2006-07 NEW YORK STATE EXECUTIVE BUDGET
REVENUE ARTICLE VII LEGISLATION
MEMORANDUM IN SUPPORT

CONTENTS

Article VII Memo Content
PART DESCRIPTION STARTING PAGE NUMBER FOR:
SUMMARY, HISTORY & STATEMENT IN SUPPORT BUDGET IMPLICATION EFFECTIVE DATE
A Eliminate the marriage penalty by increasing the standard deductions and increasing the rate recapture threshold. 6 (Part A) 38 (Part A) 45 (Part A)
B Reduce the top personal income tax (PIT) rate from 6.85 percent to 6.75 percent and increase the bracket to which the top rate applies. 7 (Part B) 38 (Part B) 45 (Part B)
C Expand the current exemption for members of organized militia to persons called to service in New York State by the Federal government. 7 (Part C) 38 (Part C) 45 (Part C)
D Provide a new refundable credit for primary and secondary tuition and other instructional expenses. 8 (Part D) 38 (Part D) 45 (Part D)
E Phase out and eliminate the estate tax by conforming State exemptions to Federal levels. 8 (Part E) 38 (Part E) 45 (Part E)
F Expand the Empire Zone Program. 9 (Part F) 38 (Part F) 45 (Part F)
G Eliminate the additional Corporate Franchise Tax imposed on subsidiary capital. 10 (Part G) 39 (Part G) 46 (Part G)
H Eliminate the Alternative Minimum base. 10 (Part H) 39 (Part H) 46 (Part H)
I Provide for immediate expensing for business assets placed in service in New York. 11 (Part I) 39 (Part I) 46 (Part I)
J Reduce the rate imposed under the Entire Net Income Tax (ENI) base from 7.5 to 6.75 percent. 12 (Part J) 39 (Part J) 46 (Part J)
K Eliminate the Capital and Asset base. 12 (Part K) 39 (Part K) 46 (Part K)
L Eliminate the S-Corporation differential tax. 13 (Part L) 39 (Part L) 46 (Part L)
M Reform the manner in which life insurance companies calculate their taxes when more than 95 percent of their total premiums consist of annuity premiums. 13 (Part M) 39 (Part M) 46 (Part M)
N Decrease the maximum and minimum limitations on the franchise tax applicable to life insurance companies. 14 (Part N) 40 (Part N) 46 (Part N)
O Increase the sales tax vendor credit from a State only base to a State and local base as well as increasing the quarterly cap from $150 to $250 over three years. 14 (Part O) 40 (Part O) 47 (Part O)
P Extend the Federal Gramm-Leach-Bliley Act provisions and make New York State and New York City Bank Tax Reform provisions permanent. 15 (Part P) 40 (Part P) 47 (Part P)
Q Authorize two sales tax free weeks for the purchase of Energy Star appliances and home weather stripping, caulking, and insulation products. 16 (Part Q) 40 (Part Q) 47 (Part Q)
R Provide a refundable credit to residents age 65 and older. 17 (Part R) 40 (Part R) 47 (Part R)
S Provide a refundable credit equal to 50 percent of the costs of upgrading or renovating a residential home heating system. 17 (Part S) 40 (Part S) 47 (Part S)
T Provide small business taxpayers and farmers with a refundable credit for energy costs. 17 (Part T) 41 (Part T) 47 (Part T)
U Provide tax credits for the purchase of alternative fuel vehicles and for the production of alternative fuels. 18 (Part U) 41 (Part U) 47 (Part U)
V Exempt the sale of alternative fuels (e.g., E85) from motor fuel and sales taxes. 19 (Part V) 41 (Part V) 48 (Part V)
W Improve the efficiency and implementation of the Brownfields program. 20 (Part W) 41 (Part W) 48 (Part W)
X Create a credit for the restoration of historic homes. 20 (Part X) 41 (Part X) 48 (Part X)
Y Create a new credit for farmers for property tax paid on land related to conservation easements. 21 (Part Y) 41 (Part Y) 48 (Part Y)
Z Make the clothing exemption permanent for purchases up to $250 for 2 weeks annually. 21 (Part Z) 42 (Part Z) 48 (Part Z)
AA Extend LLC fees. 22 (Part AA) 42 (Part AA) 48 (Part AA)
BB Extend the additional fixed dollar minimum brackets. 22 (Part BB) 42 (Part BB) 48 (Part BB)
CC Make permanent $2 million in annual credits for investing in low income housing. 23 (Part CC) 42 (Part CC) 48 (Part CC)
DD Make permanent the partial sales tax exemption for admission charges to qualifying amusement parks. 23 (Part DD) 42 (Part DD) 49 (Part DD)
EE Amend and make permanent the distribution of a portion of corporation and utility tax receipts to the Dedicated Highway and Bridge Trust Fund and the Mass Transportation Operating Assistance Fund. 23 (Part EE) 42 (Part EE) 49 (Part EE)
FF Simplify the administration of the sales and use tax registration program for persons contracting with the State. 25 (Part FF) 43 (Part FF) 49 (Part FF)
GG Authorize competitive bidding on three additional licenses to operate a Video Lottery facility. 26 (Part GG) 43 (Part GG) 49 (Part GG)
HH Lower the dormancy period on travelers’ checks and money orders under the abandoned property law. 28 (Part HH) 43 (Part HH) 49 (Part HH)
II Address deficiencies in existing law relating to the collection of taxes with respect to sales of goods and services on Indian reservations to non-Indians. 28 (Part II) 43 (Part II) 49 (Part II)
JJ Save harmless NYC from the reduction of their cigarette tax from $1.50 to $0.50 per pack. 29 (Part JJ) 43 (Part JJ) 49 (Part JJ)
KK Make Quick Draw permanent and eliminate restrictions on food sales; hours of operation and reduce the minimum size of establishments that can offer Quick Draw. 29 (Part KK) 43 (Part KK) 50 (Part KK)
LL Make the Empire State Film tax credit permanent and increase the maximum annual credit to $30 million. 31 (Part LL) 44 (Part LL) 50 (Part LL)
MM Establish a maximum bond limit to stay execution of a judgment for litigation under appeal by tobacco manufacturers and their affiliates. 32 (Part MM) 44 (Part MM) 50 (Part MM)
NN Change the tax treatment of REITS and RICS under the Bank Tax. 32 (Part NN) 44 (Part NN) 50 (Part NN)
OO Authorize joint custody of the Abandoned Property Fund. 34 (Part OO) 44 (Part OO) 50 (Part OO)
PP Reform the tobacco products and cigarette taxes to remedy various compliance and enforcement problems. 34 (Part PP) 44 (Part PP) 50 (Part PP)
QQ Clarify treatment of the taxability of certain income for non-State residents. 35 (Part QQ) 44 (Part QQ) 50 (Part QQ)
RR Hold MTA harmless for certain corporate tax reductions. 36 (Part RR) 44 (Part RR) 50 (Part RR)
SS Increase the minimum mark-ups under the Cigarette Marketing Standards Act. 37 (Part SS) 45 (Part SS) 51 (Part SS)
TT Limit amount that can be offset for the Earned Income Tax Credit. 37 (Part TT) 45 (Part TT) 51 (Part TT)

