at the tax policy because 17 we're losing people of all age ranges. 18 One can understand, and you might think that 19 it's only the older folks who have a lot of money 20 who are going to leave because they want to preserve 21 their estate; so they have the mobility, they'll go 22 to states where there's no income tax, and something 23 like that. 24 But it's not the case. 25 Going to school, getting an education, and 1 then leaving the state because there's no jobs. 2 We can't bring businesses here. 3 We're having trouble getting businesses to 4 come here, we're having trouble getting businesses 5 to stay here. 6 So all kinds of things have been tried, but 7 not always successful. 8 And we're looking for means, and we're 9 looking for ideas, and we're looking for 10 suggestions. 11 So we've got a list of people who are on the 12 speakers' list, and we're pleased that they've come. 13 They represent all walks of life on the 14 Island, and we're interested in hearing their 15 concerns. 16 But I'm, frankly, more interested in hearing 17 some practical suggestions. 18 We know we're highly taxed, we understand 19 that, that's a given. 20 But I would like to hear some thoughts and 21 ideas from the speakers as to what we can do to make 22 it better, to fix the problem. 23 So suggestions are the key, and the 24 suggestions are what we're looking for. 25 Again, we know there's testimony. 1 Many have you have given your testimony in 2 advance, we have that. 3 We would appreciate it if you didn't read it, 4 but did a summary and would leave time for questions 5 and answers, which I think are more productive on 6 this kind of a program. 7 So, with that, as I said, I introduce 8 Senator DeFrancisco to my left; 9 Senator Valesky from Syracuse, he drove a 10 long way, to my right; 11 And, Assemblyman Mike Montesano from -- 12 Mike, 15? 13 ASSEMBLYMAN MONTESANO: 15th. 14 SENATOR MARCELLINO: -- 15th Assembly 15 District on Long Island. 16 With that, Senator DeFrancisco. 17 SENATOR DeFRANCISCO: Just very briefly, this 18 is the fourth of five hearings; that we've been in 19 Albany, Syracuse, Buffalo. 20 Tomorrow we're going to be in New York City. 21 And, this is for real. 22 This is not here an exercise to show that 23 we're doing something. 24 And to indicate it's for real, the 25 announcement by the Governor this week, that he is 1 committed to broad-based tax cuts. 2 And he has appointed two very distinguished 3 gentlemen from the state of New York to co-chair 4 their discussions and get their suggestions. 5 So what our intention is, is to provide our 6 recommendations to them, so that we can work 7 together and really get something to happen, not 8 just a lot of meetings. 9 And if not, we will have these suggestions 10 available for the negotiations in the budget this 11 year. 12 So, your suggestions are important. 13 And as Carl said, he's absolutely right, if 14 you've got specific recommendations as to what we 15 should do in restructuring things, now is the time. 16 Thank you. 17 SENATOR MARCELLINO: Senator Valesky. 18 SENATOR VALESKY: I'm just -- I just want to 19 say I'm pleased to be here. 20 I've been participating in these hearings 21 with Senators Marcellino and DeFrancisco from the 22 perspective of the Chair of the Senate's 23 Small Business, Commerce, and Economic Development 24 Committee. 25 And we certainly know from a business 1 perspective and business-tax perspective that we 2 need to do a whole lot more in terms of making 3 New York State a much more business-friendly place 4 in which to do business. 5 So, I look forward to hearing all of your 6 suggestions today. 7 Thank you. 8 SENATOR MARCELLINO: Assemblyman. 9 ASSEMBLYMAN MONTESANO: Thank you, Senator. 10 Thank you for letting me participate with 11 you. 12 I'm the Ranking Member of the Assembly's 13 Oversight and Investigations Committee, and we're 14 also doing our bit to try and find a resolution to 15 this tax problem, so these hearings are important. 16 I thank the Senate, and Senator Marcellino 17 and Senator DeFrancisco for taking the lead on this, 18 and we'll be working hand in hand with them on a 19 resolution. 20 Thank you. 21 SENATOR MARCELLINO: Thank you. 22 And with that, our first speaker is 23 Matthew Cohen, who is the vice president of the 24 Long Island Association. 25 For those who may not know the Long Island 1 Association, it is almost like a huge chamber of 2 commerce. 3 It's probably the biggest group of businesses 4 on Long Island, and they represent all facets of 5 business life on the Island. 6 So, we're looking forward to your testimony, 7 and testifying again is Matt Cohen. 8 Matt. 9 MATTHEW COHEN: Thank you, Senator. 10 Good morning, Senators. 11 And, Senator Valesky, it's twice in two weeks 12 that I've seen you. 13 SENATOR VALESKY: It is. 14 MATTHEW COHEN: I saw you last week at the 15 hearing here. 16 So I'm going to actually touch on a couple of 17 the same things that I talked about last week as 18 well, as well as some other things. 19 And, Assemblyman, good morning to you, too. 20 As Senator Marcellino said, my name is 21 Matthew Cohen, vice president of legislative affairs 22 for Long Island Association. 23 He already introduced who we are and what we 24 do, but, again, we represent small businesses and 25 medium businesses, large businesses, and our goal is 1 really to bring together disparate factions in the 2 region, to promote economic development and improve 3 the business climate here on Long Island. 4 Without again restating some of the obvious 5 that we already know about how we're overtaxed and 6 overregulated here in New York, we just want to also 7 mention that, you know, we have witnessed important 8 efforts in the last few years to refocus on economic 9 development, creating jobs, and providing some 10 meaningful relief to municipalities and our 11 employers. 12 The 2 percent property-tax cap, the rollback 13 of the MTA payroll tax, some Medicaid and pension 14 reforms, and these are all things we truly 15 appreciate, and we know your efforts have been vital 16 in making this happen. 17 So, I think we're off to a good start, and 18 we've made some progress, but, as you know, there's 19 much more to do to spur investment and create jobs. 20 So as Governor Cuomo has said, and how the 21 Senate Majority Coalition has often stated: 22 "We have no future as the tax capital of the 23 country." 24 Our businesses are overregulated, overtaxed, 25 and we need to find solutions. 1 So while the property-tax cap was an 2 important start, we also support efforts to keep 3 going, and to keep further efforts to curb pension 4 and health-insurance costs. 5 And when we talk about property-tax relief, 6 which is, in our opinion, you know, the most onerous 7 tax, and the tax that everyone hates on Long Island 8 the most, the property tax, we want to talk about 9 commonsense reforms to some antiquated regulations, 10 like the Scaffold Law, and I had touched on this 11 last week with Senator Valesky. 12 As I'm sure you all know very well, the 13 current law imposes a standard of absolute liability 14 upon contractors and property owners for all 15 gravity-related injuries. 16 We support legislation, sponsored by 17 Senator Gallivan, that would replace the 18 absolute-liability standard with a fair comparative 19 negligence standard only in situations where a 20 worker's injury is found to have been caused by that 21 worker's failure to follow the safety training, use 22 available safety devices, his own intoxication, or 23 commission of a crime. 24 Meanwhile, negligent employers would still be 25 held fully liable and the injured worker may still 1 collect workers' comp benefits. 2 New York's the only state which still has 3 this law, which was enacted in 1885, remarkably; 4 thus, the insurance cost for construction projects 5 in New York are higher than anywhere else in the 6 country, and many small companies can't afford the 7 policies at all. 8 But in addition to the construction 9 companies, the high insurance costs also impact 10 businesses here on Long Island and consumers that 11 pay hundreds of thousands of dollars, to millions, 12 more to build commercial and residential projects, 13 and our local governments and taxpayers that are 14 forced to pay more for public-infrastructure 15 projects, such as roads, bridges, and the 16 "Superstorm Sandy" recovery. 17 So municipalities -- and municipalities also 18 bear the costs of judgments and settlements when 19 they are sued under the Scaffold Law. 20 So as a result, the cost of business is 21 higher than it needs to be here. 22 There's a disincentive to invest in 23 infrastructure and fewer jobs are created. 24 And we think there's a way to improve this 25 without impinging upon all of the workplace 1 safeguards that have been established, you know, 2 well since 1885. 3 Another effort that we would like to see 4 tackled, that we think would have a meaningful 5 impact on property-tax relief, is reform of the 6 Wicks Law, which requires state and local government 7 contract construction projects to issue multiple 8 contracts for HVAC, plumbing, and electrical work, 9 with the balance of the job going to a general 10 contractor for all public-works projects. 11 While perhaps it was well-intended, it's 12 also -- was originally well-intended, it was -- also 13 led to expensive inefficiencies and delays, higher 14 construction costs for municipalities and school 15 districts, and tax pressures on the business 16 community. 17 According to the report of the New York State 18 Commission on Local Government Efficiency and 19 Competitiveness that was completed in April of 2008, 20 several studies have estimated higher costs 21 resulting from the Wicks Law, and New York City had 22 estimated, at that time, that it would save 23 $3.7 billion over its 10-year capital plan with a 24 full repeal of Wicks. 25 Other studies have indicated the Wicks Law 1 could add anywhere from 8 percent to 30 percent to 2 the project's price tag. 3 So as you know, again, in 2008, the Wicks Law 4 was amended to set an exemption threshold of 5 1.5 million for Nassau, Suffolk, and Westchester; 6 $3 million for New York City; and $500,000 for the 7 rest of upstate. 8 And while we have a good relation with the 9 labor community, and we're not suggesting anything 10 that would hurt labor, we need to strike the right 11 balance. 12 So we think that the Wicks Law should either 13 be eliminated, or in the absence of that, see its 14 thresholds dramatically increased in order to 15 generate significant savings. 16 And that would improve the business climate, 17 and also result, we believe, in property-tax relief. 18 The LIA also supports broad-based tax reforms 19 to modernize business taxes, make our tax structure 20 more competitive, lower costs on businesses, and 21 keep New Yorkers from flocking the state. 22 According to the IRS and the Census Bureau, a 23 net of almost 1 million New York taxpayers have left 24 since 1992, taking with them more than $68 billion 25 in annual taxable income with them; or, about 1 15 percent of our present total taxable income. 2 Thus, the LIA supports five items that we 3 think, again, would have a meaningful impact on the 4 tax climate here in New York: 5 A reduction of marginal tax rates; 6 Elimination of the New the York State estate 7 tax, or, a minimum raise in the current exemption 8 level of $1 million. 9 New York is one of only a handful of states 10 that collect the state estate tax, and it has the 11 undeniable effect of driving New Yorkers out of 12 New York to other states, particularly to a place 13 like Florida which has neither an estate tax nor an 14 income tax. 15 Which we also -- this was also a byproduct. 16 We had met with the Governor's first 17 commission -- original commission on tax fairness 18 chaired by -- co-chaired by Carl McCall. 19 We had met with them a couple of weeks ago, 20 and this was one of the big takeaways that came out 21 of that meeting. 22 And they seemed to be very receptive to that, 23 and also indicated to us that a repeal of the estate 24 tax -- I'm sorry, the elimination of estate tax, or 25 raising its thresholds, would not have such an 1 overwhelming impact on the budget as to be unable to 2 achieve. 3 So, we thought that that would be a really 4 good commonsense tax area to tackle. 5 And, plus, we also had attorneys in the room 6 with us, that deal with wills and estates, and they 7 had told us, quite clearly, that they have a lot of 8 clients that do leave New York State towards the end 9 of their lives because they don't want to have to 10 pay this estate tax. 11 Moving forward, we also support elimination 12 of the 1.5 percent alternative minimum tax; 13 A reduction of the corporate franchise tax; 14 And, as I know Senator Marcellino, and 15 others, have fought hard for, immediate and full 16 repeal of the 18-A energy assessment. 17 As we all know, our energy costs are simply 18 too high. 19 The 18-A assessment costs New Yorkers more 20 than $500 million annually, and affects all energy 21 consumers, including non-profits, schools, 22 small businesses, and individuals. 23 A 2010 report from the Public Policy 24 Institute found that more than 26 percent of 25 New Yorkers' electric bills went to support state 1 and local taxes. 2 And that's a large part of why New York pays 3 some of the highest energy costs in the nation. 4 And, of course, there are other reasons, 5 again, as the Senator and Assemblyman know well, of 6 why we pay such high rates here on Long Island. 7 We also support a cut in the capital gains 8 tax, as we're one of a minority of states that treat 9 capital gains as ordinary income. 10 And as a result, we think revenues would 11 rise, and it would incentivize businesses to locate 12 here. 13 A large majority of small businesses in 14 New York are organized as pass-through companies, 15 which means they pay their taxes as individual 16 filers. 17 New York's income-tax rate remains among the 18 highest in the country, and the LIA also supports 19 cutting personal income taxes for small businesses. 20 Just to sum up, and then, quickly: 21 Studies have shown that New York leads the 22 nation in combined state and local tax burdens. 