Relates to qualified financial instruments of RICS and REITS

Section 2 amends clause (D) of subparagraph 1 of paragraph (d) of subdivision 1 of section 210 of the tax law, as amended by section 19 of part T of chapter 59 of the laws of 2015, to add reference to the new clause D-1.

Section 3 amends subparagraph 1 of paragraph (d) of subdivision 1 of section 210 of the tax law is amended by adding a new clause (D-1), to add a separate minimum tax schedule for RICs and REITs.

Section 4 amends the opening paragraph of paragraph (a) of subdivision 5 of section 11-654.2 of the administrative code of the city of New York, as amended by section 16 of part P of chapter 60 of the laws of 2016, to add definitions of qualified financial instruments in cases of RIC and REITS in the New York City Tax Law.

Section 5 amends clause (iv) of subparagraph 1 of paragraph (e) of subdivision 1 of section 11-654 of the administrative code of the city of New York, as added by section 1 of part D of chapter 60 of the laws of 2015, to add a separate minimum tax schedule for RICs and REITs.

Section 6 provides that the act shall take effect immediately, except for sections 1, 2, and three, which shall be deemed to have been in effect in the same time and manner as chapter 59 of the laws of 2014, and sections four and five shall be deemed to have been in effect in the same time and manner as part D of chapter 60 of the laws of 2015.

Justification

New York's recent corporate tax reforms had the unintended consequence of dramatically increasing the difficulty of determining a RIC's fixed-dollar minimum tax liability in New York. Recognizing that these consequences were unintended and that the cost of these changes will be borne solely by funds' shareholders - including tens of millions of middle-income individuals, many of whom are New York residents - a technical correction is appropriate and necessary.

The calculation of a RIC's fixed-dollar minimum tax liability under the new rules requires a RIC to undertake a complex review of its assets in order to determine its New York-sourced gross receipts. RICs have reported that some of the information necessary to complete this review may not be commercially available or, where available, may be difficult to retrieve systematically.

Systemic difficulties in sourcing a RIC's very large number of assets and transactions makes determining the fixed-dollar minimum tax liability unduly burdensome on RICs and their shareholders. The high costs associated with performing these administrative tasks far weighs any fixed-dollar minimum tax that may actually be collected by New York.

The technical corrections is also favorable to New York. New York's budgeted revenues will be maintained, as a $500 ceiling captures what we understand is the budgeted tax increase over the $300 fixed-dollar minimum tax that most RICs paid under prior law. And additional revenue is likely to accrue to New York because RICs that may not have filing obligations are likely to view the certainty and ease of a $500 fixed payment to be preferable to the costs associated with determining whether or not a filing obligation exists.

Prior legislative history

New Bill

Fiscal implications

To be determined.

Effective date

This act shall take effect immediately; provided however that sections one, two and three of this act shall be deemed to have been in full force and effect on the same date and in the same manner as part A of chapter 59 of the laws of 2014, took effect; and provided further that sections four and five of this act shall be deemed to have been in full force and effect on the same date and in the same manner as part D of chapter 60 of the laws of 2015, took effect.