MEMORANDUM IN SUPPORT

A BUDGET BILL submitted by the Governor in

Accordance with Article VII of the Constitution

AN ACT to amend the tax law, in relation to eliminating the marriage penalty in the personal income tax (Part A); to amend the tax law, in relation to reducing the personal income tax rates (Part B);to amend the tax law, in relation to the subtraction from adjusted gross income for members of the New York state organized militia serving pursuant to active duty orders issued by the federal government (Part C); to amend the tax law, in relation to providing a credit against the personal income tax for certain education expenses (Part D); to amend the tax law, in relation to the amount of the unified credit allowable under the estate tax and the rate of such tax and the generation-skipping transfer tax (Part E); to amend the general municipal law and the tax law, in relation to the expansion of the empire zone program (Part F);to amend the tax law, in relation to the elimination of the subsidiary capital base rate of tax under article 9-A thereof (Part G); to amend the tax law, in relation to the elimination of the minimum taxable income base and alternative entire net income base of tax under article 9-A and article 32 thereof (Part H); to amend the tax law, in relation to the deductions taken under articles 9-A, 22 and 32 thereof relating to the purchase of certain tangible property (Part I); to amend the tax law, in relation to the reduction of the tax rate under Articles 9-A and 32 thereof (Part J);to amend the tax law, in relation to the elimination of the capital base and taxable asset base of tax under articles 9-A and 32 thereof (Part K); to amend the tax law, in relation to permanently eliminating the article twenty-two tax equivalent in the computation of the tax imposed on a New York S corporation (Part L);to amend the tax law, in relation to the taxation of premiums from annuity contracts (Part M); to amend the tax law, in relation to the limitations on tax applicable to life insurance companies (Part N); to amend the tax law, in relation to the sales tax vendor credit authorized under article 28 (Part O); to amend chapter 298 of the laws of 1985, amending the tax law relating to the franchise tax on banking corporations imposed by the tax law, authorized to be imposed by any city having a population of one million or more by chapter 772 of the laws of 1966 and imposed by the administrative code of the city of New York and relating to other provisions of the tax law, chapter 883 of the laws of 1975 and the administrative code of the city of New York which relates to such franchise tax, to amend chapter 817 of the laws of 1987, amending the tax law and the environmental conservation law, constituting the business tax reform and rate reduction act of 1987, and to amend chapter 525 of the laws of 1988, amending the tax law and the administrative code of the city of New York relating to the imposition of taxes in the city of New York, in relation to the effectiveness of certain provisions of such chapters; and to amend the tax law, in relation to permitting certain banking corporations otherwise subject to tax under article 32 of the tax law to make an election to be taxed under article 9-A of such law; and to amend the administrative code of the city of New York, in relation to permitting certain banking corporations otherwise subject to tax under subchapter 3 of chapter 6 of title 11 of the administrative code of the city of New York to be taxed under subchapter 2 of such code (Part P); to amend the tax law, in relation to exempting new Energy Star appliances and home weatherization products from state sales and compensating use taxes imposed by article 28 of the tax law during two seven-day periods each year and authorizing counties and cities to elect such exemption from local sales and use taxes imposed by or pursuant to the authority of article 28 or 29 of such law (Part Q); to amend the tax law, in relation to providing a refundable personal income tax credit related to the cost associated with home heating (Part R); to amend the tax law, in relation to providing a refundable personal income tax credit related to the cost associated with replacement or renovation of a home heating system (Part S); to amend the tax law, in relation to providing refundable personal and business income tax credits related to energy costs associated with small businesses and eligible farmers (Part T); to amend the tax law, in relation to providing tax credits for clean-fuel property, alternative fuel vehicles and biofuel production (Part U); to amend the tax law, in relation to providing exemptions, reimbursements and credits from various taxes for certain alternative fuels (Part V); to amend the tax law, in relation to imposing certain limitations on eligibility for the brownfield tax credits described in sections 21 and 22 of the tax law (Part W); to amend the tax law and the parks, recreation and historic preservation law, in relation to providing a credit against income tax for the rehabilitation of historic homes or for the purchase of rehabilitated historic homes in certain instances (Part X); to amend the tax law, in relation to providing a tax credit for real property taxes on land covered by certain conservation easements (Part Y); to amend the tax law and chapter 285 of the laws of 2005 amending the tax law relating to exempting certain clothing and footwear sales and uses from local sales and compensating use taxes, in relation to replacing the year-round state and local sales and compensating use tax clothing and footwear exemptions with two annual weekly exemption periods and modifying such local exemptions for certain localities, to repeal subdivision (k) of section 1210 of the tax law relating to the authority of a city of a million or more to elect weekly exemption periods, to repeal section 1 of part A of chapter 101 of the laws of 2004 relating to the suspension and the effectiveness of exemptions of certain clothing and footwear from sales and compensating use taxes imposed by or pursuant to the authority of article 28 or 29 of the tax law, and to repeal part J of chapter 61 of the laws of 2005 amending the tax law and other laws relating to implementing the state fiscal plan for the 2005-2006 state fiscal year (Part Z); to amend chapter 61 of the laws of 2005, amending the tax law and other laws relating to implementing the state fiscal plan for the 2005-2006 state fiscal year, in relation to the effectiveness of filing fees for certain limited liability companies and limited liability partnerships (Part AA); to amend chapter 60 of the laws of 2004, amending the tax law relating to the fixed dollar minimum tax, in relation to extending the fixed dollar minimum tax for a taxpayer based on the taxpayer's gross payroll (Part BB); to amend the public housing law, in relation to providing a credit against income tax for persons or entities investing in low-income housing (Part CC); to amend chapter 218 of the laws of 2004, amending the tax law relating to an exemption from the tax on admission charges with respect to certain places of amusement, in relation to making such law permanent (Part DD); to amend the tax law and to amend chapter 62 of the laws of 2003 amending the vehicle and traffic law and other laws relating to increasing certain motor vehicle transaction fees, in relation to the distribution of moneys collected from the taxes imposed by sections 183 and 184 of such law (Part EE); to amend the tax law, in relation to certification of registration to collect sales and compensating use taxes by certain contractors, affiliates and subcontractors (Part FF); to amend the tax law, in relation to video lottery gaming (Part GG); to amend the abandoned property law, in relation to uncashed travelers checks, money orders and negotiable instruments (Part HH); to amend the tax law, in relation to providing tax-exempt cigarettes for export out of state from qualified Indian reservations; and to amend chapter 61 of the laws of 2005 amending the tax law and other laws relating to implementing the state fiscal plan for the 2005-2006 state fiscal year, in relation to postponing the effective date of certain provisions of such chapter relating to taxes on cigarettes, motor fuel, and Diesel motor fuel purchases on qualified Indian reservations, and providing additional amendments related to the enactment of such provisions (Part II); to amend part Z of chapter 61 of the laws of 2005, relating to authorizing compensation to the state for any reimbursements, overpayments, adjustments or other modifications made to a county or the city of New York, in relation to amounts necessary for any changes in the state and city cigarette tax rates (Part JJ); to amend chapter 405 of the laws of 1999 amending the real property tax law relating to improving the administration of the school tax relief (STAR) program, and to amend the tax law, in relation to the lottery game of Quick Draw (Part KK); to amend chapter 60 of the laws of 2004, amending the tax law relating to the empire state film credit, in relation to making permanent such credit and to increasing the annual aggregate amount of such credit available (Part LL); to amend the civil practice law and rules, in relation to the undertaking required of participating and non-participating manufacturers of the tobacco product master settlement agreement or an affiliate of such a participating or non-participating manufacturer to stay enforcement of a judgment during appeal (Part MM); to amend the tax law in relation to the determination of entire net income of corporations under articles 9-A, 32 and 33 of the tax law (Part NN); to amend the state finance law and the tax law, in relation to bringing the abandoned property fund on budget in the joint custody of the comptroller and the commissioner of taxation and finance and to increase reporting requirements (Part OO); to amend the tax law, in relation to reforming the tobacco products and cigarette taxes to remedy various administrative, compliance and enforcement problems (Part PP); to amend the tax law, in relation to the method used by a nonresident and part-year resident to report New York source income derived from stock option grants, stock appreciation rights and restricted stock (Part QQ); to amend the tax law, in relation to certain tax surcharges and in relation to the distribution of certain revenues from the taxes imposed under articles nine-A and thirty-two thereof (Part RR); to amend the tax law, in relation to increasing the minimum allowable price for the sale of cigarettes to wholesale dealers and retail dealers under the cigarette marketing standards act (Part SS); and to amend chapter 714 of the laws of 2004, amending the tax law relating to limiting the credit of tax overpayments to the office of temporary and disability assistance for certain taxpayers, in relation to permanently limiting the credit of tax overpayments to the office of temporary and disability assistance for certain taxpayers (Part TT)


PURPOSE:

This bill contains provisions needed to implement the Revenue portion of the 2006-07 Executive Budget.

SUMMARY OF PROVISIONS, EXISTING LAW, PRIOR LEGISLATIVE HISTORY AND STATEMENT IN SUPPORT:

Part A – Eliminate the marriage penalty by increasing the standard deductions and increasing the rate recapture threshold.

This bill eliminates the “marriage penalty” that currently exists in the personal income tax.

This bill would eliminate the provisions in the Tax Law that penalize married couples that file jointly. This would be accomplished by amending the tax benefit recapture provisions in section 601 which would take effect starting in 2006. The tax benefit recapture rules essentially recapture or add back the tax benefit that results from the application of the graduated tax rates to the taxpayer’s taxable income. Under current law, married couples filing jointly are required to recapture the tax benefits from the tax rate schedules at the same income levels as single individuals. Those income levels are between $100,000 and $150,000 of New York adjusted gross income. In 2006 and 2007, those income levels are increased, so that in 2007 and thereafter, married individuals filing jointly would have to recapture the tax benefit at income levels that are twice the income levels that are applicable to single individuals and other filers. Thus, in 2007, married couples filing jointly would have to recapture the tax benefit at income levels between $240,000 to $340,000 and single individuals and other filers would have to recapture the tax benefit at income levels between $120,000 to $170,000. The marriage penalty that exists in the tax benefit recapture provisions would be partially eliminated in taxable year 2006 and completely eliminated in taxable year 2007. Additionally, in taxable years beginning after 2006, all threshold amounts for the tax benefit recapture would be raised so that fewer taxpayers would be subject to the tax benefit recapture provisions

The bill would also amend section 614 of the Tax Law by increasing and equalizing the amount of the standard deduction for married taxpayers and surviving spouses for taxable years beginning after 2005 to $15,000 or exactly twice the amount that applies for unmarried taxpayers who are not heads of households. For taxable years beginning after 2005, this bill would eliminate the marriage penalty that currently exists in the standard deduction, thereby providing tax savings to married taxpayers who use the standard deduction to compute their tax liability. Also, the bill would make a related amendment to the standard deduction amount for married persons filing separately to increase the amount to that of single taxpayers.

Part B – Reduce the top personal income tax (PIT) rate from 6.85 percent to 6.75 percent and increase the bracket to which the top rate applies.

To provide New Yorkers with a reduction in the personal income tax to assist in the strengthening of New York families and the economy of the State.

The bill would amend section 606(a) of the Tax Law to reduce personal income tax rates for taxable years beginning after 2006 by increasing the size of each tax bracket and reducing the top tax rate from 6.85% to 6.75%.

Tax cuts create jobs and create the financial freedom that yields even greater opportunities for New York’s citizens. Last year, the 2003 tax increases that passed over the Governor’s veto expired. Now it is time to take action to strengthen further New York families and the State’s economy. First, this bill would reduce the top personal income tax rate, the rate most New York families pay. Second, the bill would allow more working families and citizens to pay less in taxes by stretching the tax brackets. For example, under current law, a family making over approximately $55,000 before deductions pays the top tax rate on taxable income over $40,000. This bill would stretch the top bracket to ensure that a family would have to make approximately $75,000 before deductions before paying the top rate on taxable income over $60,000..

Part C – Expand the current exemption for members of organized militia to persons called to service in New York State by the Federal government.

To allow members of the New York National Guard who are called up by the Federal Government to perform active service within the State to subtract the monies received for their active service performed within the State from their Federal adjusted gross income.

The Tax Law allows members of the New York National Guard who are called up to active service by the Governor to subtract the monies received for their active service performed within the State from their Federal adjusted gross income. Members of the New York National Guard who are called up to serve by the Federal Government to perform active service within the State are not afforded the same subtraction. This disparity in treatment was not contemplated when the income tax subtraction for active duty pay was added in 2004. Section 1 eliminates this disparity by expanding the class of members of the New York National Guard who may deduct from Federal adjusted gross income the income received for performing active service within the State to include members who are called into active service by the Federal Government pursuant to Title 10 of the United States Code. Section 2 provides an immediate effective date and would retroactively apply to taxable years beginning on and after January 1, 2004, which is when the current law took effect.

Part D – Provide a new refundable credit for primary and secondary tuition and other instructional expenses.

To provide a credit to offset qualified educational expenses incurred by taxpayers whose dependents reside in a school district where one or more schools are required by the Commissioner of Education to offer public school choice pursuant to No Child Left Behind and now attend non-public schools or receive other instructional educational assistance.

The bill would amend section 606 of the Tax Law by adding a refundable personal income tax credit for qualified elementary and secondary school expenses. Taxpayers who have eligible dependents that reside in a school district where at least one elementary or secondary school is failing under the No Child Left Behind program will be eligible to claim a credit for qualified educational expenses. Qualified educational expenses are defined as tuition expenses for the eligible dependent to attend a qualified elementary or secondary educational institution and for fees incurred for instruction outside the regular school day to assist the dependent in improving knowledge in the core curriculum areas at the dependent’s age or grade level. The amount of the credit is limited to $500 per eligible dependent for taxpayers whose Federal Adjusted Gross Income (FAGI) is less than $60,000. The amount of the credit is limited to $375 per dependent for taxpayers whose FAGI is more than $60,000 and less than $65,000. The amount of the credit is limited to $250 per dependent for taxpayers whose FAGI is more than $65,000 and less than $70,000. The amount of the credit is limited to $125 per dependent for taxpayers whose FAGI is more than $70,000 and less than $75,000. Taxpayers whose FAGI is greater than or equal to $75,000 are not eligible to receive the credit.

This bill is necessary to assist taxpayers with the qualified educational expenses incurred to provide additional educational opportunities for their dependents when such opportunities in the public school systems are below par.

Part E – Phase out and eliminate the estate tax by conforming State exemptions to Federal levels.

This bill increases the unified credit amounts allowable under the estate tax to the unified credit amounts allowable under the Internal Revenue Code beginning January 1, 2007, and to eliminate the New York estate and generation-skipping transfer taxes as of January 1, 2010.

This bill:

  1. increases the New York unified credit allowable under the estate tax to the amount of the unified credit available under the Internal Revenue Code, as amended through June 7, 2001, the date of enactment of the Federal Economic Growth and Tax Relief Reconciliation Act of 2001;
  2. reduces the estate tax to zero for decedents dying on or after January 1, 2010;
  3. eliminates the requirement to file an estate tax return for decedents dying on or after January 1, 2010; and
  4. reduces the generation-skipping transfer tax to zero for transfers made on or after January 1, 2010.

Section 951 of the Tax Law currently provides that the unified credit is the amount, not exceeding $1 million, allowed under the Internal Revenue Code on the decedent’s date of death. The Federal unified credit amount is $2 million for estates of decedents dying in 2006, 2007 and 2008, and will increase to $3.5 million for estates of decedents dying in 2009. The Federal estate tax is repealed in 2010, but is reinstated in 2011.