23 Businesses pay approximately 25 percent of 24 all state taxes, and 40 percent of local taxes, for 25 a combined tax burden of 34 percent, according to 1 the Public Policy Institute of New York State. 2 Moreover, The Tax Foundation reports that 3 New York's combined state and local tax burden, at 4 12.8 percent of personal income, is the highest of 5 any state in the nation. 6 And while, again, we believe New York has 7 taken many strides to change this paradigm through 8 the efforts of yourselves and the Governor, we think 9 we can do more to ensure more job growth, economic 10 opportunities, and a thriving business community. 11 And with that, we respectfully request that 12 you consider our recommendations, and we're looking 13 forward to working closely with you to implement 14 some commonsense tax reforms. 15 Thank you. 16 SENATOR MARCELLINO: Thank you very much, 17 Matt. 18 We are joined at this moment by 19 Senator Jack Martins, who was the former mayor of 20 the village of Mineola in which we are located right 21 now. 22 So we thank Jack for coming. 23 Senator DeFrancisco. 24 SENATOR DeFRANCISCO: Yes, I just wanted to 25 mention a couple of things. 1 First of all, the theme of the proposals that 2 you have, whether we're in Buffalo, wherever we are, 3 it's the same general theme. 4 And it's really important that we hear it 5 from all parts of the state, and it's great that 6 you're saying the same thing. 7 But I want to mention a couple other things 8 that came up with estate tax, just to put in your 9 advocacy envelope when you're advocating for these 10 changes. 11 Something came up in the Syracuse hearing 12 that I never had thought about, it's pretty obvious, 13 but, it's not only that you -- when a wealthy 14 individual moves to Florida to save estate tax, it's 15 not only that you lose their -- the income tax that 16 they were otherwise paying, but the -- even though 17 they may have many contacts still in the state of 18 New York, they shy away from charitable giving, 19 because it could be an indicia of residency, because 20 they're being careful to be out six months and one 21 day after -- in order to be a resident in the state 22 of Florida, but, if they start to do some charitable 23 giving, it even -- they won't do it, because they're 24 afraid that they will be still considered a resident 25 of state of New York. 1 Secondly, it's been -- the movement to try to 2 do what you're asking for with the estate taxes has 3 been framed, by some, that it's the rich that we're 4 all -- are all that we're worried about. 5 And the fact of the matter, in Syracuse as 6 well, a lady, a farmer, said it kills farmers 7 because they can't transfer their land. 8 They need the money that their land -- 9 they're land-rich and cash-poor, and they have to 10 sell their farms. 11 That's why a lot of the farms are going -- 12 not going from generation to generation. 13 So it's a very, very significant, not rich 14 versus poor, but the poor get served when income is 15 in New York State, not someplace else. 16 So, I just wanted to point that out, and 17 I appreciate your testimony. 18 MATTHEW COHEN: Very good points. 19 Thank you, Senator. 20 SENATOR MARCELLINO: Matt, just a couple of 21 questions. 22 We do a lot with tax credits in this state. 23 It was a program designed to, for example, 24 bring in the movie industry to New York, and onto 25 Long Island. 1 We have a lot of TV shows being filmed here, 2 a lot of movies being filmed here. 3 We have, the old Grumman site in Bethpage, it 4 was my district at one time, is now movie studios 5 and TV studios, so we do a lot of filming in those 6 areas. 7 Are there any tax credits that you believe 8 are particularly successful on the part -- from the 9 perspective of the small-business community? 10 MATTHEW COHEN: Well, we think -- one, as a 11 general statement, I'd say, you know, we don't 12 believe that targeted tax breaks to this industry or 13 that industry is a sound economic policy, generally 14 speaking, but we do think there's value in some tax 15 incentives and tax breaks, depending on what the 16 purpose is. 17 So, we think there have been positives from 18 some of the tax credits that are out there to 19 encourage high tech. 20 The, uhm -- I'm sorry, the Qualified Emerging 21 Tax Credit, you know, things like that, we think 22 good, because that's the kind of -- 23 I'm sorry? 24 SENATOR DeFRANCISCO: No, I'm waving back 25 there. 1 MATTHEW COHEN: Oh, I'm sorry. 2 -- because I think, you know, there are 3 certain things that we do need to incentivize and 4 try to build. 5 And, you know, when it comes to the film 6 credits, like you had mentioned, you know, we 7 certainly could see the arguments for and against 8 it. 9 You know, we believe that it's been 10 successful. 11 I mean, if you look at Nassau County, and 12 like you had just alluded to, and what the 13 county executive has done here, we think they've 14 done a really phenomenal job, and we do think it 15 brings income here, it creates jobs here. 16 You know, we're actually -- and I know this 17 may be a sentiment that's not shared by everybody, 18 but we were actually supportive, cautiously 19 supportive, of Start-Up NY. 20 Again, we think it's worth a shot. 21 You know, we think that we have such great 22 world-class research institutions here, especially 23 on Long Island, with Stony Brook and Brookhaven and 24 Cold Spring Harbor, and -- you know, and the others. 25 And if we can try to nurture and build the 1 next Silicon Valley, and this is a way, you know, 2 it's worth an opportunity, it's worth a shot. 3 And I know the argument's against it, but, 4 again, we're cautiously supportive of it. 5 And, you know, any types of credits that do 6 help the small-business community, we're in favor 7 of. 8 And if there are specific ones that you'd 9 look to talk about, that we could follow up with 10 your staff, we'd certainly be happy to have that 11 conversation. 12 SENATOR MARCELLINO: The brownfields tax 13 credits, we have a number of brownfield sites on 14 Long Island. 15 Do you feel that program is working? 16 MATTHEW COHEN: No, I think it needs to be -- 17 we think it needs to be improved, and enhanced. 18 We think that there's an opportunity there, 19 and I think that if we could do more there, I think 20 that's certainly worth looking at. 21 I don't think it's -- I think it's been 22 helpful, but I don't think it's been as successful 23 as it can be. 24 I think there's more opportunity there. 25 SENATOR MARCELLINO: The Governor's proposal 1 of using SUNY, you touched slightly on SUNY, where 2 they're going to be using that as economic zones, 3 tax-free zones, if you were close to a SUNY campus, 4 and so forth. 5 What's your thoughts; what the LIA's thoughts 6 on that? 7 MATTHEW COHEN: We are -- we were -- we have 8 been, and we are, supportive of the Start-Up NY 9 program. 10 We're cautious about it, because we 11 understand -- again, we understand the arguments 12 against it, and -- but, again, we think that, you 13 know, especially here on Long Island, we have such 14 great institutions, and, you know, we have 15 Accelerate Long Island now, which was incubated from 16 the LIA. 17 And, you know, we have all these efforts 18 going on to try to build a high-tech industry, 19 biotech. 20 You know, put the first word and then add 21 "tech" to it, any type of industry startups, trying 22 to really build on what are -- what we think is one 23 of our best assets, you know, besides beaches and 24 golf courses, all right, are our brains. 25 You know, is the innovation here, is the 1 education here. 2 And, you know, we think that it's -- it's 3 worth a shot. 4 You know, I think it's well -- we think it's 5 well-intended. 6 Again, we understand the counterarguments, 7 but we think it's worth a shot. 8 Let's see if it can work, let's see if it can 9 be successful. 10 We need to change the paradigm. 11 We think, at a minimum, at least it's an 12 outside-of-the-box idea to try to do something 13 that's going to be meaningful, so we support it. 14 SENATOR MARCELLINO: Okay, before I switch it 15 over to Assemblyman Montesano, just a reminder to 16 people that this program is being shown, I believe, 17 live on the Senate website as we are here. 18 It is will be DVD'd, and it can be seen on 19 the website. 20 So if you are an insomniac and you can't 21 sleep, and you need some help, you might want to 22 watch this thing over again, just, if you missed 23 something that you wanted to pick up. 24 But, it will be available on the 25 New York State Senate website. 1 Senator Montesano -- uhm, 2 Assemblyman Montesano. 3 ASSEMBLYMAN MONTESANO: Thank you, Senator. 4 Matt, I just wanted to ask you one question 5 on the Scaffold Law. 6 The way it sits today, that law, is there not 7 an exception in there already, that if the worker 8 has violated certain work rules, as, intoxication, 9 or being impaired by drugs, or doesn't wear the 10 proper safety harnesses that were given to him, that 11 the contractor or the employer has a defense under 12 the current law? 13 MATTHEW COHEN: It's my understanding that 14 there is an absolute-liability standard. 15 ASSEMBLYMAN MONTESANO: And there's no 16 exceptions? 17 MATTHEW COHEN: Not to my knowledge, but I -- 18 you know. 19 ASSEMBLYMAN MONTESANO: Thank you. 20 SENATOR MARCELLINO: Matt, thank you very 21 much for your testimony. 22 We do appreciate it. 23 MATTHEW COHEN: Thank you, Senators. 24 SENATOR DeFRANCISCO: Can I just, one quick 25 one? 1 SENATOR MARCELLINO: Sure. 2 SENATOR DeFRANCISCO: You mentioned that it's 3 worth a shot, the Start-Up NY. 4 But, if you're going to cut broad-based taxes 5 which you think -- I think you said that's the most 6 important thing we can do. 7 Is that fair to say? 8 MATTHEW COHEN: Yes. 9 SENATOR DeFRANCISCO: Okay. 10 From what I understand, it's about 11 a billion for dollars for every 1 percent cut of the 12 personal income tax, or something, a substantial 13 number such as that. 14 Every time you give a credit, it means 15 there's less dollars to do other things, broad-base. 16 So I guess, just very generally, as between 17 tax credits, whatever tax credit they may be, and 18 broad-based tax cut, does your organization have a 19 position as to which ones you prefer? 20 MATTHEW COHEN: Broad-based tax cuts versus 21 targeted? 22 SENATOR DeFRANCISCO: Exactly. 23 MATTHEW COHEN: Broad-based. 24 But, again, just to reiterate the point I was 25 trying to make before, again, we don't believe that, 1 you know, a tax credit for this industry, a tax 2 incentive for this industry, is necessarily a sound 3 economic policy, generally. 4 But that said, I think, as Senator Marcellino 5 and I were discussing, you know, there are some 6 programs that have been successful -- there's some 7 targeted tax-incentive programs that have been 8 successful; others that haven't been. 9 And we don't want to just say, as a blanket 10 statement, there should not be any targeted tax 11 incentives, because I think they, you know, can 12 work, but they should be limited, they should be 13 looked at on a case-by-case base. 14 And, you know, for us, in our opinion, we 15 support broad-based tax relief, certainly. 16 You know, something like Start-up NY, we 17 think takes advantage of our assets and what we're 18 good at. 19 And, you know, again, I don't mean to be too 20 colloquial when I say it's worth a shot, but it's -- 21 let's see. 22 I mean, again, it's a different paradigm. 23 It's a different idea. 24 It's not -- you know, again, it's building on 25 what we're good at, and I think it's worth 1 exploring. 2 SENATOR MARTINS: Matt, good morning. 3 MATTHEW COHEN: Good morning, Senator. 4 SENATOR MARTINS: Just to follow up on that, 5 you know, isn't it a slippery slope, as soon as we 6 start making exceptions? 7 You know, once we start talking about 8 individual programs, yes, we can see the benefit in 9 all of these programs and the tax credits that will 10 go towards a specific industry, but what we're 11 discussing here is really a paradigm shift. 12 Do we continue with these individualized 13 programs and targeted programs, or are we better off 14 as a state, from a policy standpoint, looking to 15 reduce taxes holistically? 16 And so we -- I don't think we have the luxury 17 of being able to say "yes, but," and then begin 18 rattling off all of the different programs that 19 we're willing to make exceptions for, because then 20 the exception becomes the rule. 21 I mean, wouldn't you agree at some point we 22 do need to reaffirm, at least from a policy 23 standpoint, which way we're going to go? 24 MATTHEW COHEN: Yes, and I agree with the 25 latter. 1 If you were going ask me, you know -- again 2 as Senator DeFrancisco was just speaking to as well, 3 we would prefer broad-based tax relief. 4 That said, we're also realistic, and, you 5 know, we know that these targeted programs are not 6 going to go away overnight, and, you know, as much 7 as we're going to try to make efforts that could be 8 incremental. 9 And, uhm -- yeah, but as a general rule of 10 thumb, we would support broad-based tax relief over 11 these targeted tax incentives. 12 SENATOR MARTINS: Thank you. 13 SENATOR MARCELLINO: Thanks, Matt. 14 Appreciate your testimony. 15 MATTHEW COHEN: Thank you very much again for 16 the opportunity. 17 SENATOR MARCELLINO: All right, our next, 18 working as a panel, with Randy Kaplan, director of 19 government affairs for the Long Island Board of 20 Realtors. 21 I believe he just stepped out in the hall for 22 two seconds and he'll be back. 23 But, Mitch Pally, from the Long Island 24 Builders Institute. 25 If you guys could come up. 1 Debi, when Randy comes back, will you direct 2 him up here? 3 Come on down, Randy. 4 MITCH PALLY: We're going to give 5 Senator Valesky honorary citizenship in 6 Nassau County, he's here so many times now. 7 SENATOR VALESKY: I'll accept. 8 SENATOR MARCELLINO: We'll wait and see if we 9 get any pushback from Syracuse. 10 [Laughter.] 11 SENATOR MARCELLINO: Okay, gentlemen, Randy, 12 do you want to go first? 13 RANDY KAPLAN: Sure thing. 14 SENATOR MARCELLINO: We'll let you both do 15 your testimony, and then we'll -- 16 RANDY KAPLAN: Mitch and I like being on the 17 on the same panel together -- 18 SENATOR MARCELLINO: Of course. 