Set Minimum Corporate Taxable Income

Section 1. Subdivision 1 of section 210 of the tax law is amended by adding a new paragraph (c) to read as follows:

(c) Minimum taxable income base. (1) For taxable years beginning on or after January first, two thousand twenty-one, the amount prescribed by this paragraph shall be computed at the rate of three percent of the taxpayer's minimum taxable income base. The "taxpayer's minimum taxable income base" shall mean the portion of the taxpayer's minimum taxable income allocated within the state, subject to any modifications required by subparagraphs two and three of this paragraph.

(2) Except as provided in clause (C) of this subparagraph or in subparagraph three of this paragraph, at the election of the taxpayer there shall be deducted from the portion of its entire net income allocated within the state either or both of the items set forth in clauses (A) and (B) of this subparagraph, except that only one of such deductions shall be allowed with respect to any one item of property.

(A) Depreciation with respect to any property as described in clause (C) of this subparagraph, not exceeding twice the depreciation allowed with respect to the same property for federal income tax purposes. Such deduction shall be allowed only upon condition that entire net income be computed without any deduction for the depreciation or amortization of the same property, and the total of all deductions allowed in any taxable year or years with respect to the depreciation of any such property shall not exceed its cost or other basis.

(B) Expenditures paid or incurred during the taxable year for the construction, reconstruction, erection or acquisition of any property

EXPLANATION--Matter in italics (underscored) is new; matter in brackets

[ ] is old law to be omitted.

LBD08385-01-9

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such as described in clause (C) of this subparagraph which is used or to be used for purposes of research and development in the experimental or laboratory sense. Such purposes shall not be deemed to include the ordinary testing or inspection of materials or products for quality control, efficiency surveys, management studies, consumer surveys, advertising, promotions or research in connection with literary, historical or similar projects. Such deduction shall be allowed only on condition that entire net income for the taxable year and all succeeding taxable years be computed without the deduction of any such expenditures and without any deduction for depreciation of the same property, except to the extent that its basis may be attributable to factors other than such expenditures, or in case a deduction is allowable pursuant to this clause for only a part of such expenditures, on condition that any deduction allowed for federal income tax purposes on account of such expenditures or on account of depreciation of the same property be proportionately reduced in computing entire net income for the taxable year and all succeeding taxable years. With respect to property which is used or to be used for research and development only in part, or during only part of its useful life, a proportionate part of such expenditures shall be deductible. If all or part of such expenditures with respect to any property shall have been deducted as provided herein, and such property is used for purposes other than research and development to a greater extent than originally reported, the taxpayer shall report such use in its report for the first taxable year during which it occurs, and the department may recompute the tax for the year or years for which such deduction was allowed, and may assess any additional tax resulting from such recomputation regardless of the time limitations set forth in section ten hundred eighty-three of this chapter.

(C) Such deductions shall be allowed only with respect to tangible property which is depreciable pursuant to section one hundred sixty-seven of the internal revenue code, having a situs in this state and used in the taxpayer's trade or business, (i) constructed, reconstructed or erected after December thirty-first, nineteen hundred sixty-three, pursuant to a contract which was, on or before December thirty-first, nineteen hundred sixty-seven, and at all times thereafter, binding on the taxpayer or, property, the physical construction, reconstruction or erection of which began on or before December thirty-first, nineteen hundred sixty-seven or which began after such date pursuant to an order placed on or before December thirty-first, nineteen hundred sixty-seven, and then only with respect to that portion of the basis thereof or the expenditures relating thereto which is properly attributable to such construction, reconstruction or erection after December thirty-first, nineteen hundred sixty-three, or (ii) acquired after December thirtyfirst, nineteen hundred sixty-three, pursuant to a contract which was, on or before December thirty-first, nineteen hundred sixty-seven, and at all times thereafter, binding on the taxpayer or pursuant to an order placed on or before December thirty-first, nineteen hundred sixty-seven, by purchase as defined in section one hundred seventy-nine (d) of the internal revenue code, if the original use of such property commenced with the taxpayer, commenced in this state and commenced after December thirty-first, nineteen hundred sixty-three, or (iii) acquired, constructed, reconstructed, or erected subsequent to December thirtyfirst, nineteen hundred sixty-seven, if such acquisition, construction, reconstruction or erection is pursuant to a plan of the taxpayer which was in existence December thirty-first, nineteen hundred sixty-seven and not thereafter substantially modified, and such acquisition,

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construction, reconstruction or erection would qualify under the rules in paragraphs four, five or six of subsection (h) of section forty-eight of the internal revenue code provided all references in such paragraphs four, five and six to the dates October nine, nineteen hundred sixtysix, and October ten, nineteen hundred sixty-six, shall be read as December thirty-first, nineteen hundred sixty-seven. A taxpayer shall be allowed a deduction under items (i), (ii) or (iii) of this clause only if the tangible property shall be delivered or the construction, reconstruction or erection shall be completed on or before December thirtyfirst, nineteen hundred sixty-nine, except in the case of tangible property which is acquired, constructed, reconstructed or erected pursuant to a contract which was, on or before December thirty-first, nineteen hundred sixty-seven, and at all times thereafter, binding on the taxpayer. Provided, however, for any taxable year beginning on or after January first, nineteen hundred sixty-eight, a taxpayer shall not be allowed a deduction under this paragraph with respect to tangible personal property leased by it to any other person or corporation. For purposes of the preceding sentence, any contract or agreement to lease or rent or for a license to use such property shall be considered a lease. With respect to property which the taxpayer uses itself for purposes other than leasing for part of a taxable year and leases for a part of a taxable year, the taxpayer shall be allowed a deduction under this paragraph in proportion to the part of the year it uses such property.

