What's happening
This bill creates tax-preferred savings accounts for small businesses in New York to help them during economic hardship and incentivize job retention or creation.
Why it matters
Creates a state-administered system for small business savings accounts with tax advantages. , aiming to encourage businesses with 50 or fewer employees to set aside funds for use during tough economic times, with specific standards to minimize risk and fees.
Contributions to these accounts are tax-deductible (up to 10% of the prior year’s gross profits), and qualified withdrawals are tax-free. , provided they are used during designated periods of economic hardship for job retention, job creation, or financial stabilization.
Strict rules define when funds can be withdrawn tax-free. , tying access to economic downturns (as measured by GDP declines or government-declared disasters) and requiring withdrawals to support employment or business stability, with penalties for non-qualified use or early distribution.
Includes accountability measures. if funds are not used for qualifying purposes or if misuse is detected, tax benefits must be repaid in the following year, discouraging abuse and ensuring the program targets its intended goals.
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Who cares
Headline styles
Create Small Business Savings Accounts
Plain English, a few words. Used as the page title.
Sponsors
Senator · Senate District 4
3 Co-sponsors
History
- Referred to ways and means
- Delivered to assembly
- Passed senateVote 62–0
- Ordered to third reading cal.1825
- Committee discharged and committed to rules
- Referred to investigations and government operations
- Returned to senate
- Died in assembly
- Referred to ways and means
- Delivered to assembly
- Passed senateVote 63–0
- Ordered to third reading cal.2023
Show 2 earlier actions
- Committee discharged and committed to rules
- Referred to investigations and government operations
Companion bill
The same bill in the other chamber. A bill becomes law when one version passes both houses and the governor signs it, so either number can carry it.
Create Small Business Savings Accounts
In Assembly Committee · Ways And Means · Sponsor Charles Lavine
Full text
3 pagesUnderlined is new[Struck] is removedOfficial text on nysenate.gov ↗
STATE OF NEW YORK
3557
2017-2018 Regular Sessions
IN SENATE
January 24, 2017
Introduced by Sen. BOYLE -- read twice and ordered printed, and when printed to be committed to the Committee on Investigations and Government Operations
AN ACT to amend the tax law, in relation to establishing small business savings accounts
The People of the State of New York, represented in Senate and Assembly, do enact as follows:
Section 1. Short title. This act shall be known and may be cited as the "savings accounts for a variable economy (SAVE) for small businesses act".
§ 2. The tax law is amended by adding a new section 43 to read as follows:
§ 43. Small business savings accounts. (a) General. (1) The commissioner shall establish a program to administer small business savings accounts under this section.
(2) The commissioner shall establish minimum standards for small business savings accounts and shall establish accounts, or enter into agreements that meet these standards to administer such accounts. In establishing such standards and making such agreements the commissioner shall, to the extent practicable, seek to minimize fees, minimize risk of loss of principal, and ensure a range of investment risk options available to account beneficiaries. Any eligible small business may establish a small business savings account with respect to such business under terms which meet the requirements of this section.
(b) Definition. For the purposes of this section, the term "small business savings account" means a tax preferred savings account which is designated at the time of establishment of the plan as a small business savings account. Such designation shall be made in such manner as the commissioner may by regulation prescribe.
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD06746-01-7
S. 3557 2
(c) Contributions. (1) There shall be allowed as a deduction an amount equal to the contributions to a small business savings account for the taxable year.
(2) The aggregate amount of contributions for any taxable year to all small business savings accounts maintained for the benefit of an eligible small business shall not exceed an amount equal to ten percent of the gross profits of the business for the preceding taxable year.
(d) Distributions. (1) Any qualified distribution from a small business savings account shall not be includible in gross income.
(2) Any amounts distributed out of a small business savings account that are not qualified distributions shall be included in gross income for the taxable year of the distribution.
(3) For purposes of this section:
(A) The term "qualified distribution" means any amount:
(i) distributed from a small business savings account during a specified period of economic hardship; and
(ii) the distribution of which is certified by the taxpayer as part of a plan which provides for the reinvestment of such distribution for the funding of worker hiring or financial stabilization for the purposes of job retention or creation.
(B) The term "specified period of economic hardship" means:
(i) any one-year period beginning immediately after the end of any two consecutive quarters during which the annual rate of real gross domestic product (as determined by the Bureau of Economic Analysis of the Department of Commerce) decreases, or
(ii) any period, in no event shorter than one year, specified by the commissioner for purposes of this section.
(C) The commissioner may specify a period under clause (ii) of subparagraph (B) of this paragraph with respect to a specified area in the case of an area determined by the governor to warrant assistance from the Federal Government under the Robert T. Stafford Disaster Relief and Emergency Assistance Act.
(D) The commissioner shall, for each specified period of economic hardship establish a distribution limitation for qualified distributions from eligible small business accounts with respect to such period. The aggregate qualified distributions for any such period from all accounts with respect to an eligible small business shall not exceed such limitation.
(E) Any distribution not used in the manner certified under subparagraph (A) of this paragraph shall be treated as a distribution other than a qualified distribution in the taxable year of such distribution.
(F) Any amount contributed to a small business savings account (and any earnings attributable thereto), once distributed, shall not be treated as a qualified distribution unless such distribution is made not later than eight years after the date of such contribution. For purposes of this subparagraph, amounts (and the earnings attributable thereto) shall be treated as distributed on a first-in first-out basis.