19 RANDY KAPLAN: -- so this is wonderful. 20 Both Chairmen, we want to thank you, 21 Assemblyman Montesano, Senator Valesky, 22 Senator Martins, thanks for inviting us this 23 morning. 24 The over 20,000 members of the Long Island 25 Board of Realtors are very appreciative for inviting 1 us to provide testimony at this important hearing on 2 tax reform in New York State. 3 As proud advocates for both the housing 4 industry and the general population as well, LIBR is 5 extremely interested in the well-being of our 6 communities where we all live, work, and play. 7 Our mission is to assist those who are 8 interested in achieving the American dream of home 9 ownership and protecting private-property rights. 10 While all of us living on this island are 11 aware of the numerous problems we face, none are 12 more alarming than the current business climate, 13 whereby young and old alike are under pressure to 14 move to lower-cost living areas. 15 Quite simply, many companies can't afford to 16 relocate here, and even stay here, because they 17 cannot afford to pay their employees enough to live 18 in our region, not to the price of the homes, but 19 due to the high and continually soaring taxes. 20 Although the number of jobs are increasing 21 here, there are very few tech jobs and high-paying 22 white-collar jobs coming. 23 The majority are service-industry jobs. 24 Better tax incentives/breaks for companies 25 would possibly help alleviate this problem. 1 As an industry, we are against any current or 2 additional taxes which would potentially impede 3 homeownership, such as transfer taxes, 4 mortgage-recording taxes, increased property taxes, 5 the possible elimination of the mortgage-interest 6 deduction, and, a possible mandated minimum down 7 payment required for the qualified residential 8 mortgage. 9 Additionally, realtors across New York State 10 are pushing a let New York -- "Let New York Work" 11 agenda, also known as a "common agenda for the 12 common good." 13 This is a package of mandate-relief measures 14 that will provide long-term property-tax relief by 15 removing mandates that Albany forces on local 16 governments, municipalities, and school districts. 17 Our area has great first-time homebuyer 18 programs. 19 We're blessed with that, but we need more 20 relief programs. 21 We desperately need middle-income 22 down-payment assistance programs. 23 Back in 2010, the National Association of 24 Realtors supported legislation which enabled 25 first-time homebuyers to garner an $8,000 grant, 1 resulting -- which resulted in the highest number of 2 monthly contracted homes and the highest number of 3 closed home sales in history that the 4 Multiple Listing Service of Long Island was 5 reporting. 6 LIBR is imploring the Legislators and the 7 regulators in New York to act now so that our area 8 remains a viable option for our kids and 9 grandchildren to live, work, and play, both now and 10 in the future. 11 Thank you. 12 SENATOR MARCELLINO: Mitch, do you want to 13 go? 14 MITCH PALLY: Yes. 15 Instead of reading my testimony, first of 16 all, I want to agree with Randy's testimony in all 17 of its facets. 18 You know, we represent different parts of the 19 home-building and residential home-building 20 industry, but we are the same on those issues, and 21 I'll just amplify a couple of things. 22 You know, the 2 percent real-property tax cap 23 is a great first step, but, it still goes up. 24 Now, it may go up less than it would have 25 gone up, and for that we thank all of you in that 1 regard, but the issue is not -- you know, 2 New York State has the highest real-property taxes 3 in the country, that continue to go up, albeit, at a 4 smaller level. 5 What we need with that, and the other part of 6 that, is, as Randy clearly pointed out, mandate 7 relief on our municipalities, especially our school 8 districts, which impose at least in our communities, 9 70 percent of the real-property tax. 10 Mandate relief is the essential second 11 component with the real-property tax cap, whether 12 that relief relates to pension costs, or just the 13 way school districts do business, they should be 14 able to set their own priorities within their own 15 community, and then determine the best way to 16 accomplish what it is they want to accomplish in 17 that regard. 18 So mandate relief is an essential component 19 of providing a better climate for the business 20 community, especially the residential-business 21 community. 22 Energy taxes: 23 As Matt clearly pointed out, over a quarter 24 of every dollar we pay in energy costs are taxes, 25 whether they're to the State of New York, or to the 1 local governments, some of which have plants that 2 operate five days a year, and still get a full 3 assessment; and, therefore, a full tax. 4 Many of us, many people who don't live in 5 those districts, end up paying energy taxes twice. 6 You pay it in your own bill, and then you pay 7 in it your LIPA bill. 8 So you pay for us, and you pay for the other 9 surrounding communities. 10 Something has to happen in that regard. 11 I know in the new LIPA legislation, there is 12 a mechanism to try and work that issue out. 13 We're hopeful that the municipalities will 14 understand that it is no longer possible to transfer 15 the cost of energy outside of their area to other 16 people who don't live in that school district or 17 don't live in that municipality. 18 So that is another major focus that we want 19 to focus on. 20 Obviously, the Scaffold Law is an integral 21 part of what we do from the construction industry, 22 and causes us significant additional costs. 23 Senator Valesky was at the hearing last week, 24 where I had one of my members testify. 25 He pays a 40 percent premium on his insurance 1 bill over what he pays in New Jersey, because we 2 have a Scaffold Law, and New Jersey does not. 3 That's 40 percent. 4 That 40 percent doesn't come out of his 5 pocket -- it comes out of his pocket first, but then 6 he has to charge the consumers who get his services 7 40 percent more to cover that additional cost. 8 That can just no longer continue, and we 9 would hope that New York State would learn, and join 10 the other 49 states in the union, to eliminate -- 11 not to eliminate the liability, we're not asking you 12 to eliminate the liability; all we're asking is, is 13 that Scaffold Law injuries be placed on the same 14 level as all other injuries. 15 If the developer or the builder is liable, so 16 be it. 17 But if they're not, then they should not be 18 held to absolute liability. 19 We should have comparative negligence 20 standards. 21 Just like the State Legislature has enacted 22 for every other industry in New York State, in that 23 regard, should be exactly the same. 24 The one thing we are concerned about in this 25 talk about tax relief is, as Randy pointed out, 1 mortgage deductibility. 2 The federal government is talking about 3 eliminating that in their federal tax-reform 4 discussions. 5 We believe that would be a mistake, because 6 many -- you know, the final cost of a home, and 7 whether or not you can afford one, is the bottom 8 line, and that bottom line occurs after the mortgage 9 deductibility is taken for many people, especially 10 first-time homebuyers, on Long Island, and in many 11 other parts of the country. 12 So if that comes to play, we're not asking 13 for a tax credit for that. 14 We're just asking that New York continue its 15 current mortgage deductibility regardless of whether 16 the federal government continues it or not in that 17 regard. 18 On the issue of selected tax credits, 19 obviously, some tax credits have been beneficial. 20 You pointed to the motion-picture industry. 21 You could very easily, on Long Island, point 22 to the solar industry, which has been made -- which 23 has become a major component of energy on 24 Long Island, mainly because of the tax credit that 25 the State of New York provides to consumers when 1 they buy it. 2 You know, put solar panels on their roof, or 3 whatever it is in that context. 4 But, the issue is, if you asked me the same 5 question you asked Matt, and I'll answer it, you 6 know, "Is broad-based tax relief better than 7 selected tax relief for selected industries?" the 8 answer is yes, but that broad-based tax relief has 9 to be substantial enough to have the same impact on 10 that industry, so that they get the same benefit 11 that everybody else gets, and decide that, you know, 12 New York State is the place to be in that regard. 13 New York State can no longer -- cannot call 14 itself fair to business or have a productive 15 business climate, when the new DEC regulations that 16 go into effect next week increase the SEQRA filings, 17 from 11 pages, to 30 pages. 18 You just can't call yourself 19 business-friendly when that happens, because all it 20 does is impose additional costs on the cost of 21 building a home, the cost of building a building, 22 whatever it happens to be in this state, which is 23 difficult enough with the SEQRA law and all of its 24 aspects. 25 We would urge -- and I said the same thing to 1 Ken Adams at the Empire State Development Corp. 2 yesterday -- California, this session, changed their 3 SEQRA law to be more friendly to business. 4 Now, that's not some state we would normally 5 consider business-friendly, but California 6 understood that their SEQRA law was impeding the 7 growth of business in their state, and they changed 8 their law to make it more business-friendly. 9 That does not mean eliminate the law. 10 It does not mean reduce the impact of what 11 you're looking at. 12 It means how it is done, the standards that 13 you have to reach, and the implementation you have 14 to get to. 15 And we would urge New York State to do the 16 same, because, every time -- the SEQRA law affects 17 every project we want to build, every project he 18 wants to finance, every business development that 19 Matt's companies want to go into. 20 That is a focal point of making New York a 21 much more better business-friendly state. 22 With that, we're done. 23 24 25 1 SENATOR MARCELLINO: Thank you. 2 SENATOR DeFRANCISCO: Thank you. 3 MITCH PALLY: And thank you for the 4 opportunity, as always. 5 SENATOR MARCELLINO: That's okay, we're going 6 grill you now. 7 MITCH PALLY: That's okay. 8 SENATOR MARCELLINO: We have been joined by 9 my colleague Senator John Flanagan, who chairs the 10 Education Committee. 11 And John has been circulating all over the 12 state, just coming back from Syracuse and Utica, 13 where he held testimony with our colleagues up there 14 as well. 15 So it's been an interesting summer for the 16 Committees on the State Senate. 17 Any other questions for these gentlemen? 18 Go ahead. 19 SENATOR VALESKY: Mitch, just a quick 20 follow-up for you, and some of these issues we did 21 talk about last week during the series of 22 Regulatory Reform hearings. 23 MITCH PALLY: Yes. 24 SENATOR VALESKY: On the SEQRA law, or the 25 changes to the SEQRA law, that you would like to 1 see, are you suggesting that we look at the changes 2 that were made in California as a model -- 3 MITCH PALLY: Yes. 4 SENATOR VALESKY: -- for something that could 5 be done here? 6 Or do you have -- 7 MITCH PALLY: Yes. 8 Yes, absolutely. 9 They especially made it easier. 10 You know, people say to me all the time, 11 Well, what land is available on Long Island to 12 develop? 13 And, in reality, the land that is available 14 on Long Island to develop is land that has already 15 been developed. 16 It's redeveloped, because we don't have large 17 swaths of open land. 18 All of that land has already been developed 19 on Long Island, whether it's housing or business, or 20 whatever it happens to be. 21 So you're looking at redevelopment of sites 22 that have already been developed, especially in 23 downtown areas and along our main thoroughfares. 24 California understood that, and significantly 25 reduced what you had to look at in a redevelopment 1 project, because, in many cases, the infrastructure 2 is already there, the traffic flow is already there. 3 What you're looking at is, in some cases, 4 either keeping the same use, or maybe modifying the 5 use to some degree. 6 And, especially, in those cases where there 7 is a redevelopment of a site that has already been 8 developed, one should not have to go through the 9 entire 30 pages. 10 And it's not just the 30 pages; it's the 11 6, to 9, to 12, to 18 months of studies and restudy 12 and restudy that are required, by whether it's DEC 13 or the local municipality, or whatever, to get to 14 the bottom line of, Okay, you know what? 15 There was a gas station there. 16 Now we're eliminating the gas station. 17 We're going to put a restaurant. 18 It shouldn't take you two years to decide 19 we're going to reuse the same site, or, we're going 20 to take away the gas station and put, you know, 21 ten apartments, whatever it happens to be in that 22 context. 23 It should not -- those type of situations 24 should clearly be much different. 25 And there are, I'm sure, I know, you know, 1 I lived upstate, there are thousands of acres 2 upstate where there are buildings that are no longer 3 being used for their original purpose, but could be 4 very easily redeveloped for mixed-use or other 5 purposes. 6 One should not have to go through the entire 7 SEQRA process to get to the bottom line, to get to 8 the end. 9 California understood that, changed many of 10 those laws. 11 And we would urge New York State to take a 12 look at what they did. 13 SENATOR VALESKY: Thank you. 14 SENATOR MARCELLINO: Mike? 15 John? 16 Mitch -- 17 MITCH PALLY: Yes. 18 SENATOR MARCELLINO: -- and also Randy, the 19 same idea: foreclosure rates. 20 You talked about the spike in building and 21 construction and homebuyers, and there seemed to be 22 an increase in the amount of homes being sold, and 23 whatever. 24 But I'm reading in the papers recently, of a 25 spike on Long Island, particularly in foreclosure 1 rates. 2 So, what are we -- how are we tying these two 3 together? 4 MITCH PALLY: Do you want to start with that 5 one, or you want me to do it? 6 RANDY KAPLAN: You can start. 