This bill increases the New York unified credit amounts beginning on January 1, 2007, to the unified credit amounts currently provided for in the Internal Revenue Code. For estates of decedents dying between January 1, 2007 and December 31, 2009, this bill ensures that any estate not required to file a return or pay estate tax to the Federal government would not have to file a return or pay estate tax to New York. The bill also eliminates the estate and generation-skipping transfer taxes as of January 1, 2010, completely ending the burden of the estate tax for many New Yorkers, including many with family farms and small businesses. In addition, some senior citizens will remain in New York, rather than leave the State to avoid estate tax liability for their heirs.

Part F – Expand the Empire Zone Program.

This bill proposes to: (1) create five new Empire Zones, each associated with a Center of Excellence, (2) create a Statewide Clean Energy Research and Development Zone and (3) accelerate designation of the 12 Zones authorized in the 2005-06 enacted Budget.

This bill adds new subdivisions to sections 957, 958, 959 and 960 of the General Municipal Law (GML) which (1) defines a “Center of Excellence Empire Zone”, (2) sets each Zone's geographical parameters at one square mile (non-contiguous), (3) designates the Commissioner of Economic Development as the sole certification officer, (4) directs the Commissioner to promulgate regulations regarding enterprise eligibility criteria, the Zone application process, and Enterprise certification and (5) authorizes the Commissioner to consult with the Budget Director and local officials when designating such zones.

The bill also adds a new subdivision to section 969 of the GML to allow the Commissioner to amend the boundaries of a Zone upon application by a Zone enterprise.

The bill also adds a new section, 959-b to the GML which (1) defines a Clean Energy Research and Development Enterprise, (2) grants certified enterprise status to the initial – but not any subsequent – “clean coal electric generating facility” in the State, (3) designates the Commissioner of Economic Development as the sole certification officer, and (4) directs the Commissioner to consult with the Executive Director of the New York State Energy Research and Development Authority to promulgate regulations regarding enterprise eligibility criteria, the Zone application process, and Enterprise certification.

The bill also amends section 14 of the Tax Law to extend the benefits and requirements in the Tax Law concerning Empire Zone tax incentives to businesses certified as Clean Energy Research and Development Enterprises.

Finally, the bill would accelerate the designation of 12 Zones authorized as part of the 2005-06 enacted Budget.

Enactment of this bill would allow the State to further leverage successful investments in Centers of Excellence, induce next generation energy producers to locate here, making New York the worldwide center for clean, renewable energy research, product development and job creation, and will allow New York to create the clean energy technologies that can be exported around the world tomorrow. The acceleration of the designation of the zones authorized in 2005-06 will provide an opportunity for counties that do not contain a Zone to benefit from the Zones program.

Part G – Eliminate the additional Corporate Franchise Tax imposed on subsidiary capital.

This bill eliminates the tax applicable to subsidiary capital under Article 9-A of the Tax Law.

The bill would phase in the elimination of the Article 9-A tax on subsidiary capital over three years starting in 2006, by reducing the subsidiary capital base rate to zero starting in 2008. A corporation’s subsidiary capital includes the corporation’s investments in the stock of its subsidiaries, and the amount of indebtedness of its subsidiaries. Existing law imposes a tax on subsidiary capital at a rate of nine-tenths of a mill for each dollar of subsidiary capital allocated in New York State. This bill, in conjunction with several other bills, would lessen the tax burden on corporations, stimulate New York’s economy and increase the State’s competitiveness.

Part H – Eliminate the Alternative Minimum base.

This bill provides tax relief to corporations and banks doing business in New York.

The bill would provide tax relief to general business corporations and banks in New York starting in 2006 by reducing the minimum taxable income base rate to zero under Article 9-A of the Tax Law and by reducing the alternative entire net income rate to zero under Article 32 of the Tax Law. Under Article 9-A, corporations pay tax on the highest of 4 bases of tax. One of those bases is the base on minimum taxable income. Minimum taxable income is entire net income increased by certain items such as tax preference items and the New York net operating loss deduction. Under Article 32, a bank pays tax on the highest of 4 bases, one of which is the base on alternative entire net income. Alternative entire net income is similar in concept to minimum taxable income under Article 9-A. It is entire net income increased by the deductions relating to interest income, dividends and gains from subsidiary capital and interest income from government obligations. Existing law imposes a tax on the minimum taxable income base at a rate of 2½ percent under Article 9-A, and a tax on the alternative entire net income of 3 percent under Article 32. This bill, in conjunction with several other bills, would lessen the tax burden on corporations, stimulate New York’s economy and increase the State’s competitiveness.

Part I – Provide for immediate expensing for business assets placed in service in New York.

This bill allows taxpayers to immediately expense the full cost of capital assets placed in service in New York for taxable years beginning in 2006.

The bill would provide that corporate taxpayers subject to tax under Article 9-A shall, in computing entire net income, subtract from federal taxable income the cost of property in the year the property is placed in service, rather than deduct depreciation relating to that property over the life of the property. To qualify for this immediate expensing deduction, the property has to be depreciable under section 167 of the Internal Revenue Code (“Code”), placed in service in New York in 2008 or thereafter and not be amortizable under Section 197 of the Code.

This bill would also require taxpayers to add back any depreciation deduction taken with respect to immediately expensed property and any federal expense deduction allowed with respect to the property.

The bill would also amend the net operating loss (“NOL”) deduction for corporate taxpayers (which is limited to an amount that cannot exceed the federal NOL deduction for the taxable year). Under the amendments, the federal NOL deduction is recomputed by including the new immediate expensing deduction and certain other modifications relating to the immediately expensed property.

Similar amendments are made Article 32 of the Tax Law (relating to taxation of banking corporations) and Article 22 (relating to personal income taxation). The Article 22 amendments, however, apply to individual taxpayers only, and do not include any modifications to an NOL deduction since Article 22 does not allow such a deduction.

Generally, corporate taxpayers and individual taxpayers engaged in business in New York are able to take a depreciation expense with respect to property used in their businesses through the deduction allowed for depreciation under the Internal Revenue Code. Since New York taxable income is derived from federal taxable income for most taxpayers, the federal depreciation deduction also reduces the amount of income subject to New York tax. In addition, under Section 179 of the Code , and other code provisions, certain taxpayers are allowed to expense the cost of capital assets, subject to limitations such as an overall limit on the Section 179 deduction of $100,000 (as increased by an inflation index). The Tax Law does not allow a broad depreciation deduction for capital assets, nor does it allow a taxpayer to take a deduction for the cost of a capital asset. However, this bill would permit such an expense deduction for the cost of the asset. To avoid a double benefit, however, the bill requires taxpayers, in computing their income subject to New York tax, to add back and depreciation deduction, and any Section 179 and similar expense deduction, taken with respect to such property.

The bill also amends the net operating loss (“NOL”) deduction provisions under Articles 9-A and 32 of the Tax Law to modify the limit on these deductions under the Tax Law, which provides that these New York NOL deductions cannot exceed the NOL deduction for the taxable year for federal purposes (as increased under Article 32 by certain bad debt deduction amounts). These amendments to the NOL provisions are necessary so that taxpayers who take the new immediate expense deduction and end up with a net loss for the taxable year (a negative Entire Net Income amount) can carry over more of the New York loss to other years. Without the NOL amendment, taxpayers in a loss position due to the new expense deduction may not receive full the benefit of the deduction.

This bill will provide a significant incentive for New York taxpayers to make capital investments in New York since the entire cost of the property may be taken as a deduction. In addition, this bill will result in substantial tax relief to taxpayers doing business in New York.

Part J – Reduce the rate imposed under the Entire Net Income Tax (ENI) base from 7.5 to 6.75 percent.

This bill reduces the tax rate under Articles 9-A and 32 of the Tax Law.

The bill would phase in a reduction of the rate of tax for general business corporations and banks from 7.5% to 6.75% of the entire net income base. This bill would reduce the tax burden of corporations and banking corporations doing business in New York State.

This bill would also amend the small business rate recapture thresholds to conform to the above provisions.

Part K – Eliminate the Capital and Asset base.

This bill eliminates the tax applicable to the capital base and taxable asset base under Articles 9-A and 32 of the Tax Law.

The bill would phase in the elimination of the tax on capital in the corporate franchise tax (Article 9-A), and on taxable assets in the bank tax (Article 32) by reducing the applicable tax rate to zero in 2008 and thereafter. Existing law imposes a tax on capital at a rate of one and seventy-eight hundredths mills on each dollar of capital under Article 9-A, and a tax on taxable assets at a rate of one-tenth of a mill on each dollar of taxable assets under Article 32. This bill, in conjunction with several other bills, would lessen the tax burden on corporations, stimulate New York’s economy and increase the State’s competitiveness.

Part L – Eliminate the S-Corporation differential tax.

This bill permanently eliminates the requirement that a New York S corporation must pay the greater of the difference between the Article 9-A and Article 22 tax rates on the fixed dollar minimum rates as its Article 9-A tax liability. Instead, taxpayers would only pay the fixed dollar minimum amount at the entity level.

The bill would permanently provide that an S corporation that does business in New York would calculate its Article 9-A tax using only the fixed dollar minimum rates, without any consideration of the Article 22 tax equivalent rate. Prior to 2003, an S corporation determined its Article 9-A tax by calculating the difference between the tax due under Article 9-A if the S corporation were taxed as if it were a C corporation and the tax due under Article 22. The S corporation then was required to pay the greater of the difference between the Article 9-A and Article 22 rates or the Article 9-A fixed dollar minimum rate. This bill would make permanent the simplified reporting requirements for S corporations by having them calculate their Article 9-A tax due using the fixed dollar minimum tax rates, rather than the greater of the difference between the Article 9-A and Article 22 rates and the fixed dollar minimum rate.

Part M – Reform the manner in which life insurance companies calculate their taxes when more than 95 percent of their total premiums consist of annuity premiums.

This bill changes the manner in which a life insurance company calculates its tax when more than 95% of its total premiums consist of annuity premiums.

The bill would amend the tax limitation provision in Tax Law section 1505(c) that applies to life insurance companies whose premiums consist of at least 95% annuity premiums. The amendment would provide that the limitation amount is computed by using the amount of premiums of the insurance company which are in excess of 95% of total premiums.

Life insurance companies have a cap or limitation on their tax equal to 2% of premiums. If their premiums consist of more than 95% annuity premiums, they calculate the tax limitation under Tax Law section 1505 by including all their annuity premiums, as well as other insurance premiums, in the limitation amount. However, life insurance companies whose annuity premiums do not make up more than 95% of total premiums are allowed to calculate the tax limitation by eliminating all annuity premiums. Thus, a small increase in annuity premiums for a company whose business consists mostly of annuities can put the company over the 95% level and drastically change the company’s tax.

Part N – Decrease the maximum and minimum limitations on the franchise tax applicable to life insurance companies.

This bill provides tax relief to the life insurance industry.

The bill would amend section 1505 of the Tax Law to provide that the cap, or upper limit, on the amount of tax that a life insurance company can be required to pay shall be 1.75% of taxable premiums. In addition, the floor, or lower limit, on the amount of tax that such a company is required to pay shall be 1.25% of taxable premiums.