(D) If the deductions allowable for any taxable year, pursuant to this subdivision, exceed the portion of the taxpayer's entire net income allocated to this state for such year, the excess may be carried over to the following taxable year or years and may be deducted from the portion of the taxpayer's entire net income allocated to this state for such year or years; provided, however, that in no event shall such excess, insofar as it reflects deductions taken with respect to items set forth in clause (B) of this subparagraph, be carried over to taxable years commencing on or after January first, two thousand twenty-one.

(E) In any taxable year when property is sold or otherwise disposed of, with respect to which a deduction has been allowed pursuant to clause (A) or (B) of this subparagraph, the gain or loss thereon entering into the computation of federal taxable income shall be disregarded in computing entire net income, and there shall be added to or subtracted from the portion of entire net income allocated within the state the gain or loss upon such sale or other disposition. In computing such gain or loss the basis of the property sold or disposed of shall be adjusted to reflect the deduction allowed with respect to such property pursuant to clause (A) or (B) of this subparagraph. Provided, however, that no loss shall be recognized for the purposes of this clause with respect to a sale or other disposition of property to a person whose acquisition thereof is not a purchase as defined in section one hundred seventy-nine (d) of the internal revenue code.

(3) At the election of the taxpayer there shall be deducted from the portion of its entire net income allocated within the state either or both of the items set forth in clause (A) or (B) of this subparagraph, except that only one of such deductions shall be allowed with respect to any one item of property, and except that a deduction of the item set forth in clause (B) may not be taken with respect to taxable years commencing on or after January first, two thousand twenty-one.

(A) Depreciation with respect to any property such as described in clauses (C) and (D) of this subparagraph, not exceeding twice the depreciation allowed with respect to the same property for federal income tax

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purposes. Such deduction shall be allowed only upon condition that entire net income be computed without any deduction for the depreciation or amortization of the same property, and the total of all deductions allowed in any taxable year or years with respect to the depreciation of any such property shall not exceed its cost or other basis multiplied by the taxpayer's business allocation percentage determined under this paragraph for the first year it deducts such depreciation under this subparagraph.

(B) Expenditures paid or incurred during the taxable year for the construction, reconstruction, erection or acquisition of any property such as described in clause (C) of this subparagraph which is used or to be used for purposes of research and development in the experimental or laboratory sense. Such purposes shall not be deemed to include the ordinary testing or inspection of materials or products for quality control, efficiency surveys, management studies, consumer surveys, advertising, promotions or research in connection with literary, historical or similar projects. Such deduction shall be allowed only on condition that it does not exceed the amount of the expenditures multiplied by the taxpayer's business allocation percentage determined under this paragraph for the year the expenditures are paid or incurred and that entire net income for the taxable year and all succeeding taxable years be computed without the deduction of any such expenditures and without any deduction for depreciation of the same property, except to the extent that its basis may be attributable to factors other than such expenditures, or in case a deduction is allowable pursuant to this clause for only a part of such expenditures, on condition that any deduction allowed for federal income tax purposes on account of such expenditures or on account of depreciation of the same property be proportionately reduced in computing entire net income for the taxable year and all succeeding taxable years. With respect to property which is used or to be used for research and development only in part, or during only part of its useful life, a proportionate part of such expenditures shall be deductible. If all or part of such expenditures with respect to any property shall have been deducted as provided herein, and such property is used for purposes other than research and development to a greater extent than originally reported, the taxpayer shall report such use in its report for the first taxable year during which it occurs, and the tax commission may recompute the tax for the year or years for which such deduction was allowed, and may assess any additional tax resulting from such recomputation regardless of the time limitations set forth in section ten hundred eighty-three of this chapter.

(C) Such deductions shall be allowed only with respect to tangible property which is depreciable pursuant to section one hundred sixty-seven of the internal revenue code, having a situs in this state and used in the taxpayer's trade or business. The deductions provided for in clause (A) of this subparagraph shall (i) be allowed only with respect to tangible property which is (I) constructed, reconstructed or erected after December thirty-first, nineteen hundred sixty-seven, pursuant to a contract which was, on or before December thirty-first, nineteen hundred sixty-eight, and at all times thereafter, binding on the taxpayer or, property, the physical construction, reconstruction or erection of which began on or before December thirty-first, nineteen hundred sixty-eight or which began after such date pursuant to an order placed on or before December thirty-first, nineteen hundred sixty-eight, and then only with respect to that portion of the basis thereof or the expenditures relating thereto which is properly attributable to such construction, recon-

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