7 MITCH PALLY: New York has the benefit of 8 having a lengthy foreclosure process. 9 It also has the detriment of having a lengthy 10 foreclosure process. 11 It provides a substantial number of 12 protections for the homeowner through the process, 13 which is very good. 14 The problem is, it takes so long, that a 15 foreclosure in New York, in many cases, takes over 16 three years. 17 So what you're seeing now with the spike, in 18 the article in "News Day" last week, I believe it 19 was, with that, is that many of the foreclosure 20 filings that happened three, four years ago, that in 21 most other states, have already been taken care of, 22 and have already been -- had their impact on the 23 housing market in New York, are just now getting to 24 the point where they're being settled, and now are 25 having the impact on housing market, because of the 1 length of time it takes to go through the process in 2 New York State. 3 So, yes, that is going to have an impact, 4 because foreclosed homes have an impact on selling 5 prices, especially if they're in a -- if you have 6 more than one in a community, it reduces everybody 7 else's -- 8 RANDY KAPLAN: Correct. 9 MITCH PALLY: -- ability to sell their home 10 at what they thought, or what they might be able to 11 get if there were no other foreclosed homes in the 12 area. 13 It has -- it will have that impact in this 14 state, especially on Long Island, until we get 15 through that entire process. 16 And it's just taken a much longer period of 17 time. 18 That's why you've seen the housing markets in 19 many other parts of the country, where they had even 20 more foreclosed homes than we did -- Florida, 21 Las Vegas, California -- those foreclosed homes' 22 impact have already taken place. 23 Why? 24 Because the foreclosure process in those 25 states is a significantly shorter period of time 1 than it is in New York. 2 That's why we're seeing that come to fruition 3 now. 4 RANDY KAPLAN: I piggyback on what Mitch just 5 said. 6 I will also tell you that the housing market 7 is actually in a great place right now. 8 As you know, the interest rates are 9 historically low. 10 Still, we're hoping they remain so for a 11 while longer. 12 Housing prices are starting to be on the 13 rise. 14 Okay, what does that mean? 15 That means that, if a home is on the market 16 and it's priced correctly, that home is gone within 17 a matter of days. 18 I personally have been involved in about 19 four or five real-estate transactions in the last 20 three, four years, and each of those homes was sold 21 immediately, within a couple of days, because it was 22 priced right. 23 The other thing that Mitch touched upon, 24 because it's such a time issue, we're hearing horror 25 stories, so to speak, of residents, homeowners, who 1 are underwater and realize they can't do anything. 2 They're walking away from the house, but not 3 until after, Mitch said, three years later, when 4 they've banked every penny they can, and now will 5 get a fresh start. 6 So they stop paying their mortgages. 7 They're saving this money, they're banking 8 this money, so they can go get a fresh start, 9 because they realize that two to three years are 10 taking place before the banks are catching up with 11 them. 12 And that's crazy. 13 SENATOR MARCELLINO: What about the rate 14 of -- or the initiation rate of foreclosures? 15 Is that in any way measurable? 16 MITCH PALLY: Well, yes. 17 I mean, there are records. 18 You know, the number of foreclosures that are 19 being initiated now is significantly less than it 20 was two, three years ago. 21 What's happening now, is the ones that were 22 initiated two, three years ago, are now finally 23 getting through the system, the process that the 24 State of New York has created, to where they are 25 now, either the -- there's a mortgage modification, 1 or, the bank or the financing institution -- it's 2 not necessarily always a bank -- takes the house 3 over and now puts it back on the market. 4 They're putting it back on the market. 5 All they're looking for is getting their 6 mortgage number back. 7 They don't really care what they get back as 8 long as they get something back. 9 But what that did is it depresses everybody 10 else's ability to sell the home for the higher 11 amount in that community because there are 12 foreclosed homes there. 13 So, it's not so much that we're continuing to 14 initiate foreclosures at a high rate. 15 We are yet to get through the ones that were 16 initiated two, three years ago. 17 And that is having, in some places, a 18 depression on the market. 19 SENATOR MARCELLINO: Earlier you talked about 20 mortgage deductibility off your income taxes. 21 MITCH PALLY: Yes. 22 SENATOR MARCELLINO: I'm sure that most 23 homeowners would like charitable deductions, as 24 well, included in that. 25 I know the charities would appreciate that. 1 It would boost them up. 2 But if we do a broad-based tax cut, which 3 seems to be what we're hearing in our hearings 4 throughout the state, and we heard this just a few 5 seconds -- a few minutes ago from the prior speaker, 6 if that can be brought down to the point where the 7 mortgage deductibility doesn't help that much, is 8 not that big a deal, would you all agree with that? 9 RANDY KAPLAN: Chairman, thank you. 10 One of the concerns is, back in 1996 when 11 Jack Kemp was on the vice-presidential ticket with 12 Bob Dole, he was touting the flat tax, and it became 13 an issue again for a couple of years. 14 Then after that administration -- I'm 15 sorry -- after that candidacy failed, it did not end 16 up moving forward. 17 There's been a lot of talk for years about 18 bringing this back. 19 And I assure you, because we're in touch with 20 our folks at the National Association of Realtors 21 constantly, members of the House and Senate, on both 22 sides of the aisle, are imploring us to be cognizant 23 that this is something that's realistically on the 24 table. 25 Okay? 1 Whether it's the complete elimination, we 2 doubt that's going to happen early on. 3 They probably will be end up making a 4 reduction, as you alluded to, at some point. 5 And the fact is, that they look at Canada, 6 where it's a different -- it's apples and oranges, 7 but Canada does not have a mortgage-interest 8 deduction, and they work just fine. 9 So Mitch mentioned that it's something that 10 would be a major obstacle to the industry if we lost 11 a percentage and/or the complete deductibility. 12 In many cases, it's the only reason why 13 somebody can afford to actually purchase their home. 14 MITCH PALLY: The other aspect of that, 15 Senator, is that the mortgage deduction is one of 16 the few parts of the federal tax code that actually 17 benefit New York State. 18 Why? 19 Because the cost of housing in New York State 20 is significantly higher than almost any other part 21 of country; and, therefore, our mortgages are 22 higher. 23 So it's one of the few places in the tax code 24 where New York State gets a benefit over many other 25 states in the country, and, many people have bought 1 their home with a large mortgage, because of the 2 cost of the home itself, based upon the mortgage 3 deduction that they get back -- or, they don't get 4 back, but they get to take off their taxes. 5 You know, as I said, we're not interested in 6 a tax credit. 7 There are mortgage deductions that occur 8 because you -- you know, your pension payments, or 9 other things, are automatically deducted; or, your 10 taxes that we pay to the federal government come off 11 your New York State tax rate before you get to the 12 amount you're gonna pay in tax. 13 This has been a longstanding policy of the 14 state of New York for many years, even when the tax 15 rates were significantly lower than they are now, if 16 we can ever remember when that actually took place. 17 So that's why we would hope that New York 18 could at least consider and look at the impact of 19 eliminating that, before it does it, if the feds do 20 it. 21 Because if the feds did it, then, of course, 22 New York State would have to uncouple its tax code 23 in that capacity from the federal tax code. 24 We've done that in certain other situations. 25 We would urge to you look at that and see 1 what the possibility is. 2 RANDY KAPLAN: If I may add just one more 3 thing? 4 SENATOR MARCELLINO: Sure. 5 RANDY KAPLAN: It was recently brought to my 6 attention by a lot of the elected officials, a few 7 of you who are even here today, and I thank you for 8 this information, I could not believe when I found 9 out that the governors of South Carolina and the 10 governors of Florida have shops set up on Route 110, 11 luring businesses from here with better tax breaks 12 and promises that Long Island just can't give them. 13 Has this become more of an issue that you're 14 hearing about internally with your confidential 15 conversations, so to speak? 16 SENATOR MARCELLINO: It's an issue. 17 I know personally, the governor of Florida 18 had set up office space on Route 110, and had taken 19 one of our companies that was in the incubator at 20 SUNY-Farmingdale, that was put there to move to the 21 state of Florida. 22 These were about -- I won't go in -- I don't 23 remember the an exact number, but it was a 24 significant number of well-paying jobs, in the 25 eighty-five-to-ninety-thousand-dollar range, went 1 down to Florida. 2 RANDY KAPLAN: Matt Cohen had mentioned 3 before about, one of our biggest resources is our 4 brains. 5 Our kids can't afford to stay here anymore. 6 Once they get educated, they have to leave. 7 And it's taxes, it's -- there are no 8 high-paying jobs. 9 SENATOR DeFRANCISCO: That's why we're having 10 these hearings. 11 We get that. 12 The question is, what the solutions are. 13 RANDY KAPLAN: Right. 14 SENATOR MARCELLINO: Senator DeFrancisco, do 15 you have a question? 16 SENATOR DeFRANCISCO: I'm not in favor of 17 eliminating the mortgage-tax deduction -- the 18 mortgage deduction, but, the alternative minimum tax 19 is such, that no matter how many deductions you 20 have, you lose the effectiveness of the deductions. 21 And I know that -- I see -- I happily see 22 there's an accountant, a CPA, that's going to speak, 23 earlier, but I've heard that, something like 24 80 percent of the accountants in Syracuse, some of 25 the returns, people shouldn't even bother with their 1 tax deductions, including mortgage tax, because they 2 might as well get the standard deduction because of 3 the alternative minimum tax. 4 Have you focused in on that? 5 Is that true? 6 MITCH PALLY: Yes. 7 SENATOR DeFRANCISCO: Because your 8 argument -- that would be the counterargument to 9 what you're saying about mortgage. 10 MITCH PALLY: There is no question that the 11 alternative minimum tax imposes a burden on 12 New York State, and especially Long Island, which is 13 a high-cost area; and, therefore, a high-wage area, 14 far greater than it does almost any other state. 15 SENATOR DeFRANCISCO: Well, I'm talking about 16 the state's alternative minimum tax. 17 MITCH PALLY: Right, but the state's 18 alternative minimum tax is, obviously, much lower, 19 okay, than the federal one is, but there's no 20 question that an alternative -- any alternative 21 minimum tax which imposes a flaw, for lack of a 22 better term, on somebody paying something, has to be 23 looked at in this context, because, you know, we all 24 agree that everybody should pay their fair share of 25 taxes. 1 Of that there is no doubt. 2 It's just that we leave to it each individual 3 person to figure out what their fair share has to be 4 in that context when we determine what the 5 computation is. 6 So, the alternative minimum tax on the state 7 level is -- you know, imposes a tax in high-wage 8 areas and other places. 9 It really was intended -- all of these 10 alternative minimum taxes were intended for 11 high-wage people who had substantial interest and 12 dividend income. 13 That was what it was intended for, and did 14 not -- because of their business, did not have large 15 wage income. 16 SENATOR DeFRANCISCO: All right, and the 17 first -- 18 MITCH PALLY: And it's become the exact 19 opposite of what has occurred. 20 SENATOR DeFRANCISCO: Okay, but that would be 21 an argument you should be concerned about. 22 MITCH PALLY: Yes. 23 SENATOR DeFRANCISCO: If it's there, you got 24 to get -- 25 So Matthew Cohen, the first speaker, said 1 that's on his short list. 2 MITCH PALLY: And that would be on ours also. 3 SENATOR DeFRANCISCO: That was my question. 4 Thank you. 5 MITCH PALLY: Absolutely. 6 SENATOR DeFRANCISCO: Thank you. 7 SENATOR MARCELLINO: So it would be fair to 8 say that, broad-based tax cuts rather than tax 9 incentives? 10 MITCH PALLY: From our perspective, the 11 answer to that question is yes. 12 That way, everybody benefits. 13 SENATOR MARCELLINO: From the real-estate 14 community too? 15 RANDY KAPLAN: Correct. 16 SENATOR MARCELLINO: Okay. 17 Any other questions? 18 Thank you, gentlemen. 19 We appreciate it. 20 MITCH PALLY: Thank you very much. 21 RANDY KAPLAN: Thank you. 22 SENATOR MARCELLINO: The next panel will be, 23 Lisa Predmore, from the Syosset Woodbury -- 24 president of the Syosset Woodbury Chamber of 25 Commerce, and, Brian Yudewitz, Esquire, who is the 1 vice chairman of the board of directors of the 2 Huntington Township Chamber of Commerce. 3 Lisa, did you want to go first? 4 DR. LISA PREDMORE: I guess so. 5 First, thank you for inviting me to speak 6 today. 7 My name is Dr. Lisa Predmore, and I am a 8 board-certified clinical audiologist in private 9 practice. 10 I am also the president of the 11 Syosset Woodbury Chamber of Commerce. 12 There are so many reasons why there need to 13 be changes in the tax codes. 14 The government should be making these codes 15 and regulations easier for small businesses, for the 16 small-business person to navigate, not more 17 convoluted. 18 The State does not appear to be helping the 19 small-business owner; but, rather, bogging them down 20 with more and more taxes, regulations, and 21 paperwork. 22 As the president of the chamber of commerce, 23 I deal with new business owners all the time who 24 understand little or nothing of the tax codes. 25 They don't understand what a C corp is or an 1 S corp is, or what a limited-liability company is, 2 or even a limited-liability partnership. 