Currently, the law provides that a life insurance company will pay a tax no greater than 2% of taxable premiums. At a minimum, a life insurance company is required to pay a tax equal to at least 1.5% of taxable premiums. The cap amount of tax applicable to life insurance companies has been set at the level of 2% of taxable premiums since 1998. Before 1998, the floor was at 2.6% of taxable premiums. The floor amount provision was added to section 1505 in 2003. The reductions in the cap and floor amounts that apply with respect to life insurance companies would provide tax relief to life insurance companies doing business in New York State. These reductions would also result in lower retaliatory taxes assessed against New York insurance companies by other states where the New York companies conduct business.

Part O – Increase the sales tax vendor credit from a State only base to a State and local base as well as increasing the quarterly cap from $150 to $250 over three years.

To increase and simplify the credit available to persons required to file sales tax returns.

The bill would amend the Tax Law to provide that the credit available for persons required to file sales tax returns for quarterly or longer periods would be increased from 3½% of the amount of State sales tax collected from customers and paid over with such returns to 5% of the State, local and other taxes and fees required to be paid or paid over with such returns (or roughly 10% of the State sales tax rate collected). However, the credit would be charged and allowed against only the State sales and compensating use taxes so that the amount of revenues distributed to or on behalf of localities, or otherwise dedicated, would not be reduced. In addition, the maximum allowable credit would increase from $150 to $250, for each quarterly or longer period. The credit increase would be phased in over a period of three years. The bill would also eliminate the Department’s current vendor credit voucher program.

The credit available to persons required to file sales tax returns is intended to help defray administrative costs associated with collecting and remitting sales and use taxes collected from customers in trust for the State. This bill would increase the amount of the credit available to help defray a greater portion of those costs, especially for smaller vendors. This bill would also simplify the credit by making it a percentage of all taxes and fees required to be paid over with the returns required to be filed under Tax Law section 1136 for quarterly or longer periods. This would simplify the calculation and reduce vendor errors.

Part P – Extend the Federal Gramm-Leach-Bliley Act provisions and make New York State and New York City Bank Tax Reform provisions permanent.

This bill makes the provisions of the New York State and New York City bank taxes dealing with the taxation of commercial banks permanent and to extend the transitional provisions concerning the enactment and implementation of the federal Gramm-Leach-Bliley Act for two years.

The bill would make permanent the provisions concerning the New York State and New York City taxation of commercial banks which were first added to the bank tax in 1985. In addition, the bill would make permanent the provisions concerning the bad debt deduction for commercial banks for New York State and New York City franchise tax purposes which were added in 1987 and 1988, respectively.

Further, the bill would extend for two additional years through 2007 the transitional provisions in the State and City bank taxes relating to the enactment and implementation of the federal Gramm-Leach-Bliley Act (which eliminated many of the prohibitions against the affiliation of banks, insurance companies and securities firms).

In 1985, significant changes to the franchise tax on banking corporations under the Tax Law and the Administrative Code of the City of New York were made. Many of those amendments, however, were made subject to a sunset provision providing that they would no longer be effective as to commercial banks for taxable years beginning on or after January 1, 1990. This sunset provision has been extended numerous times since 1990, and currently these provisions are set to expire for taxable years beginning on or after January 1, 2006. In addition, in order to prevent a windfall to New York, New York State and New York City in 1987 and 1988 decoupled from the changes made by the Federal Tax Reform Act of 1986 with regard to the bad debt deduction. However, these provisions concerning the bad debt deduction for commercial banks also sunset for taxable years beginning on or after January 1, 2006.

Starting in 2000, transitional provisions were added to both the Tax Law and the New York City Administrative Code relating to the federal Gramm-Leach-Bliley Act which removed the prohibition against the affiliation of banks, securities firms and insurance companies. These transitional provisions were intended to provide some certainty to banks and securities firms in relation to their taxable status under the New York State and New York City taxes as they exercised the expanded powers provided at the federal level.

The provisions first enacted in 1985, 1987 and 1988 which relate to the taxation of commercial banks and the bad debt provisions for commercial banks have been effective in accomplishing their legislative goals. They have been extended numerous times without change. It is appropriate, therefore, to make these provisions permanent by eliminating the sunset date for these provisions.

Without the transitional provisions relating to the federal Gramm-Leach-Bliley Act, businesses in the financial industry may encounter unexpected tax consequences or be left with difficult uncertainties concerning their tax status. This comes about by the fact that, in order to affiliate, the banking, securities and insurance industries must do so under the umbrella of a financial holding company. Since most financial holding companies are, by definition, bank holding companies, securities firms making the financial holding company election and their subsidiaries may unknowingly subject themselves to liability under the bank tax because they fall within the definition of a banking corporation. This sudden reclassification of a company from a general business corporation taxpayer to a bank tax taxpayer will cause a considerable administrative and compliance burden. In addition, in light of the expanded activities that may be engaged in by financial subsidiaries, these companies may have a difficult time determining whether or not they should be classified as a taxpayer under the bank tax. Moreover, the ability of such companies to join in the filing of a combined report is left open to question. Thus, it is appropriate to extend the transitional relief for two additional years.

Part Q – Authorize two sales tax free weeks for the purchase of Energy Star appliances and home weather stripping, caulking, and insulation products.

This bill exempts certain Energy Star appliances and home weatherization products from State sales and compensating use taxes for two seven-day periods each year and to authorize localities to elect such exemption from their local sales and use taxes.

The bill would provide two seven-day State sales and use tax exemption periods for certain Energy Star appliances and home weatherization products. The bill would also authorize localities to elect such exemption from their local sales and use taxes. The bill would also provide that, if a county or city located in the Metropolitan Commuter Transportation District (MCTD) elected such exemption, the exemption would apply to the 3/8% rate of taxes imposed in the MCTD and the State and the county or city (or both) would reimburse the MCTD for the amount of revenue forgone as a result of the county or city electing the exemption.

Energy Star appliances consist of residential: refrigerators, combination refrigerator/freezers, freezers, clothes washers, light fixtures which use exclusively pin-based compact fluorescent bulbs, ceiling fans, dishwashers and room air conditioners, provided such appliances qualify for, and are labeled with, an Energy Star label. Home weatherization products is defined as caulking and weatherstripping, used for weatherization purposes, window weatherproofing kits, and insulation materials designed exclusively for insulating purposes, for use in a residence.

Energy Star products are more energy efficient than required by the current federal minimum energy efficiency standards. Home weatherization products work together to seal and insulate the exterior of a residence to control airflow and prevent heat or cold from exiting or entering the residence. Providing an exemption for these products will encourage consumers to purchase energy-efficient appliances and maintain energy-efficient homes, thereby conserving the State’s energy resources while affording consumers with reduced utility costs over time.

Part R – Provide a refundable credit to residents age 65 and older.

This bill provides a tax credit to help ensure that home heating fuel costs remain affordable for and accessible to senior citizens.

This bill would provide for a refundable personal income tax credit to individuals age 65 or older and whose federal adjusted gross income does not exceed $75,000 for the cost of fuel directly associated with heating the taxpayer's principal residence located in this State, provided such costs exceed 7.5% of the taxpayer's federal adjusted gross income and the credit would equal 25% of such fuel cost but shall not exceed $500. For purposes of this credit, fuel would not include electricity.

This bill will assist elderly low-income taxpayers with home heating costs. In light of the current energy situation, partially due to the devastating effects of Hurricane Katrina, it is vital that New York take action to minimize the current impact of high fuel prices.

Part S – Provide a refundable credit equal to 50 percent of the costs of upgrading or renovating a residential home heating system.

This bill will encourage taxpayers to replace or renovate home heating systems in order to reduce home heating costs.

This bill would provide a refundable personal income tax credit to individuals for costs associated directly with the replacement or renovation of an existing home heating system in the taxpayer’s principal residence located in this State with a heating system which meets national Energy Star requirements. The credit would be equal to 50% of such cost but shall not exceed $500. The credit is applicable for tax year 2006.

In light of the current energy situation, this bill will renew New York’s commitment to improve energy efficiency by providing an incentive to taxpayers to replace or renovate home heating systems.

Part T – Provide small business taxpayers and farmers with a refundable credit for energy costs.

This bill will help ensure that energy costs remain affordable and accessible to small businesses and farmers in New York.

This bill would provide refundable corporate franchise and personal income tax credits to small businesses and farmers in 2006 and 2007 for energy costs associated with the operation of their small business or farm. The small business energy credit would be for energy costs directly associated with the taxpayer's small business. The amount of the credit would equal 25% of such energy costs, provided such costs exceed 10% of the taxpayer's total costs incurred in the small business. However, the credit would not exceed $3,000 and would be applicable only for tax years 2006 and 2007. If the amount of the credit exceeds the taxpayer's tax for the year, any excess would be credited or refunded to the taxpayer. New subdivision (39) would provide an eligible farmer energy credit. This credit would be for energy costs directly associated with the production of goods for market. The amount of the credit would equal 25% of such energy costs, provided such costs exceed 5% of the taxpayer’s total costs incurred in the production of goods for market.

This bill would help ensure that energy costs remain affordable and accessible to small businesses and farmers in New York. High energy costs hurt all consumers and have a negative impact on New York's business community and its ability to create jobs.

Part U – Provide tax credits for the purchase of alternative fuel vehicles and for the production of alternative fuels.

This bill will help limit the State’s reliance on foreign oil through tax credits to encourage the production of alternative fuels and the purchase of vehicles powered by alternative fuels.

The bill would provide tax credits under the corporation tax, corporate franchise tax and the personal income tax for the purchase of clean-fuel vehicle property (equipment installed on a motor vehicle which allows the vehicle to be propelled by a clean burning fuel) in an amount equal to sixty percent of the cost of such property, qualified hybrid vehicles in an amount equal to two thousand dollars per vehicle, and biofuel production in an amount equal to twenty cents per gallon for the first twenty million gallons produced and ten cents per gallon for production over twenty million gallons after the first forty thousand gallons of production. The biofuel credit would be limited to one million dollars per taxpayer per taxable year per biofuel plant.

In addition, the bill would reinstate the credit for clean-fuel vehicle refueling property (equipment for the storage or dispensing of a clean-burning fuel into a motor vehicle’s fuel tank) under the personal income tax. Existing law under Articles 9 and 9-A provides a tax credit for clean-fuel vehicle refueling property against corporate income tax and the corporate franchise tax.

This bill would continue to stimulate the developing market for alternative fuel vehicles by offering tax credits for the purchase of vehicles and the installation of alternative fuel vehicle property and alternative fuel vehicle refueling property until December 31, 2008. By offering tax incentives for the production and sale of biofuel (including ethanol and cellulosic ethanol), until December 31, 2010, this proposal additionally seeks to promote the growth of biofuel production and distribution in New York State. The bill offers a comprehensive effort to encourage investment in energy efficient transportation technologies that displace petroleum consumption and reduce emissions of harmful pollutants.

Part V – Exempt the sale of alternative fuels (e.g., E85) from motor fuel and sales taxes.

This bill provides incentives to use alternative fuels.

As gasoline prices rise and resources dwindle, individuals are seeking out alternative ways to fill their tank. This bill is aimed at promoting alternative fuels, including ethanol, biodiesel, Compressed Natural Gas (CNG) and Hydrogen, as a viable and affordable choice.

The most popular form of ethanol is E85, which is defined as a mixture of 85 percent ethanol and 15 percent motor fuel. The most common form of biofuel is B20, which is defined as a mixture of 20 percent biodiesel and 80 percent diesel motor fuel. CNG is defined as fuel comprised primarily of methane, stored in either a gaseous or liquid state, suitable for use and consumption in the engine of a motor vehicle. Hydrogen is defined as fuel comprised primarily of molecular hydrogen, stored in either a gaseous or liquid state, suitable for use and consumption in the engine of a motor vehicle.

