What's happening
This bill creates new tax credits and modifies existing tax rules for qualified pass-through manufacturers in New York State.
Why it matters
Creates a separate tax treatment for income from "qualified pass-through manufacturers". this means manufacturers structured as LLCs, partnerships, S corporations, or sole proprietorships can exclude certain business income, gains, losses, and deductions from their state income calculation, potentially lowering their tax burden.
Defines "qualified pass-through manufacturers" more narrowly. these are manufacturers principally engaged in manufacturing (using "business receipts" instead of "gross receipts" to determine eligibility), but excludes those already benefiting from the START-UP NY program. This targets the benefits to a specific group, avoiding overlap with other incentives.
Adjusts existing small business tax credit rules. pass-through manufacturers can no longer claim the small business tax deduction, ensuring they don’t "double-dip" by getting both benefits at once. This differentiates tax relief based on business type and structure.
Prevents double tax benefits on investments. property used by a qualified pass-through manufacturer cannot also earn the state investment tax credit, further targeting the bill’s financial incentives and preventing stacking of multiple major tax breaks for the same activity.
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Who cares
Headline styles
Tax Credit for Small Manufacturers
Plain English, a few words. Used as the page title.
Sponsors
History
- Recommit, enacting clause stricken
- 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.
Zero Tax for Manufacturers
In Assembly Committee · Ways And Means · Sponsor Albert A. Stirpe
Full text
2 pagesUnderlined is new[Struck] is removedOfficial text on nysenate.gov ↗
STATE OF NEW YORK
1596
2019-2020 Regular Sessions
IN SENATE
January 15, 2019
Introduced by Sens. O'MARA, AKSHAR, AMEDORE, BOYLE, GALLIVAN, HELMING, JACOBS, ORTT, RITCHIE, SEWARD -- 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 tax credits for qualified pass-through manufacturers
The People of the State of New York, represented in Senate and Assembly, do enact as follows:
Section 1. Subsection (b) of section 612 of the tax law is amended by adding a new paragraph 43 to read as follows:
(43) Any income, gain, loss and deduction, to the extent it is included in federal adjusted gross income and is, combined, less than zero, of an individual or trust from a qualified pass-through manufacturer, as defined in paragraph forty-four of subsection (c) of this section.
§ 2. Paragraph 39 of subsection (c) of section 612 of the tax law, as added by section 1 of part Y of chapter 59 of the laws of 2013, is amended and a new paragraph 44 is added to read as follows:
(39) In the case of a taxpayer who is a small business who has business income and/or farm income as defined in the laws of the United States, an amount equal to three percent of the net items of income, gain, loss and deduction attributable to such business or farm entering into federal adjusted gross income, but not less than zero, for taxable years beginning after two thousand thirteen, an amount equal to three and three-quarters percent of the net items of income, gain, loss and deduction attributable to such business or farm entering into federal adjusted gross income, but not less than zero, for taxable years beginning after two thousand fourteen, and an amount equal to five percent of the net items of income, gain, loss and deduction attributable to such business or farm entering into federal adjusted gross income, but not less than zero, for taxable years beginning after two thousand fifteen.
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD00656-01-9
S. 1596 2
For the purposes of this paragraph, the term small business shall mean a sole proprietor or a farm business who employs one or more persons during the taxable year and who has net business income or net farm income of less than two hundred fifty thousand dollars. For the purposes of this paragraph, the term small business shall exclude any business that is a qualified pass-through manufacturer, as defined in paragraph forty-four of this subsection for the current tax year.
(44) (A) Any income, gain, loss and deduction, to the extent included federal adjusted gross income and is, combined, greater than zero, of an individual or trust from a qualified pass-through manufacturer. Income from a qualified pass-through manufacturer shall not include an amount representing reasonable compensation for an individual controlling ten percent or more of the qualified business or entity.
(B) The qualified pass-through manufacturer may be organized as a sole proprietorship, a partnership, a limited liability company electing to be treated as a partnership or sole proprietorship, or an S corporation.
(C) For the purposes of this subsection, the term qualified passthrough manufacturer shall mean a business that is a qualified New York manufacturer, as defined by subparagraph (vi) of paragraph (a) of subdivision one of section two hundred ten of this chapter, except that the term "gross receipts" shall be replaced by "business receipts" in determining whether the business is "principally engaged" in manufacturing. A qualified pass-through manufacturer shall not include a business that is currently participating in the START-UP NY program.
§ 3. Paragraph 2 of subsection (a) of section 606 of the tax law is amended by adding a new subparagraph (B-1) to read as follows:
(B-1) Property placed in service during the tax year that is otherwise eligible for the investment tax credit described in subparagraph (A) of this paragraph, will not be eligible for the investment tax credit if the use of the property is by a qualified pass-through manufacturer, as defined in paragraph forty-four of subsection (c) of section six hundred twelve of this article for the current tax year.
§ 4. This act shall take effect immediately.
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 tax credits for qualified pass-through manufacturers
Purpose or general idea of bill
To extend the corporate franchise tax zero percent rate to all manufac- turers located in New York State.
Summary of specific provisions
Section one - amends subsection (b) of section 612 of the tax law by adding a new paragraph 43 to extend the corporate franchise tax zero percent rate to qualified pass-through manufacturers
Section two - amends paragraph 39 of subsection (c) of section 612 of the tax law, as added by section 1 of part Y of chapter 59 of the laws of 2013, by adding a new paragraph 44 to define qualified pass-through manufacturer
Section three - amends paragraph 2 of subsection (a) of section 606 of the tax law by adding a new subparagraph (B-1) to disallow duplicity of certain tax deductions and credits
Section four - contains the effective date
Justification
In 2014, a zero percent corporate franchise tax rate was enacted for manufacturers organized as C corps. This accounted for only 25% of manufacturers in New York State. While this was a significant help to those manufacturers, it left 75% of manufactures still paying the higher rate, putting them at a competitive disadvantage with manufacturers located in states with no income tax.
This legislation would extend the zero percent Corporate Franchise Tax rate to all manufacturers in New York State regardless of how they are organized. The proposed changes lower the income tax rate to zero for NY pass-through manufacturers by: creating a "NY modification" that subtracts the income, or adds back a loss (if any); disallowing any Investment Tax Credits for affected entities/taxpayers; disallowing the existing 5% subtraction modification for small businesses (for affected entities/taxpayers); and disallowing a resident credit for taxes payable to another state (not applicable if NY tax is zero)
According to a study conducted by The Beacon Hill Institute in November 2017, the elimination of the PIT for pass-through manufacturers would increase private sector jobs by 3,455 the first full-year and by 4,850 in 2022. The increase in economic activity sparked by extending the zero-percent tax rate to income from pass-through manufacturers would mitigate the loss of revenue to New York State and boost local tax collections.
Enacting this proposal could catapult New York's ranking as a manufac- turing friendly state from 49th to one of the top-ranked states, estab- lishing New York as a safe haven for manufacturers. This would allow existing manufacturers to continue to invest in their operations and workforce in New York as well as attract manufacturers from across the country and worldwide.
Prior legislative history
2018 - S7S61A
Fiscal implications
Approximately $140 million to the State.
Effective date
This act shall take effect immediately.
Summaries, headlines and scores are AI-generated from the official bill text. How we score bills. Source: NYS Open Legislation.