3 Often, they don't even know what their status 4 is, let alone that each of these arrangements 5 present them with different tax codes, obligations, 6 and requirements for filing. 7 Many of them don't even know where to turn 8 for help. 9 As a small-business owner, I am overwhelmed 10 by the costs associated with these taxes. 11 Instead of providing my staff with benefits 12 and paying them at a higher rate, I must pay taxes 13 that are irrelevant to my business, such as the 14 MTA tax. 15 As a board-certified doctor of audiology, 16 because of the complexity of the tax codes and these 17 numerous changes that are implemented each year, I'm 18 unable to file my own taxes, and must incur 19 thousands of dollars of expense to hire accounting 20 and tax professionals. 21 I'm not against these professions, but I am 22 here in support of simplified tax codes. 23 As a professional corporation with 24 Subchapter S status, I'm looking for simplification 25 of both corporate and personal tax laws. 1 But, enough with the income taxes. 2 There are more taxes that greatly affect our 3 businesses. 4 Obamacare is the current headline. 5 I would like speak to you about how my 6 profession is obligated to contribute to the rising 7 costs of healthcare. 8 In my practice we accept Medicaid. 9 I am one of the few providers left in this 10 state who will do so. 11 I do so to ensure that the children are taken 12 care of, and I provide them with the highest quality 13 of care, but since I'm a contracted provider, I must 14 open to all populations. 15 I'm happy to help anybody who walks through 16 my door, but at what cost? 17 Not only are the reimbursements abominably 18 low, but we're assessed a surcharge for each and 19 every service that we provide, by the State, whether 20 it's a durable medical device, such as a hearing 21 aid, or simply a diagnostic evaluation. 22 I'm required to pay a manufacturer 23 full-invoice pricing, but the State assesses a 24 surcharge on me, which causes me to lose money at 25 every turn. 1 I estimate that I lose 20 to 30 dollars per 2 patient when fitting a hearing aid. 3 When you multiply that over thousands of 4 people, I'm losing an enormous amount of money. 5 How does the State expect providers to 6 continue to accept these terms and still stay in 7 business? 8 I happen to be fortunate enough to be able to 9 provide my patients with the same high level of care 10 and services regardless of their income. 11 But what about families who rely on their 12 practices as their sole support for their family? 13 As for my chamber members, they struggle 14 daily with increased expenses and lower revenues, 15 and our state tax policies are not alleviating the 16 burdens of today's businesses. 17 Our chamber is always gaining new members who 18 are opening the doors as new business in our town. 19 They are spending thousands of dollars to 20 start their businesses, and are struggling to keep 21 their doors open. 22 They struggle with the burdens of not just 23 running their business, but of getting customers 24 through their door, but with the overly complicated 25 administrative requirements. 1 Our downtown is littered with vacant 2 storefronts, many of which have not had tenants 3 since the beginning of the financial crisis. 4 To revitalize our community with strong 5 businesses and well-paying jobs, I'm asking you not 6 to decrease taxes, but I'm asking to you decrease 7 the administrative burden placed on our small 8 businesses through the overly complicated tax codes. 9 Thank you for the time. 10 SENATOR MARCELLINO: Brian. 11 BRIAN J. YUDEWITZ, ESQ.: Senator Marcellino, 12 Senator DeFrancisco, and distinguished members of 13 the Committee, I want to thank you for inviting me 14 to testify today about the important issues 15 regarding New York State taxes, and how they can 16 best be reformed. 17 I've been asked to appear today on behalf of 18 the Huntington Township Chamber of Commerce. 19 I've been a proud member of this most active 20 chamber for more than 15 years. 21 Like most chambers of commerce, we work 22 closely with our members who are predominantly local 23 businesses. 24 We assist them to form partnerships with and 25 work with government and stakeholders in the 1 community. 2 The goals are to help them grow their 3 businesses, while at the same time, giving back to 4 the community. 5 As our member businesses grow, this helps to 6 improve the quality of life and helps create jobs 7 locally. 8 We often seek feedback from our members to 9 learn about what issues they are concerned most 10 about. 11 Usually, it's the high cost of living on 12 Long Island and the high taxes assessed at the many 13 levels that are of chief concern. 14 A large part of my work as an attorney 15 includes representing small businesses from 16 inception to success, and, unfortunately, in the 17 recent climate, to wind-down and dissolution. 18 As counsel to a not-for-profit company that 19 works with individuals and businesses to find 20 solutions to their financial problems, I found that, 21 many times, the tax burdens have been too great for 22 individuals and businesses to overcome; thus, 23 bankruptcy and business dissolution are the result 24 in some cases. 25 I often work with my clients, in consultation 1 with many tax professionals, to consider how much 2 impact taxes have on their business decisions as 3 well. 4 When considering tax reform, there should 5 not, essentially, be any one focus. 6 In my opinion, any changes must not be 7 considered in a vacuum. 8 To create reform, we should examine the 9 successes of other states and consider all areas of 10 taxation before changing any one. 11 Overall tax change and the impact of each 12 area of taxation should be carefully considered. 13 No one wants any legislation to go into 14 effect that will result in unintended consequences, 15 causing harm to sectors, that have not been 16 carefully considered. 17 Additionally, since all legislation has an 18 economic impact, I believe it would be prudent to 19 consider attaching economic impact statements to all 20 pieces of legislation. 21 This action would more comprehensively inform 22 all members of the Assembly and Senate of the impact 23 each bill brought to the floor has on its spending. 24 It would, thus, create a healthy debate, 25 including cost-benefit analyses of each bill. 1 Business reform for New York is essential. 2 Changes to tax policy, and resulting 3 implementation, will spur a thriving business 4 community, which, in turn, will create job growth, 5 improve quality of life, and broaden the tax base. 6 When first asked to testify at this hearing, 7 I considered what I thought to be an obvious 8 question: 9 How does New York compare to other states 10 regarding competitive tax rates? 11 I think it should be considered on 12 two levels. 13 First, how does New York compare to the 14 neighboring states in all areas of taxation? 15 And, second, how do New York's business and 16 individual tax rates compare to the top-rated states 17 for tax climate? 18 The second is important, as many businesses 19 that do not need to be locally based appear to be 20 considering moving to states far away, based upon 21 the tax benefits of better-climate states. 22 Elected officials at all levels need to be 23 very careful when considering options for businesses 24 that either want to leave the state or wish to seek 25 tax credits if they move to the state. 1 Broad-based tax reform appears to be a better 2 choice than attempts to lure businesses with 3 single-business tax incentives. 4 A broad approach should result in more 5 businesses wanting to stay, and move here, rather 6 than just a few seeking preferential treatment. 7 Another point I wish to make concerns recent 8 programs introduced through legislation. 9 Programs such as Start-Up NY provide great 10 narrowly directed incentives and tax relief to 11 businesses. 12 I believe that this program could likely more 13 effective if brought into more areas throughout the 14 state, not just at the SUNYs. 15 An example that I found in my work through 16 the chamber of commerce, my law practice, and other 17 private business, I've had the pleasure of getting 18 to know about the many revitalization projects in 19 Suffolk and Nassau counties. 20 These are -- at the local downtowns. 21 I believe that well-considered tax relief 22 and/or enterprise zones with tax credits or tax 23 reductions for all businesses in these areas could 24 spur smart development and business growth. 25 Two example areas are Huntington Station and 1 Hempstead Village. 2 When this Committee considers tax reform, it 3 should explore the potential for benefits that tax 4 credits and incentives can provide to these types of 5 downtowns on a wide scale. 6 Overall economic growth of these communities 7 could lead to more jobs, better housing, and 8 business growth. 9 In essence, it would further broaden the tax 10 base in these financially-suffering areas. 11 In preparation for today, I was also pleased 12 to come across and review prior testimony from your 13 September 4th hearing. 14 I saw some excellent recommendations made by 15 the Business Council of New York State regarding the 16 corporate franchise tax, as well as several other 17 solidly researched positions on overall tax reform. 18 It appears that the Business Council 19 carefully researched and presented these reform 20 positions, and I think they should be seriously 21 considered. 22 I just wanted thank you for taking the time 23 to reach out to the community to get our input on 24 these very important issues. 25 1 SENATOR MARCELLINO: And, Brian, just so 2 you're aware, and perhaps you can pass it on to your 3 members, we do require, currently, a financial 4 impact statement for every piece of legislation that 5 comes before our Committees. 6 In my Committee, which deals a lot with the 7 taxes and tax credits, that go through, and I know 8 in the Finance Committee, too, a financial impact 9 statement is required, and no bill gets by without 10 one. 11 So that is already a requirement and a policy 12 in New York State, at least in the Senate. 13 Any questions? 14 Go right ahead. 15 SENATOR MARTINS: Good morning. 16 You know, new business wants to open up. 17 Decides they want to open up in a downtown. 18 The comments I've gotten from our business 19 community, from various areas that I represent, is 20 how difficult it is for that business to actually 21 get up and running. 22 That the primary consideration for someone 23 who wants to start a new business, even during this 24 tough economic climate, are the hurdles that they 25 have to go through just to open the doors, just to 1 get the sign on the building, just to be able to, 2 you know, turn on the lights. 3 Can you give us some perspective on that? 4 Because, I do believe that, in many respects, 5 regulations, red tape, are the unspoken tax out 6 there on our business community that, oftentimes, 7 even is more intrusive than the taxes themselves. 8 The impasses and the hurdles that our 9 business communities have to go through, just to get 10 the lights on, get the doors open, whether you're a 11 restaurant, whether you're a gas station, whether 12 you're an audiologist or an attorney. 13 Can you speak to those issues, specifically, 14 again, also in your capacities with your chambers of 15 commerce. 16 BRIAN J. YUDEWITZ, ESQ.: I think one of the 17 most important things is, how the local governments 18 run the towns, the villages. 19 SENATOR MARCELLINO: Can we just check his 20 microphone? 21 Because I'm not hearing well here at all. 22 BRIAN J. YUDEWITZ, ESQ.: Is this better? 23 SENATOR MARCELLINO: It's better now. 24 Because it wasn't coming through up here at 25 all. 1 BRIAN J. YUDEWITZ, ESQ.: How's this? 2 SENATOR DeFRANCISCO: Good. 3 SENATOR MARCELLINO: Much better. 4 BRIAN J. YUDEWITZ, ESQ.: Okay. 5 As far as the regulations, I think they 6 should be looked at. 7 You have the local governments, the villages, 8 the towns, and often the regulations that get caught 9 in the weeds are on a local level. 10 You know, oftentimes, you had questioned 11 about certain issues with opening the doors. 12 The county health departments, you know, they 13 have a lot of say in how quickly different 14 businesses can open their doors. 15 I think any kind of streamlining at the 16 county level would help in that area. 17 DR. LISA PREDMORE: We just had a business 18 who just opened in the town, happened to be a dog 19 groomer. 20 Poor lady -- was my personal friend -- you 21 know, she was on the phone with me all the time, How 22 am I going to get my -- literally, get her sign on 23 the door. 24 She couldn't get -- the red tape to get to 25 that point. 1 I think she told me it took her about 2 six months. 3 And the fees, and everything, there's too 4 much; too many people. 5 It needs just to be a little more 6 streamlined. 7 And then the poor lady couldn't get her 8 business open, so she missed most of the season. 9 You know it's -- people don't walk in 10 downtown in the cold weather. 11 She couldn't get her door open because there 12 were too many red tapes and too many 13 back-and-forths. 14 BRIAN J. YUDEWITZ, ESQ.: If I just may also 15 add, oftentimes, individuals and businesses have to 16 reach out to expediters who understand each level of 17 government, to assist them in getting to that point 18 where they can actually cut through the red tape and 19 the regulations. 20 And people who don't know about such 21 expediters or people who can assist them with the 22 local governments often get stuck waiting a longer 23 time to open up their doors. 24 SENATOR MARTINS: But I guess we can all 25 agree that life would be a lot easier if we didn't 1 need expediters, and if the average person looking 2 to open a business was able to do so without having 3 to go through so many hoops and hurdles. 4 BRIAN J. YUDEWITZ, ESQ.: We absolutely 5 agree, yes. 6 SENATOR MARCELLINO: Senator Valesky. 7 SENATOR VALESKY: Thank you, Mr. Chairman. 8 And, actually, to Senator Martins' question 9 and point, that's exactly why we're hosting these 10 parallel hearings on regulatory reform. 