This bill would amend the Tax Law to provide:

To qualify for such exempt treatment or refund, E85, CNG, Hydrogen or B20 would have to be dispensed directly into a motor vehicle at a filling station.

The provisions of this bill would further authorize the Commissioner of Environmental Conservation, after consulting with the New York State Energy and Research and Development Authority, to adopt regulations identifying other renewable or alternative fuels which may be marketed in the future for use and consumption in the engine of a motor vehicle. After any such regulations are adopted, the Commissioner of Taxation and Finance would be authorized to adopt regulations to provide an exemption, reimbursement, refund or credit for the use and consumption in the engine of a motor vehicle of such renewable or other alternative fuels, from the taxes imposed under Articles 12-A, 13-A, 21-A, 28 and 29 of the Tax Law.

This new proposal is part of the Governor’s comprehensive energy plan, which is a comprehensive strategy to reduce dependence on foreign oil and to increase the use of clean energy fuels.

Part W – Improve the efficiency and implementation of the Brownfields program.

This bill provides new limitations on eligibility for certain tax credits available under the brownfield cleanup program.

This bill would provide for two new limitations regarding brownfield redevelopment tax credits. Under the first limitation, taxpayers will not be eligible for the tangible property credit if the qualified site relating to the credit is located in Manhattan between 96th Street and Canal Street. Under the second limitation, the same restriction would be added to section 22 of the Tax Law, which provides for a brownfield credit for real property taxes.

While the brownfield cleanup program has been successful, the tax incentives may be more efficiently utilized. The limitations contained in this bill with respect to the brownfield credit program are necessary and consistent with the State’s fiscal plan.

Part X – Create a credit for the restoration of historic homes.

This bill establishes a financial incentive for rehabilitating historic residential property in areas of economic distress in the State.

This bill would create a new subsection (ff) to section 606 of the Tax Law to provide that a taxpayer shall be allowed a credit against personal income tax equal to either 15 percent or 25 percent of the qualified rehabilitation expenditures made by the taxpayer with respect to a qualified historic home. A credit in the amount of 15 percent would be allowed for qualified rehabilitation expenditures if only the exterior work has been approved by a local landmarks commission or by the Office of Parks, Recreation and Historic Preservation. A credit in the amount of 25 percent would be allowed for qualified rehabilitation expenditures that have been approved by the Office of Parks, Recreation and Historic Preservation or by a local government certified pursuant to section 101(c)(l) of the National Historic Preservation Act (16 USCS ( 470a). For the 25 percent credit, approval is necessary for both exterior and interior work affecting primary significant historic spaces.

For any residence of a taxpayer, the credit allowed may not exceed $50,000. If the credit allowed for any taxable year exceeds the taxpayer's tax for such year and the taxpayer’s New York adjusted gross income for such year does not exceed $100,000, the excess credit may be refunded. If the taxpayer’s New York adjusted gross income exceeds $100,000, the excess credit may be carried over to future taxable years.

Currently, there is no State tax credit for the rehabilitation of historic homes used as residences. A similar credit was proposed as part of the 2001-02 Executive Budget.

Part Y – Create a new credit for farmers for property tax paid on land related to conservation easements.

This bill creates a tax credit that will recognize the on-going public benefits provided by farmland that is permanently protected by a conservation easement.

The bill would allow refundable income tax and corporate franchise credits to farmers equal to twenty-five percent of school district, county and city/town real property taxes paid on land that is under a conservation easement. The maximum allowable tax credit is $5,000. Currently, there are no income tax credits to encourage the donation and protection of farm land through conservation easements. A tax credit for real property taxes paid on land under a conservation easement will help farmers bear the annual carrying cost of land that provides multiple public benefits. This tax credit will have a large impact on farmers who have modest incomes while providing an incentive to make a gift to perpetually conserve land that they otherwise could not afford to make.

Part Z – Make the clothing exemption permanent for purchases up to $250 for 2 weeks annually.

To provide two annual weekly sales and use tax exemption periods for clothing and footwear costing less than $250 per item and to make conforming and technical changes to the year-round clothing and footwear exemptions currently authorized for New York City and Chautauqua County.

In general, this bill would replace the year-round State and local sales and compensating use tax exemptions for clothing and footwear costing less than $110 per item with two annual weekly exemption periods for clothing and footwear costing less than $250 per item and would make related conforming and technical amendments. The weekly periods would be described as they have been for the past year with respect to the recent “temporary” exemptions.

The bill would provide that New York City’s existing year-round exemption threshold of less than $110 per item would be conformed to the $250 per item threshold applicable to the two annual weekly exemption periods during those weekly exemption periods. Otherwise, the city’s year-round exemption would continue unchanged under this bill. Chautauqua County’s year-round exemption authorization would be conformed to provide for a threshold of less than $110 per item, except, like New York City’s year-round exemption, it would be less than $250 per item during the two annual weekly exemption periods. Also, the bill would provide that, if Chautauqua County elects the year-round exemption from its sales and use taxes, then its local enactment imposing such taxes would automatically incorporate the changes made by this bill, such as the exemption threshold levels.

The bill would authorize counties and cities which impose sales and use taxes to elect or reject the new annual weekly exemption periods by adopting a resolution by June 1, 2006, and properly mailing it the Tax Commissioner by that date. A locality’s election for the 2005-06 weekly exemption periods would automatically remain in effect for subsequent years unless it affirmatively adopts a resolution changing its election. New York City would not be authorized to provide the two annual weekly exemptions since it has in effect a mandatory year-round exemption. By operation of current law, the city and the State would each be required to reimburse to the MCTD 50% of the taxes foregone as a result of the exemption, but only during the two weekly exemption periods which would be added by this bill. Chautauqua County would be authorized to provide the new annual weekly exemptions if its year-round exemption is not in effect as of June 1, 2006. The county would also be authorized to repeal the year-round exemption at that date as well.

This bill would repeal section 1 of Part A of Chapter 101 of the Laws of 2004, relating to the suspension of State and local year-round clothing and footwear exemptions, and would repeal Part J of Chapter 61 of the Laws of 2005, which suspends the State and local year-round exemptions, but also would have brought back the year-round exemptions in 2006, or in 2007, if a certain contingency occurred.

Part AA – Extend LLC fees.

This bill extends for three years the increase in the filing fees for every subchapter K limited liability company, every limited liability company which is a disregarded entity for Federal income tax purposes, every limited liability partnership under Article 8-B of the Partnership Law and every foreign limited liability partnership which has income derived from New York sources.

Section 1 amends the effective date of Part L of Chapter 61 of the Laws of 2005 to extend for three years to January 1, 2010 the increases in LLC filing fees which is currently scheduled to expire January 1, 2007. Existing law imposes the filing fee for tax years 2005 and 2006 at the rate of $100 multiplied by the number of members or partners in the entity, but not less than a fee of $500 or more than $25,000. If the existing law is allowed to expire, the filing fees will revert back to the levels that were in existence prior to 2003. Those fees, which did not apply to LLCs which were disregarded entities, were equal to $50 per member but in no event less than $325 or more than $10,000.

Part BB – Extend the additional fixed dollar minimum brackets.

To extend for 3 years the additional gross payroll brackets applicable to the fixed dollar minimum tax under Article 9-A of the Tax Law.

The bill extends for 3 years the additional gross payroll brackets used to calculate the fixed dollar minimum tax under Article 9-A. Existing law provides that the additional gross payroll brackets applicable to the fixed dollar minimum tax for general business corporations expire for taxable years commencing on or after January 1, 2006. This bill extends these brackets until taxable years commencing on or after January 1, 2009. In general, a corporation is subject to a fixed dollar minimum tax even if a lower tax liability exists under the other alternative franchise tax bases. The fixed dollar minimum tax varies with the size of the taxpayer’s gross payroll during the tax year. The maximum rate is $10,000 for taxpayers with gross payrolls of $25 million or more. The original relationship between a corporation’s gross payroll and its fixed dollar minimum tax was established in 1989. In 2004, new brackets were provided for in order to reflect the changes in economic realities of businesses since the time the brackets were originally established, and to benefit small businesses by reducing the fixed dollar minimum tax for those companies with a gross payroll of $500,000 or less.

Part CC – Make permanent $2 million in annual credits for investing in low income housing.

This bill increases the aggregate amount of low-income housing tax credit the Commissioner of Housing and Community Renewal may allocate from $8 million to $10 million in 2006. Thereafter, the low income housing tax credit would increase by $2 million annually.

The bill amends section 22 of the Public Housing Law by increasing the aggregate amount of low-income housing tax credit the Commissioner may allocate from $8 million to $10 million, and annually increasing that amount in two million dollar increments thereafter. Current State law provides for total allocation authority of $8 million.

Part DD – Make permanent the partial sales tax exemption for admission charges to qualifying amusement parks.

To make permanent the partial sales tax exemption for admission charges to qualifying amusement parks.

Section 1 amends section 2 of Chapter 218 of the Laws of 2004 to make the amendments contained in that Chapter permanent by removing the October 1, 2006 expiration date. Chapter 218 added section 1122 to the Tax Law to exempt from State and local sales taxes 75% of the admission charge to a qualifying place of amusement (i.e., certain amusement parks). Section 2 provides that the bill takes effect immediately.

Chapter 218 of the Laws of 2004 did not originally have an expiration date, but was amended by Chapter 506 of the Laws of 2004 to add an April 1, 2005, expiration. Chapter 218 was further amended by Chapter 14 of the Laws of 2005 to extend the expiration date to October 1, 2006.

Prior to enactment of section 1122 of Tax Law, the charge for admission to a place of amusement was fully subject to sales tax. On the other hand, a charge made to ride an amusement ride, such as a roller coaster, was (and is) not subject to tax; nor is a charge to participate in an arcade game of chance, such as tossing a ring on a bottle. The so-called “pay-one-price ticket” was generally taxable, since a patron could not enter the park without paying the full price of the ticket. The NYS Department of Taxation and Finance issued a memorandum in 2003 (TSB-M-03(5)S) to explain the sales tax related procedures associated with amusement parks. The memorandum indicated that, if a park had pay-one-price tickets, and also had “admission-only” tickets which allowed the patron to enter the park but not use the rides, then only the portion of the pay-one-price ticket equal to the price of the admission-only ticket would be subject to tax.

Section 1122 of Tax Law section 1122 was enacted in an effort to provide a uniform manner of sales tax for the “pay-one-price” amusement park admission charges. The Legislature included an expiration date for the Act in order to determine whether this section would serve as a workable solution. This section has proven workable and, therefore, should now be made permanent.

Part EE – Amend and make permanent the distribution of a portion of corporation and utility tax receipts to the Dedicated Highway and Bridge Trust Fund and the Mass Transportation Operating Assistance Fund.

This bill amends the Tax Law with respect to the distribution of revenue collected from the taxes imposed by Tax Law sections 183 and 184.