(e) Eligible small business. For purposes of this section:
(1) The term "eligible small business" means, with respect to any calendar year, any person if the annual average number of full-time employees employed by such person during the preceding calendar year was fifty or fewer. For purposes of this paragraph, a preceding calendar year may be taken into account only if the person was in existence throughout the year.
S. 3557 3
(2)(A) The term "full-time employee" means, with respect to any year, an employee who is employed on average at least forty hours of service per week.
(B) The commissioner shall prescribe such regulations, rules, and guidance as may be necessary to determine the hours of service of an employee, including rules for the application of this subdivision to employees who are not compensated on an hourly basis.
(f) Effect of pledging account as security. If, during any taxable year of the eligible small business for whose benefit an account is established, the account or any portion thereof is pledged as security for a loan, the portion so pledged shall be treated as distributed in a distribution other than a qualified distribution.
§ 3. Section 209 of the tax law is amended by adding a new subdivision 13 to read as follows:
13. For any taxable year beginning on or after January first, two thousand seventeen, any eligible small business, as such term is defined pursuant to section forty-three of this chapter, shall be exempt from all taxes imposed pursuant to this article for any contribution to and qualified distribution from a small business savings account established pursuant to section forty-three of this chapter, subject to the limits set forth in such section. If a taxpayer files for and receives an exemption from the tax imposed under this section pursuant to the provisions of this subdivision and the funds withdrawn, or any portion thereof, are not expended for a qualifying purpose as set forth in section forty-three of this chapter, then the amount of such exemption claimed by the taxpayer shall be added back to tax in the next succeeding taxable year or in the year in which the exemption is disallowed.
§ 4. Subsection (c) of section 612 of the tax law is amended by adding a new paragraph 44 to read as follows:
(44) Any qualified contribution to and any qualified distribution from a small business savings account established pursuant to section fortythree of this chapter. If a taxpayer files for and receives an exemption from the tax imposed under this section pursuant to the provisions of this paragraph and are not a qualifying contribution or distribution as set forth in section forty-three of this chapter, then the amount of any such exemption claimed by the taxpayer shall be added back to tax in the next succeeding taxable year.
§ 5. This act shall take effect immediately and shall apply to taxable years beginning after such date.
Reflowed for reading: line numbers and page breaks removed. Cite the official text.
Sponsor's memo
Title of bill
An act to amend the tax law, in relation to establishing small business savings accounts
Purpose
This bill would allow small businesses to make contributions into a small business tax-deferred savings account to which the monies in such account may be withdrawn tax free during times of specified economic hardship, for the purpose of job retention or creation, or times where the Governor deems it a natural disaster to warrant assistance from the federal government.
Summary of provisions
Tax law is amended by adding a new section 42 requiring the commissioner to set minimum standards in establishing small business savings accounts while seeking to minimize fees, minimize risk of loss of principal, and ensure a range of investment risk options available to account beneficiaries. This section defines qualified contributions and qualified distributions from these saving accounts. The aggregate amount of contributions for any taxable year shall not exceed an amount equal to 10% of the gross profits of the business for the preceding taxable year. Qualified Distributions from a small business savings account shall not be includible in gross income. Any amounts distributed out of the small business savings account that are not qualified distributions shall be included in gross income for the taxable year of the distribution. Qualified Distributions as defined by this section are distributed during a specified period of economic hardship, distributions that are certified by the taxpayer as part of a plan which provides for the reinvestment of such distribution for the funding of worker hiring or financial stabilization for the purposes of job retention or creation, and distributions during a period where the Governor deems it a natural disaster to warrant assistance from the federal government under the Robert T. Stafford Disaster Relief and Emergency Assistance Act. In addition this section states that any amount contributed to a small business savings account once distributed shall not be treated as a qualified distribution unless such distribution is made no later than eight years after the date of contribution.
Read the full memo (616 words)
Section 209 of the tax law is amended by adding a new subdivision 13 claims that for any taxable year beginning on or after January 1 2016 any eligible small business pursuant to section 42 shall be exempt from imposed taxes for any contribution to and qualified distribution from a small business savings account. If a taxpayer files and receives funds that aren't considered qualified then the amount exempt will be added back to the tax in the next succeeding taxable year.
Subsection c of section 612 of the tax law is amended by adding a new paragraph 42 stating that if a taxpayer files for and receives exemptions from the tax imposed under this section that are not considered to be a qualified contribution to or a qualified distribution from a small business savings account then the amount of any such exemption claimed shall be added back to the tax in the next succeeding taxable year.
Justification
More than 170,000 small businesses were lost after the economic downturn of 2008 and many that survived are still having trouble obtaining loans and credit to help them stay open. This bill seeks to serve as a remedy for the challenges that small businesses face accessing credit to pay their bills by encouraging them to put money into a special savings account that can be used tax-free in times of economic hardship, for the purposes of job retention or creation, and during natural disasters.
Legislative history
2015-16: S.4376A Passed Senate
Fiscal implications
To be determined.
Effective date
This act shall take effect immediately and shall apply to taxable years beginning after such date.
Summaries, headlines and scores are AI-generated from the official bill text. How we score bills. Source: NYS Open Legislation.