11 Just to comment, Dr. Predmore, and 12 I appreciate you raising the issue of -- well, it's 13 not really a question, just a comment, but, raising 14 the issue of simplifying the tax code itself. 15 When we, from a government perspective, are 16 looking at various taxes to reduce or tax credits to 17 provide, they all come with an impact on the state 18 budget, some sort of a dollar impact on the same 19 budget, which we make decisions about, in part, 20 based on that. 21 But the issue that you're raising, is that by 22 simplifying the code itself, while you wouldn't 23 necessarily be saved tax dollars, in your testimony 24 you say that you would be saved thousands of dollars 25 because you could prepare the taxes yourself, as 1 opposed to hiring others to do them for you? 2 Is that your point? 3 DR. LISA PREDMORE: Uh-huh. 4 Just, if X, then Y. 5 SENATOR VALESKY: Yeah. 6 DR. LISA PREDMORE: You know, instead of 7 having me go to my accountant and say -- he says, 8 if X, then you need to do A, B, C, D, to get to Y, 9 just simplify things. 10 Make it so that the dog groomer can do it 11 herself, make it so I can do it myself. 12 I'm not asking to charge me less, or to 13 change the rates, but just make it simple so that 14 the general layperson can get to the answer 15 themselves. 16 SENATOR VALESKY: Great, thank you. 17 It's a good point. 18 SENATOR DeFRANCISCO: And interesting point 19 in the Syracuse hearing, an accountant testified 20 that when the federal government passed the 21 Tax Reform Act of 1980, whatever it was, he had more 22 and more business because of the complication of the 23 so-called "reform." 24 So we'll try to make sure that we go the 25 other way. 1 SENATOR MARCELLINO: Just a quickie. 2 You heard the testimony of prior people, and 3 who have been here before, the question of 4 broad-based tax or tax incentives. 5 Are there any tax incentives that you feel 6 are working well for small businesses? 7 BRIAN J. YUDEWITZ, ESQ.: Well, I feel that 8 the film-industry credits have really created a lot 9 of jobs in Nassau County, and I think we'll start to 10 see the benefits of Start-Up NY once it gets going. 11 But I think that -- I also agree that that 12 should be considered to be broadened to other areas, 13 not just development around the SUNYs. 14 SENATOR MARCELLINO: So if I said that the 15 broad-based sort of tax cuts would be preferable, we 16 could lower, generally, would help you more than 17 just picking and choosing spots? 18 BRIAN J. YUDEWITZ, ESQ.: I think that would 19 be the more prudent way to go, yes. 20 SENATOR MARCELLINO: Thank you very much. 21 Appreciate your testimony. 22 DR. LISA PREDMORE: Thank you. 23 BRIAN J. YUDEWITZ, ESQ.: Thank you. 24 SENATOR MARCELLINO: The next speaker is, 25 Richard McGrath, CPA, from Thomson Reuters Tax and 1 Accounting, Inc., and, Frank Degen, past president 2 of the National Association of Enrolled Agents. 3 Richard, go ahead. 4 RICHARD McGRATH, CPA: Senator Marcellino, 5 can you hear me okay? 6 SENATOR MARCELLINO: I can hear you fine, 7 Richard. 8 RICHARD McGRATH, CPA: Thank you. 9 Senator DeFrancisco, Senator Marcellino, and 10 the Committee, I want to thank you for the 11 opportunity to address the Committee. 12 A little bit about my background. 13 I know Senator Marcellino well, not so much 14 the others, so, just in the way of background: 15 I started by career working for the CPA firm 16 Price-Waterhouse & Company, back then was the name, 17 in audit and tax. 18 Basically, over the last 30 years, have made 19 a living selling and supporting tax software at the 20 nation's largest CPA firms, corporations, and banks, 21 used to do their tax returns, and in CPA firms' 22 cases, their clients' tax returns. 23 So, that's what I've been doing for a living. 24 But I just want clarify, I'm not speaking for 25 Thomson Reuters, because we actually make a lot of 1 money with tax complexity. 2 Okay? 3 I'm speaking as an individual, and my 4 experiences and what I've seen, you know, during my 5 career in that regard, to hopefully, you know, 6 recommend some tax policies that would generate 7 economic growth, and maybe even help New York 8 socially, okay, on a lot of different levels. 9 But, I'll give you a couple of general 10 observations I've seen, and then some specifics, if 11 I was sitting in your seat, what I think I'd like to 12 try to do. 13 But a general observation, and we've heard it 14 over a number speakers, it seems intuitive, but 15 sometimes we forget it, but taxes matter. 16 Okay? 17 My part of Thomson Reuters Tax and 18 Accounting, our division, is headquartered down in 19 north Dallas. 20 And in the early '80s, when you went from 21 DFW airport to north Dallas, it was just cattle, it 22 was all green fields. 23 You go to that same place right now, it's 24 packed with business, business people, it's 25 incredible. 1 They lead the country, Texas does, in job 2 growth almost every year, and I believe, in large 3 part, because they have no income tax on 4 corporations or people. 5 So taxes matter. 6 You see in it California. 7 People leave California, they go to 8 Washington, they go to Nevada; no income tax. 9 In New York, we go to Florida. 10 That tends to be. 11 So people have choices and they will make 12 their actions accordingly. 13 The other thing that I want -- a general 14 observation that's changed in the three decades I've 15 been involved in, you know, preparing and 16 supporting, you know, tax returns, is the federal 17 tax law -- and I think Mitch Pally mentioned this, 18 the federal tax law has changed a lot, you know, 19 since 1981, that really hurts people that live in 20 high-taxed states. 21 When I was doing of tax returns in 1981, the 22 top rate was 70 percent. 23 Okay? 24 So if you had somebody paying New York State 25 taxes of $5,000, okay, which was common, you could 1 easily justify it by saying, Okay, I paid New York 2 their five grand, but when I did my federal-tax 3 return, I got $3500 reduction in my federal tax. 4 So the cost, the premium, to live in New York 5 was 1500 bucks. 6 Okay? 7 And I would justify that, I'd to go Texas, 8 I wouldn't pay the 1500, but for 1500, I'm on 9 Long Island, New York City, job opportunities. 10 But what's happened is, because the top tax 11 rate has come way down, at one point to 28 percent, 12 the value of that, you know, $5,000 deduction is not 13 nearly what it once was. 14 And worse, as a couple of speakers might have 15 mentioned, because of the alternative minimum tax, 16 the change in the federal law, which, now, doesn't 17 capture your wealthy people only, but, basically, 18 the middle class, in most of the returns I see, 19 okay, at least here in downstate, for that $5,000 in 20 New York State, okay, which is no longer 5,000 -- we 21 all know that, it's often higher -- I get no 22 deduction on my federal tax return because of AMT. 23 So now that same person who used to say, 24 "Ah, I can live and stay in New York, because it's 25 really only costing me an extra 1500," because of 1 the federal write-off, he's getting no write-off, 2 and the 5,000 is not 5,000; it's 15 or 20 grand. 3 That person, ultimately, is gonna make a 4 decision and vote with their feet. 5 Okay, so that's a broad-based thing. 6 You can't change it, it's because of federal 7 policy. 8 Okay? 9 So those are two broad-based. 10 So what can you do, you know, at your level 11 to actually have any impact? 12 I'd like to see, you know, elimination of 13 corporate income taxes and personal-property taxes. 14 That's never happening in New York State. 15 You know, we're not gonna become Texas and 16 Florida. 17 Okay? 18 But what can we do? 19 All right, I think there's one major, major 20 change, and Matt Cohen mentioned it earlier today. 21 The biggest negative -- it's almost 22 anti-senior policy taxation -- the biggest negative 23 we have is the estate tax. 24 Okay, you're chasing people out of here. 25 You'll probably chase me out of here, you 1 know, at that point in time. 2 People that have saved their entire lives, 3 okay, when they die, the federal tax code now does 4 not tax the first $5 million -- $5,250,000, no 5 federal tax. 6 Okay? 7 But if I live in this state, if you have over 8 a million, you tax it aggressively. 9 Okay? 10 Once you get over a million, you start at 11 almost 6 percent. 12 You go up to as high as 16 percent. 13 And the average person is very loathe to give 14 you any money that they worked their entire lives 15 for. 16 They think it is almost like you're stealing 17 from their kids. 18 I saved $4 million. 19 And, you know, nobody -- if I go to Florida, 20 or most any other state, okay -- well, actually, 21 most of the states. 22 Over -- probably 35 states don't tax estate 23 taxes. 24 But New York State's gonna tax that. 25 What they're gonna do, it's very simple, they 1 move. 2 The estate tax is the easiest tax to get out 3 of. 4 You simply vote with your feet. 5 And the Senator mentioned, that has so many 6 bad impacts. 7 Okay, I lose the money that comes with that. 8 I lose that community member, okay, that was 9 giving to local charities, that supports your golf 10 outings, that supports your campaigns, that supports 11 local business, the library...I lose all of that, 12 all because of this one simple, you know, tax. 13 And the reason other states don't do that any 14 longer, if I was here in 2001, every state pretty 15 much had an estate tax, because, back then, the 16 federal estate-tax exclusion was only $675,000. 17 So any decent-size estate would pay the feds; 18 and, so, whatever you paid New York State, or any 19 other state, would be a credit against what you paid 20 the feds. 21 So states would do it because they're, like, 22 Okay, they pay us, but they get it off on the 23 federal. 24 Nobody pays federal -- I shouldn't say 25 nobody. 1 Most people don't pay federal estate taxes 2 any longer because you have to have assets greater 3 than $5,250,000. 4 So whatever you pay in taxes to the states 5 are real. 6 Okay? 7 You could goes elsewhere and avoid them. 8 So all the other states fell in line, they 9 don't do it, they dropped it. 10 And every year, I think North Carolina is 11 going to drop it this year. 12 There's probably 16 states that do it. 13 You make that one single change, and you 14 raise the exclusion from a million to, let's say, 15 5 million to match the feds, I don't think it's 16 going to break the bank, because [unintelligible], 17 you have to look at the hard numbers. 18 I don't think this is raising big dollars, 19 but you're chasing, I think they talked to, about, 20 a million people have left here since 1992, with 21 $68 billion, and, I don't know, in aggregate 22 revenue. 23 But, if you could make that one change, 24 I think it would substantially keep a lot of people 25 with resources that can invest in our community 1 members, by that one simple change. 2 The other thing I would do, it's a smaller 3 item, but it kind of peeves people when they're 4 filling out their tax returns: 5 If you work for New York State and you get a 6 pension, it's not taxable. 7 Okay? 8 Generally, that person worked for 9 New York State, they didn't pay anything in, it all 10 comes back, and they don't -- we don't pay income 11 tax on it. 12 If -- in my case, if you invest in a 401(k) 13 or an IRA, and you get that same pension, if you 14 will, okay, New York State excludes 20,000, but they 15 tax all the rest. 16 And it's just not equitable. 17 Here's a state worker, they didn't pay 18 anything in, their pension's totally tax-free. 19 Here's a private-sector worker who gets a 20 401(k), an IRA payment, or a regular pension, if 21 you're lucky enough to still have a defined benefit, 22 and you have to pay tax on that. 23 It's just another one of those items that, 24 for somebody, a retiree, and they get to that point 25 in life, and these are people with resources that we 1 want to retain, you know, when they leave, their 2 kids off and go, and everybody goes with them. 3 Okay? 4 It's just another line item. 5 If you could -- I don't think this raises 6 tremendous revenues, but if that exclusion could be 7 raised, or make IRA distributions and 401(k)'s, you 8 know, tax-free just like a pension is, I think that 9 would be very helpful. 10 One thing that New York State, I'll give them 11 credit for, you don't tax social security. 12 Federal -- you know, U.S. 1040 tax return, at 13 above a certain level, you know, it was $32,000, 14 it's indexed up, you pay tax on your 15 social security. 16 New York backs that out. 17 So you do a good thing. 18 You're actually -- you keep a lot of people 19 that were working for the state, or they worked for 20 the police force or the fire department, it's a 21 pretty tax-friendly place. 22 You fill out a tax return, you don't pay 23 taxes on your pension. 24 The rates could be lower, of course, 25 broad-based. 1 But, in general, if you could do better on 2 the private-sector side, I think you'd retain people 3 there. 4 And then, last thing, because I know I'm 5 rambling on here a little bit. 6 That's on the individual side. 7 On the business side, the one main 8 recommendation I'd make, and it has really nothing 9 to do with taxes, it's more of a Department of State 10 requirement: 11 LLCs (limited-liability companies) have 12 replaced corporations as the new business-entity 13 type. 14 And when you create -- somebody in this room 15 wants to create a dog-grooming business, most 16 likely, they're going to create a limited-liability 17 company. 18 It has a lot of advantages, but one of the 19 big advantages is, on your tax return, if it's just 20 me, it ends up on my Schedule C. 21 I don't have to do a special corporate tax 22 return, or any of that, so -- but I still get a 23 protective corporate veil. 24 So that's why you see LLCs all over the 25 place. 1 We have this ridiculous requirement, in my 2 mind, that when you create one of these things, you 3 have to go and put in the newspaper -- in two 4 newspapers, not only one newspaper, the fact that, 5 Rich McGrath, LLC, created an LLC, and my name is 6 Rich McGrath; my office, 260 Main Street, Northport, 7 New York. 8 I have no idea what good that does anybody. 9 But in New York State -- there was only one 10 other state I could find that does this. 11 It was Nebraska. 