Section 1 amends subdivision 3 of section 205 of Tax Law to provide that, on and after April 1, 2006, after reserving amounts for refunds and reimbursements, 20 percent of the moneys collected from the taxes imposed by sections 183 and 184 of the Tax Law shall be deposited to the credit of the Dedicated Highway and Bridge Trust Fund created by section 89-b of the State Finance Law, 53 percent will be deposited in the Mass Transportation Operating Assistance Fund (MTOAF) created by section 88-a of the State Finance Law to the credit of the Metropolitan Mass Transportation Operating Assistance Account (MMTOAA) and 27 percent deposited to such Mass Transportation Operating Assistance Fund to the credit of the Public Transportation Systems Operating Assistance Account (PTSOAA). Under existing law, 20 percent of such moneys are deposited in the dedicated Highway and Bridge Trust Fund and the remainder is deposited in the Mass Transportation Operating Assistance Fund to the credit of the Metropolitan Mass Transportation Operating Assistance Account.

The redistribution will more closely align revenue deposits in regionally dedicated transit funds with regional sources of tax collection. While these revenues are collected at the corporate level, population provides a reasonable proxy for estimating regional sources. Therefore, the 80 percent of these taxes set aside for transit purposes would split as follows: (1) 34 percent to be deposited in the PTOA account, which supports mass transit services provided in upstate counties outside of the Metropolitan Commuter Transportation District (MCTD) and (2) 66 percent to be deposited in the MMTOA account, which supports mass transit services in counties belonging to the MCTD. Previously 100 percent of the transit portion of these taxes was deposited in the MMTOA account.

Section 2 of this bill eliminates the repeal date for Tax Law section 205(3), which is scheduled to expire on March 31, 2010.

Part FF – Simplify the administration of the sales and use tax registration program for persons contracting with the State.

To simplify administration and enhance the effectiveness of the sales and compensating use tax registration program prescribed by Tax Law § 5-a for State contractors and certain other persons.

The bill would make numerous amendments to Tax Law § 5-a in order to simplify and improve administration of the contractor sales and use tax registration program. The most significant of these amendments include: 1) making it easier to determine whether a contract is subject to the statute by simplifying the Tax Law § 5-a definitions of “commodities” and “services;” 2) clarifying that only those contracts let in accordance with Article 11 of the State Finance Law and having a value in excess of $100,000 are subject to the statute; 3) making clear that “public corporations” and “education corporations” as such terms are defined in § 66 of the General Construction Law, are not contractors for purposes of Tax Law § 5-a; 4) narrowing the definition of “subcontractor” to include only those persons engaged by a contractor or another subcontractor to perform a portion of the contractor’s obligations under a contract; 5) eliminating the certification requirement for affiliates of subcontractors; 6) providing that the contractor certification of registration must be filed with the Tax Department only once, and updated by contractors as necessary; 7) making it easier for procuring agencies to administer the program by requiring contractors to file a written certification with them stating that the contractor has filed the required certification with the Tax Department, and that such certification is correct and complete, or that such certification is not required to be filed; and 8) simplifying the process for determining whether a contract is exempt from application of the statute. A contract would be exempt if the procuring agency and the applicable approving authority determined in writing that the contract was necessary to address an “emergency,” within the meaning of Article 11 of the State Finance Law, or to preserve the public health, safety or welfare. In addition, the current law requirement that the contractor must be the sole source for performance of the contract is eliminated.

Tax Law § 5-a requires certain persons awarded contracts valued at more than $15,000 with state agencies, public authorities or public benefit corporations to certify that they, their affiliates, their subcontractors and the affiliates of their subcontractors are registered with the Tax Department to collect New York State and local sales and compensating use taxes. A contractor, affiliate, subcontractor or affiliate of a subcontractor must be registered pursuant to § 5-a if such person makes, or has made, sales delivered within New York State of more than $300,000 during a specified period. Persons awarded contracts with state agencies, public authorities or public benefit corporations must make this certification before the Office of the State Comptroller (OSC), or other responsible approver, will approve the contract. In addition, persons holding state contracts are subject to this requirement at specified intervals during the terms of multi-year contracts and for those contracts subject to renewal upon expiration of an initial or renewal term.

Since the enactment of Tax Law § 5-a, the Tax Department has received a large volume of questions and complaints from procuring agencies and prospective contractors regarding the application and administration of the statute. Most of the correspondence can be broken down into the following categories: 1) the statutory definitions are too complex, particularly those of “commodities” and “services,” and it is thus difficult to determine whether a contract is covered by the statute; 2) the threshold for contracts subject to the statute is too low ($15,000), thereby adversely affecting small business contractors; 3) the definition of “person,” used in determining whether a contractor is covered by the statute, is overbroad, in that it encompasses public entities and educational institutions receiving grant awards; 4) the statute should not apply to certain contracts, such as revenue contracts, intergovernmental agreements, and construction or public works contracts; 5) the statute’s certification and documentation requirements are difficult to comply with; 6) it is burdensome to have to submit the certification of sales and use tax registration with each contract award; and 7) the statute’s exemption criteria are difficult to apply. This bill would address the above problems, as well as various others that have arisen in the wake of § 5-a’s enactment. At the same time, the proposed revisions do not undermine the intent of the statute, namely, to ensure that businesses seeking to contract with the State, as well as their affiliates and subcontractors, are registered to collect State and local sales and compensating use taxes as a condition for receiving State work.

Part GG – Authorize competitive bidding on three additional licenses to operate a Video Lottery facility.

This bill authorizes the Lottery Division to award up to three licenses for the operation of video lottery franchise gaming facilities in New York State.

This bill will expand the video gaming program in order to generate additional education revenues.

The bill adds a new section 1621 to the Tax Law to authorize the Division of the Lottery to award up to three licenses to operate video lottery franchise gaming facilities. The Lottery Division shall award the licenses on a competitive basis and each location will require a separate license. Any entity, including but not limited to Off-Track Betting Corporations, which demonstrates to the satisfaction of the Division that it possesses the qualifications and expertise to operate the video lottery franchise, shall be eligible to competitively bid for a license.

The following geographical restrictions shall apply:

Video lottery game venues will not be allowed in temporary structures for longer than 18 months.

Section 1621(b) requires the Lottery Division to promulgate rules and regulations governing all aspects of the video lottery gaming operation. Included in the criteria for awarding licenses are: maximizing financial support for education, timely implementation of video lottery franchise gaming, location and quality of the facility, and expertise of the applicant. The rules and regulations may be adopted on an emergency basis pursuant to section 202 of the State Administrative Procedure Act.

Section 1621(c) requires each licensee to pay a one-time license fee to be established by the Lottery Division for each license issued.

Section 1621(d) requires the specifications for video lottery franchise gaming to be designed so that prizes will average no less than 90 percent of sales.

Section 1621(e) requires the Division of the Lottery to pay into the State treasury on or before the twentieth day of each month, to the credit of a separate and distinct account to be known as the Sound Basic Education Account within the State Lottery Fund created by section 92-c of the State Finance Law, the balance of the total revenue after payout for prizes, less an amount established by such rules and regulations to be retained by the Division for operation, administration and procurement purposes, and less a lottery agent fee, which will be determined and paid to each licensee at a rate, to be established by such rules and regulations, but not to exceed 20 percent of total revenue wagered after the payout of prizes at such agent's facility. The intention is to provide the maximum lottery support for education while also ensuring the effective implementation of this section through reasonable reimbursements and compensation to the licensees for participation in video lottery franchise gaming.

Section 1621(f) authorizes the Lottery Director to enter into contracts as an agent of the State with private entities and non-profit racing associations licensed pursuant to section 1621 and section 1617-a of the Tax Law to encourage timely participation in video lottery gaming. The contracts may include a commitment by the State that each video lottery gaming facility have the exclusive right to operate the facility at its licensed location consistent with the geographical restrictions contained in subdivision a of this section for a period of ten years. An agreement by a video lottery gaming facility operator to build and operate a licensed video lottery gaming facility shall be deemed good and valid consideration for such a commitment by the State.

Section 1621(g) authorizes the Lottery Division to amend, upon negotiated agreement, competitively bid contracts on the effective date of this act in connection with video lottery gaming authorized pursuant to section 1617-a of the Tax Law, to allow contractors to provide goods and services for the video lottery franchise gaming, and to extend the terms of such contracts.

Part HH – Lower the dormancy period on travelers’ checks and money orders under the abandoned property law.

This bill amends the State Finance Law to reduce the dormancy period on uncashed traveler’s checks from fifteen to five years, and on money orders from seven to five years.

Section 1 of this bill reduces the dormancy period on uncashed traveler’s checks from fifteen to five years, and on money orders from seven to five years.

Section 2 of this bill provides that this bill shall take effect April 1, 2006 and apply to any organization, other than a banking organization, on or after such date regardless of whether such amount was held or owing prior to such effective date.

Part II – Address deficiencies in existing law relating to the collection of taxes with respect to sales of goods and services on Indian reservations to non-Indians.

This bill makes various amendments to address deficiencies in existing law relating to the collection of taxes with respect to sales of goods and services on Indian reservations to non-Indians.

First, the bill amends the Tax Law to remove the requirement that the Legislature would need to approve a tax agreement with an Indian nation or tribe to facilitate and expedite the process of the State reaching such agreements.

The bill would allow qualified Indians to purchase tax exempt products from any qualified reservation in a manner consistent with tribal tradition and culture.

This bill would establish an Indian export decal system to allow Indian nations or tribes to obtain cigarettes that are affixed with an export decal for sales to be made out-of-State. Under the coupon system passed by the Legislature last year, a reservation cigarette seller would be required to obtain stamped product to make the out-of-State sales that are not subject to New York State tax, and seek a refund upon proof of a sale out-of-State. Such a system would excessively entangle the Department of Taxation and Finance with the activities of tribal governments. The use of Indian export decals avoid such entanglement and ensure that the nation or tribe has sufficient quantities of cigarettes for export purposes. The export decal will distinguish the product from taxable product that residents of New York can obtain and assist in the enforcement process.

The bill additionally adds a criminal penalty for the creation or possession of counterfeit Indian export decals. This penalty is structured like the penalty for counterfeit cigarette tax stamps to be a class E felony. Since the Indian export decals will be similar to cigarette tax stamps, it will be beneficial for enforcement purposes to penalize the same activities in relation to counterfeit Indian export decals as the Tax Law does for counterfeit cigarette tax stamps.

The bill also allows for suspended enforcement of the tax-exemption coupon system, as well as the export decal system, where Indian nations or tribes file a challenge to such provisions based upon an alleged Federal constitutional or treaty right in Federal District Court on or before December 1, 2006. This provision will be beneficial to tax administration by ensuring the resolution of any treaty-based or constitutional challenges to the law prior to commencing substantial administrative and enforcement actions.

Lastly, the implementation date for the tax-exemption coupon system will be delayed until March 1, 2007.

Part JJ – Save harmless NYC from the reduction of their cigarette tax from $1.50 to $0.50 per pack.

To hold the City of New York harmless from any lost revenue resulting from the reduction of the City’s cigarette excise tax from $1.50 per pack to $0.50 per pack.

This bill will save New York City harmless for any changes in the State and City cigarette excise tax rates by allowing the amount of compensation from the New York City to the State’s General Fund for any overpayments or other monetary liabilities owed to the State to be adjusted by an amount necessary to compensate the City.

Current law does not allow for payments to New York City to reimburse the City for any loss in receipts which occurs from changes in either the State or City cigarette excise tax. This bill will provide a mechanism to reimburse the New York City for lost cigarette tax receipts when the State's tax rate is increased from $1.50 per pack to $2.50 per pack and the City's tax rate is reduced from $1.50 per pack to $0.50 per pack.

