Relates to business income base and certain small business taxpayers

4 Co-sponsors

• Rich Funke
• Patrick M. Gallivan
• William J. Larkin Jr.
• Catharine Young

Title of bill

An act to amend the tax law and the administrative code of the city of New York, in relation to business income base and certain small business taxpayers

Purpose

Reduces the amount small businesses and farms must pay in taxes by increasing the corporate tax threshold from $390,000 to $500,000 and lowering the rate to 2.5%. Expands the small business exemption to all PIT businesses regardless of whether they have employees, increases the threshold to $500,000, increases the exemption to 15%, and increases the exemption to 20% for farmers.

Summary of provisions

Section 1 amends article 9-A of the tax law to increase the threshold for which corporations are considered small corporations from $290,000 to $400,000 while reducing the tax rate for small corporations from 6.5% to 2.5%. The transition threshold from the small business rate to the full corporate rate will increase from $390,000 to $500,000. The phase down of rates will occur over two years: to 4% in 2017 and to 2% in 2018 and beyond.

Section 2 amends article 22 of the tax law to expand the business tax exemption to partnerships, LLCs, and S-corporations. The requirement that the business have at least one employee is eliminated. The exemption is increased from 5% to 10% for tax year 2017 and to 15% for tax years beginning on or after 2018. The exemption for farm businesses is increased from 5% to 20% for tax years beginning on or after January 1, 2017. The threshold for eligibility is increased from $250,000 to $500,000.

Section 3 makes corresponding changes to the New York City personal income tax code.

Justification

The FY 2014 Enacted Budget included a Senate sponsored Personal Income Tax exemption for small businesses and small farms. The exemption is equal to five percent of net income in 2016 and beyond. To qualify, the business must be a sole proprietor or farm (regardless of how the business is structured, sole proprietor, LLC, etc.), have less than $250,000 in net business income and employ at least one employee.

This bill increases the exemption, expands on the taxpayers eligible for the exemption, provides a rate cut for small businesses filing under the Corporate Franchise Tax and will help New York's small businesses and family farms remain an integral part of the State's economy for generations to come.

Legislative history

New bill.

Fiscal implications

SFY 2018: $302 million. When fully effective, the annual tax savings to small businesses will be $484 million.

Effective date

This act shall take effect immediately and apply to tax years beginning on or after January 1, 2017.