12 In Nebraska, it costs you $35 to do that same 13 ad, the advertising, in general, on average. 14 In New York State, the cost of newspapers, 15 it's crazy. 16 On average, in New York City, it could cost 17 you 1500 bucks. 18 Okay? 19 Here on Long Island, 800 to 1,000. 20 So here I am. 21 Most LLCs amount to nothing. 22 You create it, because it's an idea, but you 23 want to encourage that, because LLCs can be 24 created anywhere. 25 They're separate and distinct from the 1 person, so you can create it in Nevada, like a lot 2 of people do. 3 So you want to make it easy. 4 So I personally would take that same 5 information, if you really want to publicize it, put 6 it on a state website for free. 7 Don't make the poor guy -- 8 Or the guy who owns the "Long Islander" I'm 9 looking at over there, they wouldn't like it, 10 because they do pages and pages of these 11 advertisements. 12 -- but it really inhibits, and in a real 13 practical way, creating LLCs. 14 So, I'd make that recommended change. 15 Thank you very much. 16 FRANK DEGEN: Good morning, 17 Senator DeFrancisco, Senator Marcellino, and the 18 rest of the gentlemen. 19 And a special good morning to 20 Senator Flanagan. 21 I happen to live in his Senatorial District, 22 so I just wanted to acknowledge him. 23 My name is Frank Degen. 24 I am an enrolled agent. 25 And, I thank you for the opportunity to be 1 here today. 2 I'm speaking on behalf of the New York State 3 Society of Enrolled Agents, which is the New York 4 affiliate of the National Association of Enrolled 5 Agents; or, "NAEA." 6 And NAEA represents the interests of about 7 47,000 enrolled agents in the United States. 8 And for anyone who may not know what an 9 "enrolled agent" is, we are the only 10 federally-licensed tax practitioners that have 11 unlimited rights to represent taxpayers. 12 My comments today are going to be a little 13 bit different than most of the ones you've heard 14 today. 15 I've heard comments about tax legislation, 16 the impact on business, and so on. 17 I want to talking about after-the-fact 18 comments. 19 After legislation is passed, taxpayers have 20 an obligation to comply with the tax laws, and 21 enrolled agents and certified public accountants 22 help taxpayers do that. 23 And that's where I want to address my 24 comments. 25 EAs are invested in sound tax-administration 1 policy. 2 We believe that the taxpayers, are the 3 benefactor of this discussion today, because, as 4 I said, you know, we want to enable them to fulfill 5 their obligations. 6 The biggest issue that we have, that 7 practitioners see in New York State, is a lack of 8 transparency. 9 So I want to focus a little bit of comments 10 on transparency and procedures. 11 It is very difficult in New York State to 12 know what the rules and regulations are. 13 Well, obviously, the income-tax regulations 14 are written and we can find them online, but, the 15 policies and procedures of the Department of 16 Taxation and Finance are not so simple. 17 The Internal Revenue Service has a document 18 called the "Internal Revenue Manual." It's called 19 the "IRM." 20 It's available online. 21 If any of you have an iPad, when I'm done 22 speaking, you can go to www.IRS.gov/IRM, and there 23 you will see the entire compendium of all the 24 policies and procedures that the IRS gives to its 25 employees; and, therefore, there's a level playing 1 field. 2 Tax practitioners, taxpayers, know what the 3 IRS procedures are. 4 So, for example, and the IRM is broken up 5 into parts. 6 There's a part on the examining process: 7 auditing. 8 There's a part on the collection process. 9 There's a part on the appeals process. 10 New York, apparently, does not have such a 11 similar document. 12 So the one thing that NYSSEA would request, 13 is that there be some movement to have the 14 publication of a New York State "IRM." 15 Maybe it exists, but if it does, it's not 16 readily available to the public. 17 One of our members sent a Freedom of 18 Information Act into the State Tax Department, 19 asking for the audit manual. 20 Now, the purpose of knowing what the audit 21 manual, is not to avoid taxes. 22 Taxpayers have an obligation to pay their 23 correct amount of tax, but there should be 24 transparency in what a taxpayer is supposed to 25 encounter. 1 And the response was back, Well, we have to 2 check with a lot of different units to find these 3 audit guidelines, and we haven't decide whether or 4 not we're going to make them available to you. 5 And, like -- in addition, though, there's 6 going to be a 25 percent -- 25-cent-page for 7 copying. 8 Now, we don't know how big it is. 9 We don't know what the result is. 10 But my point is, the International Revenue 11 Service, which is, traditionally, the bad guy here, 12 makes this available to the taxpayer and to the tax 13 practitioner. 14 So what we would ask is, that you perhaps 15 consider asking the Department of Taxation and 16 Finance to produce such a document; or, if it 17 exists, to make its availability online. 18 One of the reasons why [unintelligible] for 19 the taxpayer, for example, if I want to enter into 20 an installment agreement for a taxpayer that cannot 21 pay their full liability, I can go to the IRM and 22 I know what the procedures are. 23 If it's this amount of money, I know I have 24 to do this. 25 I know if they can pay it in 60 months, I can 1 do this. 2 But in New York State, we don't have that. 3 The taxpayer really is sort of on the end of 4 the stick. 5 Another issue is, timing is an issue. 6 You know, practitioners such as myself, or 7 certified public accountants, enrolled agents, we 8 need powers of attorney in order to represent 9 taxpayers. 10 We step in their shoes. 11 We try to interact with either the IRS or the 12 Department of Taxation and Finance. 13 But here's the problem we encounter, is that, 14 if enrolled agents or CPAs are dealing with a 15 tax-compliance officer in New York State, and the 16 tax-compliance officer, we have a power of attorney 17 and we want to stop, for example, a wage garnish or 18 a levy, or something, we don't have the ability to 19 send the power of attorney directly to that 20 tax-compliance officer. 21 We have to send to it to a centralized 22 location. 23 Two or three days may go by, and the 24 taxpayer's wages may have been garnished in that 25 interim time. 1 So it's important that we hope we have a 2 change in policy like that. 3 We also would like to see the Department of 4 Taxation and Finance empower some of their people to 5 make sound judgments. 6 Apparently, and a lot of this is anecdotal, 7 personal experience, but it -- there does not seem 8 to be enough judgment-making, and I'm not talking 9 about cases that involve multi-millions of dollars. 10 Obviously, there have been guidelines. 11 But if a compliance officer's dealing with a 12 $2500 outstanding tax liability, and the 13 practitioner or the taxpayer says, Listen, I need a 14 couple of days, I need a couple weeks, I can do an 15 installment agreement, blah, blah, blah, often they 16 are just turned down, because the guidelines, which 17 we really don't know because of the lack of this 18 transparency, the personnel will tell us, My hands 19 are tied. I have to levy on this. Or, I have to 20 just ignore you. 21 So, we need this transparency. 22 It's very, very important in terms of dealing 23 with the personnel. 24 And we think this empowerment, you know, on a 25 limited basis, would go a long way in solving 1 problems. 2 I want to just address two other issues. 3 One is somewhat parochial, in the sense that, 4 enrolled agents, in the eyes of the IRS, are viewed 5 on a par with certified public accountants and 6 attorneys in their ability to represent taxpayers. 7 Now, I'm not saying I have the same skill 8 sets as a CPA. 9 No, I can't audit. 10 I can't do those kinds of things. 11 But in terms of representing clients, we are 12 all the same group. 13 We call ourselves the "Legacy Circular 230." 14 "Circular 230" is a document that the 15 United States Treasury Department has produced which 16 governs the rights to practice. 17 So the three of us -- our three groups are 18 joined together. 19 In New York State, when legislation is 20 passed, unfortunately, because of our lesser numbers 21 than CPAs or attorneys, we are often the forgotten 22 children. 23 In 2009, for example, when the department 24 decided to register all tax preparers, and the 25 registration was simply a listing. 1 And, basically, you had -- if you did any tax 2 returns in New York, you had to enter your name in 3 the book, so to speak. 4 If you did ten or more tax returns, you had 5 to pay a $100 fee. 6 Now, when that came about, CPAs and 7 attorneys were exempt from the registration, because 8 of their alleged expertise. 9 Enrolled agents were not; and, yet, as 10 I said, on the federal level, we have the same 11 rights and powers. 12 And so what happened is, it took us a long 13 time in order to get that changed. 14 Now EAs are grouped. 15 And I do -- he's not here today, but I do 16 thank Assemblyman David McDonough who took a real 17 lead in the legislative solution to that problem. 18 So we ask you, as an organization, in the 19 future, anytime there is legislation, where the 20 rights of practitioners are involved, please keep 21 enrolled agents in the same group as attorneys and 22 certified public accountants. 23 And the last thing I want to mention is the 24 recent proposal of the Department of Taxation and 25 Finance to regulate tax preparers. 1 I don't know if you're familiar with a case 2 that's been a national one -- 3 And Mr. McGrath probably is. 4 -- it's called "IRS versus Loving." 5 And, Loving -- I just want to take one minute 6 to explain the case so you'll understand the point 7 of my testimony here -- or my comments, not 8 testimony. 9 In 2011, the IRS promulgated regulations that 10 required all tax-return preparers, except attorneys, 11 enrolled agents, and certified public accountants, 12 to pass a competency exam, and to take continuing 13 education, in order to prepare tax returns for the 14 public. 15 That's an admirable goal. 16 NAEA and NYSSA, we support that. 17 We believe it's good policy. 18 We believe that it should be done on a 19 national basis. 20 The IRS, as I said, instituted these 21 regulations in 2011. 22 Three plaintiffs; the first lady's name is 23 Sabrina Loving, hence the case "IRS versus Loving." 24 They contested that in the United States 25 District Court, and the District Court ruled in 1 favor of the three unlicensed preparers. 2 They said the IRS had no statutory right to 3 do it. 4 It is now in -- it's just been heard -- oral 5 arguments were heard September 24th in the Court of 6 Appeals for the District of Columbia Circuit, and we 7 don't know what's going to happen. 8 If the IRS prevails, then all tax preparers 9 will have to be regulated, with a competency exam 10 and continuing education. 11 Or in the interim, about -- oh, I guess it 12 was about a month ago, New York State Department of 13 Taxation and Finance introduced regulations, subject 14 to the provisions of Section 32 of the 15 New York State Tax Law, which is the original 16 registration of preparers which they instituted in 17 2009, to now have a competency exam and a continuing 18 education for all tax-return preparers. 19 Now, normally, that would be a good idea, but 20 it seems duplicative of what the federal is. 21 If the IRS is going to do this, why does 22 New York State want to have a second tier of this? 23 It just doesn't make any sense. 24 Now, I would suggest that this initiative, 25 while it's noble in purpose, should be at least 1 postponed until the Court of Appeals rules. 2 If the IRS wins the case, then this New York 3 registration seems to be just a redundancy, and to 4 serve no useful purpose. 5 All right? 6 So I would just ask for some, perhaps 7 restraint on the Department of Taxation and Finance, 8 to wait to see, rather than institute something, 9 because it will be costly, and it's just one more 10 regulation, and, unfortunately, it could be a 11 redundancy in terms of where we are. 12 Once again, I do thank you for the 13 opportunity to be here. 14 NYSSEA and our legislative teams stand ready 15 to assist anytime we can be available. 16 If you have any questions, I'll be glad to 17 answer them. 18 And, Senator DeFrancisco, I just want to make 19 one comment about the AMT which I heard today. 20 The AMT in New York is very, very 21 infrequently imposed on taxpayers. 22 I have taxpayers with hundreds of thousands 23 of dollars of income, and it really is rare, there's 24 very few tax-preference items. 25 But on the federal, you mentioned about the 1 mortgage deduction -- 2 SENATOR DeFRANCISCO: Excuse me. 3 FRANK DEGEN: -- the mortgage deduction isn't 4 allowed -- 5 SENATOR DeFRANCISCO: Excuse me. 6 Before you get to federal -- 7 FRANK DEGEN: I'm sorry? 8 SENATOR DeFRANCISCO: Before you get to 9 federal, what do you mean, it's rarely imposed? 10 What does that mean? 11 FRANK DEGEN: It's rarely imposed in 12 New York State. 13 Very few taxpayers, as far as I can see. 14 SENATOR DeFRANCISCO: Are affected by the -- 15 FRANK DEGEN: By the New York State AMT, 16 right. 17 Yeah, very rare. 18 SENATOR DeFRANCISCO: Okay. 19 FRANK DEGEN: And on the federal level, 20 mortgage interest is allowed, except, if it's used 21 for something other than to buy your house or 22 improve your house. 23 So if someone takes a mortgage -- 24 RICHARD McGRATH, CPA: [Unintelligible], up 25 to a million. 1 FRANK DEGEN: -- up to a million dollars, 2 right. 3 Actually, it's 1.1 now on the federal. 4 But you -- you -- so if you use it to buy or 5 build your house, there's no problem, as Rich said, 6 up to $1 million; or 1.1 as they now have it. 7 But if you go on vacation, then it becomes a 8 preference item for AMT. 9 I just wanted to clarify that, just so for 10 everyone's edification. 11 And, rightly so. 12 You know, I guess the government shouldn't 13 subsidize people's vacations if they're using their 14 mortgage. 15 But thank you, once again, for being here. 16 SENATOR MARCELLINO: Thank you. 17 Senator Flanagan. 