Part KK – Make Quick Draw permanent and eliminate restrictions on food sales; hours of operation and reduce the minimum size of establishments that can offer Quick Draw.

The bill: (i) makes permanent the Lottery Division’s authority to operate the Quick Draw game; and (ii) eases certain restrictions on the operation of the Quick Draw game.

This bill authorizes the Lottery Division to operate the Quick Draw game permanently. Current law includes a sunset provision which automatically repeals the authorization to operate the Quick Draw game on May 31, 2006. This bill also removes the restrictions on hours of operation and food sales and eases the restriction on the minimum size of the premises imposed on Quick Draw by the 1995 authorizing statute. The restriction on the size of premises not selling alcoholic beverages is retained, but reduced from 2,500 square feet to 1,200 square feet. Removal of those restrictions makes it unnecessary to provide exceptions for bowling establishments and pari-mutuel facilities; therefore, the bill also deletes these exceptions. Finally, an obsolete authorization of emergency rulemaking at the time of Quick Draw start-up is deleted.

Current law authorizes the Lottery to operate the Quick Draw game with the following restrictions. Quick Draw may only be offered at: (1) premises licensed for the sale of alcoholic beverages for on-premises consumption where at least 25 percent of gross sales are from sales of food; (2) premises greater than 2,500 square feet in area which are not licensed for the sale of alcoholic beverages for consumption on the premises, (3) commercial bowling establishments, or (4) pari-mutuel gambling facilities. In addition, Quick Draw is limited to no more than 13 hours of daily operations, no more than 8 hours of which may be consecutive.

The restrictions imposed on Quick Draw by the 1995 authorizing statute were experimental. In practice, they have proven to be cumbersome and unnecessary, and have substantially reduced the amount of revenue otherwise available from this game.

The 25 percent food sales requirement for bars, restaurants, and other businesses licensed to serve alcoholic beverages on premises is similar to a discredited policy that previously was applied to those same businesses under the Alcoholic Beverage Control Law. It is impossible to enforce the restriction without conducting regular, systematic audits of the financial records of each business; and the Lottery has never possessed the resources needed to carry out such an aggressive audit program. Most of the businesses licensed to sell Quick Draw would rather surrender their Lottery Sales Agent Licenses than submit to such an intrusion into their finances.

The limitation on the minimum size of a Quick Draw location has the effect of eliminating many locations that are ideal for the game and deprive many small businesses of the opportunity to increase their profits through the commissions paid on Quick Draw sales and from the ancillary sales accompanying the increased traffic generated by offering a popular lottery game.

The limitations on the hours of operation also have the effect of arbitrarily restraining Quick Draw sales. Expanding the hours of operation will benefit the 3,300 businesses that currently offer the game and produce a significant increase in revenue dedicated to education.

The restrictions were intended to protect against the possibility of compulsive playing of the Quick Draw game. Quick Draw has proved to be only slightly more attractive than other Lottery games and there have been few, if any, instances of players wagering more than they could afford. The restrictions are unnecessary; they produce no perceptible benefits; they are difficult and sometimes impossible to enforce; and they cause poor relations with Quick Draw retail businesses. Eliminating these restrictions is not expected to cause any undesirable results, while adding substantially to sales and aid to education. Removing restrictions on the licensing of Quick Draw retailers maintains the Lottery’s ability to generate and grow revenues to support education at the budgeted levels. There will be no increased costs to administer or operate this game.

The Quick Draw game was authorized in 1995 and reauthorized in 1999, 2004 and 2005 and is now due to sunset on May 31, 2006. By the end of November 2005, Quick Draw sales exceeded $4.971 billion since inception while generating over $1.576 billion for education and over $298 million to Lottery retailers as commission. Ticket sales during fiscal year 2004-05 were over $472 million. In that fiscal year alone, Quick Draw produced over $155 million in earnings which were available for aid to education. So far this fiscal year, Quick Draw has produced $305 million in sales, with over $100 million in aid to education.

This bill seeks to safeguard these revenues by making the Quick Draw game’s authorization permanent. Permanent authorization may also have the effect of encouraging retailers who are reluctant to offer the game because of concerns about its stability, to apply for licenses to sell the game, resulting in an increase in Quick Draw sales and revenue, and in an increase in aid to education.

Part LL – Make the Empire State Film tax credit permanent and increase the maximum annual credit to $30 million.

This bill makes the Empire State Film Production Credit permanent and increases the annual aggregate amount of such credit available in calendar years 2009 and thereafter.

This bill would make the Empire State Film Production Credit permanent and increase the total amount of tax credits allowed under the business corporation franchise tax and the personal income tax for any calendar year from $25 million to $30 million in calendar years 2009 and thereafter. The bill would also increase the total amount of tax credits allowed under New York City’s general business corporation taxes from $12.5 million to an amount not in excess of $30 million in calendar year 2009 and thereafter. Existing law provides that the Empire State Film Production Credit will expire August 20, 2008. The Empire State Film Production Credit has proven to be a crucial incentive for attracting and reviving film production work in New York State and New York City. This legislation is necessary to ensure the continued success and enhancement of the Empire State Film Production Credit.

Part MM – Establish a maximum bond limit to stay execution of a judgment for litigation under appeal by tobacco manufacturers and their affiliates.

This bill is intended to protect the flow of funds to the State under the Tobacco Master Settlement Agreement (MSA).

This bill adds a new provision to the civil practice law and rules to establish a maximum aggregate undertaking of $100 million to stay the execution of a judgment against participating manufacturers, non-participating manufacturers, or an affiliate thereof, to the MSA. It also permits the courts to impose a higher bond amount, not to exceed the total amount of the judgment, if there is evidence of deliberate action to avoid the payment of a judgment.

This bill protects the flow of funds to the State and localities under the MSA by imposing a $100 million limit on the bond required to stay the execution of a judgment against signatories, successors or affiliates of the MSA, as well as non-participating manufacturers and their affiliates. Without such a limit, the burden placed on the assets of tobacco companies from large awards could cause payments under the MSA to become unaffordable.

Part NN – Change the tax treatment of REITS and RICS under the Bank Tax.

This bill amends the Tax Law to disallow the exclusion of dividends from by a real estate investment trust (REIT) or a regulated investment company (RIC) subsidiary.

The bill would disallow the exclusion of all or part of the dividends paid by a REIT or a RIC, or by a subsidiary that owns or controls over 50 percent of a REIT or RIC from the Article 9-A general business corporation tax. A comparable amendment would be made to the bank tax under Article 32 to exclude dividends from REITS, RICS or a REIT or RIC holding company from the 60% deduction allowed for dividend income from subsidiaries. Also, the 60% deduction for net gains from subsidiary capital would not include the gain or loss on any sale of an ownership interest in such entities to the extent such dividends, gains or losses are attributable to the ownership interest in the REIT or RIC.

The bill would also exclude the capital of REITS, RICS and subsidiaries that own or control over 50 percent of a REIT or RIC from the base of the subsidiary capital tax under the franchise tax on general business corporations and the insurance tax.

Generally, a REIT is taxed on the federal level (under IRC § 857) upon its real estate investment trust taxable income, but the REIT is allowed to take a deduction for dividends paid to its shareholders. A REIT must distribute at least 90% of its dividends to avoid taxation of this income to the REIT. The dividends paid to the shareholders of the REIT are taxable to the shareholder as ordinary income. Dividends received by a corporate shareholder of a REIT, or that are deemed to be received, do not qualify for the dividends received deduction allowed to corporations under the Code. A RIC is a domestic corporation that meets the requirements of section 851 of the IRC. Like a REIT, a RIC must distribute at least 90 percent of its annual ordinary income (not including capital gain income) and tax-exempt income to its shareholders. RICS and their shareholders are taxed at the federal level much the same way as REITS and their shareholders.

REITS and RICS are taxable entities under Article 9-A of the Tax Law (even if a majority interest in the REIT or RIC is owned by a banking corporation or insurance company), but since they are allowed a deduction for dividends paid to shareholders, which flows through to the determination of taxable income for New York purposes, and because they are not taxed based on capital or assets, these entities usually pay the minimum tax under Article 9-A. General business corporations and insurance corporations subject to tax under Article 33 of the Tax Law are allowed to deduct 100% of income, gains or losses from subsidiaries and 50% of income, gains or losses from non-subsidiaries. Banking corporations are allowed to deduct 60% of the dividend income received from subsidiaries, and 60% of net gains from the sale or other disposition of subsidiary capital. A subsidiary can include a REIT.

The federal scheme of taxation of REITS ensures that either the REIT or its shareholders pay tax on the income earned by the REIT. As at the federal level, the REIT itself can avoid almost all New York State tax. However, because of the treatment of dividends from subsidiaries in New York State tax law, the treatment of a REIT and its corporate shareholder allows a corporate taxpayer to form a REIT, receive through distributions the income earned by the REIT, and avoid the payment of New York tax on this distributed income. Because the REIT itself usually has little New York tax liability, the income is almost entirely untaxed by New York. Corporate taxpayers, particularly banking corporations subject to tax under Article 32 of the Tax Law, have exploited these provisions of the Tax Law by transferring large mortgage loan portfolios or other assets to a controlled REIT so that the income from these assets can be funneled back to the taxpayer in the form of a deductible dividend. This practice converts what would have been ordinary income, fully includible in entire net income, into income from a subsidiary that is subject to a full or partial deduction. Similarly, a RIC avoids almost all taxation by the State under Tax Law Article 9-A if it distributes its earnings to shareholders.

It is evident that the current method of taxing REITS and RICS, and their corporate shareholders, can be exploited to shelter all or most of the income earned in New York from taxation. Other states, including California, Connecticut and Massachusetts, have recognized the problems posed by permitting corporate shareholders to exclude REIT or RIC distributions from their income, and have passed legislation requiring such distributions to be included in the taxable income base. The amendments set forth in this bill address the problems recognized by these other states by preventing the use of REITS or RICS to avoid taxation of income that the corporation tax provisions were intended to cover.

Part OO – Authorize joint custody of the Abandoned Property Fund.

This bill amends the State Finance Law to: provide for joint custody of the abandoned property fund between The Comptroller and The Commissioner of Taxation and Finance; bring abandoned property on budget; and require more transparent and frequent reporting of abandoned property funds.

Section 1 of this bill: establishes the abandoned property fund in joint custody between The Comptroller and The Commissioner of Taxation and Finance; provides that The Comptroller file an expense report with the Director of the Budget on or before the end of the calendar year; provides that The Comptroller and The Commissioner of Taxation and Finance review the abandoned property fund balance monthly and transfer excess balances to the State Purposes Account; provides for the investment of Abandoned Property Funds; and allows The Comptroller to pay claimants of abandoned property out of the abandoned property fund.

Section 2 of this bill provides for the joint deposit and disposition of abandoned property revenue between The Comptroller and The Commissioner of Taxation and Finance.

Section 3 of this bill provides that this bill shall take effect immediately and apply to taxable years beginning on or after January 1, 2006.

Currently, Abandoned Property revenues are kept in a sole custody fund by the Office of the State Comptroller with annual reporting on their status to New York State and the public at large. This proposal would move those monies out of their current sole custody fund and put them on budget in order to make New York State’s fiscal situation more transparent and ensure agency to agency cooperation. Under this new proposal, claimants’ funds would still be protected and paid out when claimed.

This is a new bill.

