New York’s 2013 – 2014 Budget Bill Modifies Related-Party Addbacks and Other Taxes
(April 5, 2013)
Gov. Andrew M. Cuomo signed into law the state of New York’s 2013 – 2014 budget bill on March 28, 2013. Highlights of the bill include the following:
- The 8.82 percent “millionaire’s tax” on single taxpayers with income greater than $1 million and married taxpayers with income greater than $2 million is extended through 2017. It had been set to expire in 2014.
- Effective for tax years beginning on or after Jan. 1, 2013, the addback requirement for related-party royalty payments has been modified. Exceptions to the addback requirement will be provided in the following situations:
- The related member is subject to tax on the royalty payment in a state or foreign nation, and the related member receiving the royalty (directly or indirectly) has paid, accrued, or incurred such portion to a person that is not a related member.
- The related member is subject to state income tax on the royalty payment, and the aggregate effective tax rate applied to the related member is at least 80 percent of the statutory tax rate that applied to the taxpayer in New York for the taxable year.
- The related member is domiciled in a foreign country that maintains a comprehensive income tax treaty with the United States, and the tax applied to the royalty payment is at least equal to that imposed by New York.
- The tax rate on entire net income of qualified New York manufacturers will be reduced gradually, with the rate reduced by 25 percent by 2018. Currently, qualified New York manufacturers are subject to a 6.5 percent tax rate on entire net income, and eligible qualified New York manufacturers are subject to a 3.25 percent tax rate on entire net income. (See this previously published Crowe Tax Alert for additional information.)
- The MTA business tax surcharge has been extended through 2018.
- The youth works credit has been extended through 2017.
- A new credit has been made available to businesses that hire veterans.
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