18 SENATOR FLANAGAN: Frank and Rich, appreciate 19 the -- how detailed your comments are. 20 But, just one of things I've heard in 21 practice with clients, more recently in the last 22 couple of years, in particular, and now more than 23 ever, is how aggressive the Tax Department has 24 become; where, in the past, you might have had a 25 little more flexibility, particularly in working 1 with people in the field. 2 The feedback that I'm getting now is, when 3 you're talking about things like sales tax, and 4 issues like that, and audits, there's a lot of 5 manipulation of the time frames, which can then 6 ultimately be adverse to the small-business owner. 7 Do you -- in your experience, do you find 8 less of a willingness, and more of sort of a 9 maniacal focus on, "got to get the dollars"? 10 FRANK DEGEN: Yeah, I would agree with your 11 comments. 12 It seems that there's more direction from 13 Albany to do that. 14 Less -- there's less ability to interact on 15 telephones. 16 And the audit side, for example, a 17 non-residency audit, they are so, so intrusive. 18 It's, just, you know, you have, to get your 19 cell phone records, your credit card -- I mean, 20 obviously, we all have the same interests: 21 We want people, if they owe the tax in 22 New York State, to pay it. 23 But you're absolutely correct, there just 24 seems to be this aggressiveness. 25 As a matter of fact, I have taxpayers that 1 have liabilities at the end of the year. 2 I always say to them, Our first move is, we 3 always pay New York first, because they're 4 impossible -- 5 I'm using the word "impossible." 6 You know, take that word out. 7 You know, poetic license, if you will. 8 -- they're impossible to work with. 9 I want to work -- I'll -- we'll pay that. 10 We'll work with the IRS. 11 They're much more amiable to reasonable 12 solutions. 13 So I think what you said is perfectly on 14 point. 15 SENATOR DeFRANCISCO: Thanks a lot. 16 RICHARD McGRATH, CPA: And you'll 17 definitely -- John, you'll definitely see it, when 18 people move to Florida, there's people, 19 legitimately, move to Florida. 20 But because they're, you know, legacy 21 New York residents, they come back for golf outings, 22 or whatever, there's definitely a feel, when that 23 letter comes in that you have to prove that you're a 24 Florida resident, you're guilty, you know, until 25 proven innocent. 1 And then there are people that just, 2 basically, cut their ways. 3 And the more you do that be, it's easier for 4 the kids to leave, and you lose it all. 5 So, you know -- and that's very common. 6 FRANK DEGEN: Yeah, and even in the notices 7 that are sent to taxpayers, Richard's hit on it, he 8 says, "you're guilty." 9 The question will come, you owe us $2,000 10 because you didn't do this. 11 Not -- the letter should come and say, We 12 think you may owe us. Can you explain? 13 It's just -- it's just the mindset to the 14 taxpayer, that you are guilty, and it's your turn to 15 get out of this now. 16 SENATOR FLANAGAN: Thank you. 17 SENATOR MARCELLINO: Assemblyman. 18 SENATOR VALESKY: He's gone. 19 SENATOR MARCELLINO: He's gone. 20 He had a question. 21 Gentlemen, thank you very much. 22 I do appreciate your testimony. 23 It's been very helpful. 24 Our final speaker will be 25 Damon J. Hemmerdinger. 1 Hope I didn't mispronounce the name. 2 And, he's co-president of ATCO, which is a 3 private real-estate development company. 4 DAMON J. HEMMERDINGER: Hello. 5 Thank you for your time this morning. 6 SENATOR MARCELLINO: Thank you. 7 DAMON J. HEMMERDINGER: My name is 8 Damon Hemmerdinger, and I'm co-president of a 9 private real-estate developer called "ATCO." 10 I also serve as chair of the 11 International Council of Shopping Centers New York 12 Government Relations Committee, and the Board of 13 Governors of the Real Estate Board of New York. 14 Until it was disbanded, I was the developer 15 member of the official New York State Brownfield 16 Advisory Panel. 17 I'm here today on behalf of the ICSC's 18 New York Government Relations Committee, as well as 19 myself. 20 My company, ATCO, is based in New York City, 21 with offices in Manhattan and Queens. 22 We employ 53 people, plus staff at our 23 buildings. 24 We're currently remediating our third 25 brownfield site in New York State, and our previous 1 remediation work has garnered awards, including the 2 Phoenix Award for U.S. EPA Region 2. 3 New York State's Brownfield Cleanup Program 4 works, and it should be made permanent. 5 The BCP has been one of New York's best tools 6 for encouraging economic growth and prosperity, 7 while making more of our state healthy for humans 8 and the environment. 9 Over the past several years, the broader 10 development community gained a familiarity with the 11 program, and the state and local communities began 12 to reap the rewards of the 485 urban and rural 13 former industrial-contaminated sites in the program 14 located throughout the state. 15 It was encouraging when, in 2012, the 16 Legislature passed and the Governor signed into law 17 an amendment extending the sunset date until 18 December 31, 2015. 19 My colleagues and I in the development and 20 remediation industries were disappointed that the 21 past session ended without another extension. 22 Since remediation projects take so long, and 23 since issuance of the certificate of completion is 24 subject to the department -- to DEC's discretion, in 25 terms of its timing, we're once again approaching 1 the moment where no developer could rationally enter 2 a new site into the program. 3 New York's BCP is one of the nation's 4 exemplary programs, because it is market-driven and 5 as-of-right. 6 The tax credits, which are not available 7 until after a developer completes the cleanup, and 8 then the project, have produced better cleanups and 9 better projects. 10 The taxes generated from the average project 11 more than offset the State's investment in the tax 12 credits over a relatively short period of time, and 13 also result in exponential increases in real-estate 14 property values in the surrounding areas. 15 The as-of-right nature of the program is a 16 critical component. 17 The certainty of the credit allows the 18 program to impact siting decisions before they're 19 made. 20 In other words, Should I locate this factory 21 or shopping center on a brownfield or greenfield; 22 or, frankly, should I build it in New York State at 23 all? 24 A discretionary award made after a site is 25 under control, and after enough predevelopment work 1 has been undertaken to submit a typical ESDC 2 application, would still have a powerful impact on 3 the project's feasibility, scale, and quality, but 4 it will have missed the opportunity to influence the 5 initial siting decision. 6 Although very little statistical research has 7 been performed on the actual benefits and costs of 8 the BCP, I'd like to share a couple of pieces of 9 data which I think are significant. 10 By one calculation, the cost to create a job 11 through the BCP has been $175,000, versus $433,000 12 in all other state economic-development programs 13 during the same period. 14 New York City EDC calculated that the city of 15 New York will reap a $188 million benefit, that's 16 net present value in 2007 dollars. 17 So, a $188 million benefit from a $32 million 18 brownfield tax-credit award. 19 This 5.9-times return did not reflect the 20 benefits obtained by the state or increasing 21 property values in the surrounding area. 22 Critics of the law refer over and over again 23 to misleading facts. 24 For example, critics still focus on the small 25 number of projects that received windfalls early on 1 in the Brownfield Cleanup Program. 2 But they know, and more importantly, you 3 know, that this problem was eliminated when the 4 tax-credit formula was amended in 2008, linking the 5 cost of cleanup on the site to credits, and also 6 imposing a cap. 7 Situations, such as Destiny and certain other 8 projects that still get talked about, cannot happen 9 again. 10 While .3 percent of the tax credits awarded 11 under the pre-2008 program were directed to 12 site-prep cleanup, by reason of -- in part, of 13 federal deduction for cleanup costs, 31 percent of 14 the credits have been directed to site preparation 15 under the current program. 16 In addition, the average award has been 17 reduced, from $14 million per project, to less than 18 $2 million. 19 Critics also claim that the BCP benefits only 20 projects in New York City, but the data proved that 21 the program is, in fact, being used throughout the 22 state. 23 Upstate sites account for 63 percent of all 24 BCP applications submitted, and, far upstate sites, 25 which is DEC Regions 7, 8, and 9, actually account 1 for 51 percent of all BCP applications submitted. 2 Long Island is starting to use the program to 3 remediate sites and put them back into productive 4 use, encouraged by the Suffolk County Land Bank and 5 other initiatives. 6 As you probably know, Long Island is second 7 only to Buffalo in the number of state Superfund 8 sites. 9 And one of the few changes that I would hope 10 to see made in the program, would be to allow 11 Class 2 sites to be eligible for the program. 12 Remediating Long Island Superfund sites and 13 other brownfields, and covering them with new 14 projects that are protective of human health and the 15 environment, is the only way to safeguard 16 Long Island's sole drinking-water source, its 17 aquifer. 18 Without this program, there is little or no 19 incentive, and, certainly, no other program to 20 encourage parties to take on these sites. 21 In conclusion: 22 An investment by the State in brownfields is 23 a good deal for taxpayers because it is results in: 24 Clean and usable land instead of fenced 25 contaminated sites, certified by DEC for the planned 1 reuse; 2 New brick-and-mortar construction. 3 Over $6 billion of new capital has been 4 reported by DTF, from 2007 to 2012; 5 A corresponding increase in taxable 6 real-estate values, since that $6 billion was all 7 private-sector money; 8 Job creation for construction, materials, and 9 consultants, as work goes back into brownfield 10 cleanup and redevelopment; 11 And pay back many times over, through sales, 12 property, mortgage income, and payroll taxes. 13 The pending tax-credit sunset discourages new 14 brownfield investment, and thereby hampers job 15 creation, and the generation of sales, property, and 16 income taxes. 17 No innocent developer has an obligation to 18 develop someone else's contaminated real estate. 19 Therefore, eliminating the sunset provision 20 and making the BCP program permanent, without 21 turning the tax credits into a discretionary award, 22 will provide developers and investors with the 23 certainty they need to put their money back into 24 New York State's aging industrial real estate. 25 Thank you. 1 SENATOR MARCELLINO: Thank you. 2 And I do appreciate your comments on the 3 brownfield program. 4 I was the one who passed the bill in the 5 first place. 6 It has long been one that I thought should 7 have been expanded. 8 I agree with you, the idea of bringing in the 9 Class 2 sites is a good idea. 10 And, we will be working with the Governor's 11 Office and the Assembly, to try to carry out your 12 suggestions, because we think it should be a 13 permanent program, the way you described. 14 DAMON J. HEMMERDINGER: Great. 15 SENATOR MARCELLINO: Any questions? 16 John. 17 SENATOR FLANAGAN: Just one quick question. 18 I'd be interested to know where -- I won't 19 assume that you have this information right now -- 20 but you say, by one calculation, the cost to create 21 a job through the BCP is 175,000, versus 433,000. 22 I'd love to see the backup that goes with 23 that. 24 DAMON J. HEMMERDINGER: Sure, I'll get that 25 to you. 1 SENATOR FLANAGAN: It's a very interesting 2 number. 3 DAMON J. HEMMERDINGER: I'll get that to you. 4 SENATOR FLANAGAN: Thank you. 5 SENATOR MARCELLINO: Thank you very much. 6 We appreciate it. 7 DAMON J. HEMMERDINGER: Thank you very much. 8 SENATOR MARCELLINO: And we thank the people 9 who testified at this hearing. 10 It was very productive, and very good 11 testimony. 12 This will be go into the record. 13 As I said earlier, the -- you can view this 14 entire hearing on the State website -- State Senate 15 website, so that if you missed anything or any part 16 of it, you can get it if you have need for it. 17 We will be making recommendations to the 18 Senate. 19 We will have one more hearing tomorrow, in 20 New York City, at 250 Broadway, starting at 10:00 in 21 morning, and testimony will be taken in. 22 And then the staffs and my colleagues will be 23 working on a set of recommendations. 24 We will issue a report, which would be a 25 public document and available to anyone who would 1 like a copy of it, when it's done. 2 And, hopefully, we've seen the Governor has 3 put forth a commission, appointing both Carl McCall 4 and my old colleague, former-Governor George Pataki, 5 as chairs of that commission to look at tax reform 6 in New York State. 7 Our testimony will be offered to them as 8 well. 9 I think Senator DeFrancisco alluded to that 10 earlier. 11 We want to do this in a bipartisan and 12 cooperative manner. 13 We want things to work here, and we want to 14 see a reduction in taxes for the residents of 15 New York State. 16 That is the purpose of these hearings. 17 We want to make the tax system in 18 New York State fairer, so it's equitable. 19 If the State gets the revenue it needs to pay 20 its bills and to perform the functions that we are 21 required to perform, and that our constituents and 22 the residents of our state need, but, we don't want 23 to take more money than is necessary to do that. 24 So, this system will be looked at carefully, 25 and, hopefully, we'll come to a positive end. 1 Any other comments? 2 SENATOR DeFRANCISCO: Ditto. 3 SENATOR MARCELLINO: Thank you very much. 4 Meeting adjourned. 5 (Whereupon, at approximately 11:52 a.m., 6 the public hearing held before the New York State 7 Senate Standing Committee on Finance and the 8 New York State Senate Standing Committee on 9 Investigations and Government Operations 10 concluded, and adjourned.) 11 ---oOo--- 12 13 14 15 16 17 18 19 20 21 22 23 24 25