Part PP – Reform the tobacco products and cigarette taxes to remedy various compliance and enforcement problems.

This bill reforms the tobacco products and cigarette taxes imposed by Article 20 of the Tax Law to remedy various compliance and enforcement problems.

This bill contains various provisions to assist the Department of Taxation and Finance in the collection of cigarette and tobacco product taxes and enforcement activities related to these taxes. First, the bill amends the definition of “wholesale price.” The tobacco products tax is currently based on a percentage (37 percent) of the wholesale price. These amendments: (1) require that the tax be based generally on the price paid by the importing distributor or on the price at which the products are first sold in New York by the distributor, resulting in a more consistent application of the tax than current law which allows the tax to be measured at various point in the transaction chain, and (2) provide special rules for determining the wholesale price when the products are sold to or purchased from a person related to the distributor (“related person”), thereby closing a potential loophole in existing law which may allow such distributors to use an artificially low price as the base of the tax. The bill defines “related person” by using the criteria set forth in section 465 of the Internal Revenue Code. These changes will help ensure that each type of tobacco distributor is required to calculate the tax on a similar tax base and that distributors are paying the proper amount of tax due.

The bill also allows the Department to review the suitability of an applicant for a license under Article 20, including a license to be a wholesale dealer, distributor or stamping agent, thereby ensuring that the Department can deny licenses under appropriate circumstances. Currently, the Department may deny a license only upon certain specific grounds, curtailing the Department's ability to prevent an unsuitable applicant from being responsible for collecting and remitting tax.

The bill also authorizes the Department to suspend or revoke a retail dealer’s certificate of registration if that dealer possesses or sells contraband tobacco products (the current authorization only pertains to unstamped or counterfeit stamped cigarettes).

The bill further revises the civil penalties for the possession of contraband tobacco products. Currently, these penalties range from a token amount to not more than $75 for each 50 cigars or one pound of tobacco to not less than $50 but not more than $200 for each 50 cigars or ten pounds of tobacco. These penalties have caps ranging from $7,500 to $20,000 and depend on the volume of contraband products possessed, the persons possessing the products, and the ability to prove such persons know that the product is contraband. The civil penalty for the possession of contraband tobacco products is changed to 200 percent of the amount of the tax on cigars or tobacco with respect to which the tobacco products tax was not paid or assumed when due. However, the penalty applies only when and to the extent the number of cigars equals or exceeds 250 or the tobacco equals or exceeds five pounds. By tying the amount of the penalty directly to the amount of the tax being evaded, the bill provides a more effective and straight-forward deterrent to dealing in and profiting from contraband product.

Lastly, a monetary penalty equal to the total amount of the tax not paid will be imposed upon persons who, in their capacity as representative of a corporation, partnership or sole proprietorship, fail to pay the cigarette and tobacco taxes.

The addition of this penalty to Article 20 will help with compliance and evasion of such taxes by having the liability follow those individuals responsible.

Part QQ – Clarify treatment of the taxability of certain income for non-State residents.

This bill will require the Commissioner of Taxation and Finance to issue regulations which would clarify New York State’s tax treatment of stock options, restricted stock, and stock appreciation rights received by a nonresident or part-year resident taxpayer.

The bill would provide that a nonresident or a part year resident, who performs services or is employed within New York, would allocate compensation income attributable to stock options, restricted stock or stock appreciation rights pursuant to regulations prescribed by the Commissioner of Taxation and Finance. The bill would require that the Commissioner of Taxation and Finance propose rules and regulations within 180 days of this act becoming law and that such rules and regulations may apply to taxable years beginning on or after January 1, 2006.

The recent decision by the Tax Appeals Tribunal in the Matter of E. Randall Stuckless has raised significant confusion for both taxpayers and the Department of Taxation and Finance as to the proper allocation of New York source income from stock options, restricted stock, and stock appreciation rights. Although the Department had developed allocation rules which were published in a Technical Services Bureau Memorandum, that memorandum was ignored by the Tribunal in Stuckless. As a result, there currently are no clear rules for taxpayers, practitioners and Tax Department staff to follow. This bill would require the Commissioner to develop clear guidelines for the allocation of income from stock options, restricted stock and stock appreciation rights with input from taxpayers and practitioners pursuant to the State Administrative Procedure Act regulation process.

Part RR – Hold MTA harmless for certain corporate tax reductions.

This bill will assist the Metropolitan Transportation Authority by providing the Authority with a portion of revenue received from taxes imposed under the Article 9-A general business corporation business tax and the Article 32 bank franchise tax.

The bill would clarify that the MTA is held harmless in the calculation of the MTA surcharge under the Article 9-A general business corporation franchise tax from any tax rate reductions in the general business tax itself. In addition, the bill would provide that a portion of revenue received from taxes imposed under the general corporation business tax and the bank franchise tax, less administrative costs relating to such amounts, be deposited and credited to the Metropolitan Mass Transportation Operating Assistance Account of the Mass Transportation Operating Assistance Fund (MTOAF). The amount of revenue transferred from the tax imposed on general business corporations would be $8 million for state fiscal year 2006 - 2007, $16 million for state fiscal year 2007 – 2008, and $65 million for state fiscal years 2008 – 2009, 2009 – 2010 and 2010 – 2011. The amount of revenue transferred from the tax imposed on banking corporations would be $7 million for state fiscal year 2006 – 2007, 14 million for state fiscal year 2007 – 2008 and $32 million for state fiscal years 2008 – 2009, 2009 – 2010 and 2010 – 2011. These amounts would be transferred to the Metropolitan Transportation Operating Assistance Fund in September, December and March of such fiscal years.

Existing law provides that for Article 9-A taxpayers, the MTA surcharge is computed based on the Tax Law in effect for taxable years on or after July 1, 1997 and before June 30, 1998. This provision has been interpreted by the Department to mean that a taxpayer computes its MTA surcharge using its current year’s tax base and the tax rates in effect for taxable years commencing on or after July 1, 1997 and before July 1, 1998. This bill would ensure sufficient funding to the MTA is not lost as a result of business tax rate reductions.

Part SS – Increase the minimum mark-ups under the Cigarette Marketing Standards Act.

This bill will increase the presumed minimum markup in price for the sale of cigarettes to wholesale dealers and retail dealers under the Cigarette Marketing Standards Act.

The bill increases the presumed minimum markup in price for the sale of cigarettes to wholesale dealers and retail dealers under the Cigarette Marketing Standards Act. The presumed cost of doing business by a stamping agent for sales to wholesale dealers is increased from 0.875 percent to 1.9375 percent, for sales to chain stores from 1.5 percent to 3.0 percent, and for sales to retail dealers from 3.875 percent to 5.4375 percent. The bill also increases the presumed cost of doing business by a wholesale dealer for sales to chain stores from 0.625 percent to 1.125 percent and for sales to retail dealers from 3.0 percent to 3.5 percent. All percentages will be in addition to a fixed component, left unchanged by this bill, except that the calculation with respect to sales of fewer than twenty cigarettes in a package will be removed since the Public Health Law now prohibits sales of packages containing less than 20 cigarettes.

This bill will help address the rising costs to stamping agents and wholesale dealers of storing and transporting cigarettes, as well as decreased sales volume and costs due to proposed increases in New York’s cigarette tax.

Part TT – Limit amount that can be offset for the Earned Income Tax Credit.

This bill makes permanent the limitation of 10 percent on the amount a taxpayer’s earned income tax credit which could be offset against a debt owed to the Office of Temporary and Disability Assistance.

Section 1 amends section 2 of Chapter 714 of the Laws of 2004 to make permanent the limitation added by that chapter of 10 percent on the amount of a taxpayer’s earned income tax credit which could be credited against a past due legally enforceable debt owed to the Office of Temporary and Disability Assistance for an overpayment of public assistance. Current law provides that this provision expires December 31, 2006.

BUDGET IMPLICATIONS:

Part A – Eliminate the marriage penalty by increasing the standard deductions and increasing the rate recapture threshold.

This bill would decrease personal income tax revenues by $125 million in 2006-07 and $400 million annually when fully implemented. Enactment of this bill is necessary to implement the 2006-2007 Executive Budget and its fiscal implementations are reflected in the Financial Plan.

Part B – Reduce the top personal income tax (PIT) rate from 6.85 percent to 6.75 percent and increase the bracket to which the top rate applies.

This bill would have no impact in 2006-07 and would reduce tax receipts by $800 million annually when fully implemented. Enactment of this bill is necessary to implement the 2006-2007 Executive Budget and its fiscal implications are reflected in the Financial Plan.

Part C – Expand the current exemption for members of organized militia to persons called to service in New York State by the Federal government.

This bill reduces 2006-07 State tax receipts by $1 million and by $1 million annually thereafter. Enactment of this bill is necessary to implement the Executive Budget and its fiscal implications are reflected in the Financial Plan.

Part D – Provide a new refundable credit for primary and secondary tuition and other instructional expenses.

The bill would have no fiscal impact in 2006-07 and would reduce tax receipts by $400 million annually when fully implemented. Enactment of this bill is necessary to implement the 2006-2007 Executive Budget and its fiscal implications are reflected in the Financial Plan.

Part E – Phase out and eliminate the estate tax by conforming State exemptions to Federal levels.

When fully effective, this bill reduces All Funds receipts by approximately $1 billion annually. Enactment of this bill is necessary to implement the 2006-07 Executive Budget and its fiscal implications are reflected in the Financial Plan.

Part F – Expand the Empire Zone Program.

Enactment of this bill is necessary to implement the 2006-07 Executive Budget and would result in a State revenue loss of $20 million 2007-08 and each year thereafter.

Part G – Eliminate the additional Corporate Franchise Tax imposed on subsidiary capital.

This bill would reduce tax receipts by $5.0 million in 2006-07, $10.1 million in 2007-08 and by $15.1 million when fully implemented. Enactment of this bill is necessary to implement the 2006-2007 Executive Budget and its fiscal implications are reflected in the Financial Plan.

Part H – Eliminate the Alternative Minimum base.

This bill would reduce tax receipts by $37.1 million in 2006-07, $74.3 million in 2007-08 and $111.3 million when fully effective. Enactment of this bill is necessary to implement the 2006-2007 Executive Budget and its fiscal implications are reflected in the Financial Plan.

Part I – Provide for immediate expensing for business assets placed in service in New York.

Enactment of this bill is necessary to implement the 2006-2007 Executive Budget.

Part J – Reduce the rate imposed under the Entire Net Income Tax (ENI) base from 7.5 to 6.75 percent.

This bill would reduce tax receipts by $36.7 million in 2007-08, $73.4 million in 2008-09 and $110.2 million when fully effective. Enactment of this bill is necessary to implement the 2006-2007 Executive Budget and its fiscal implications are reflected in the Financial Plan.

Part K – Eliminate the Capital and Asset base.

This bill will reduce tax receipts $74 million in 2006-07, $148 million in 2007-08 and $222 million when fully effective. Enactment of this bill is necessary to implement the 2006-2007 Executive Budget and its fiscal implications are reflected in the Financial Plan.

Part L – Eliminate the S-Corporation differential tax.

This bill will decrease State revenues by $40 million in 2006-07 and thereafter. Enactment of this bill is necessary to implement the 2006-2007 Executive Budget and its fiscal implications are reflected in the Financial Plan.

Part M – Reform the manner in which life insurance companies calculate their taxes when more than 95 percent of their total premiums consist of annuity premiums.

This bill would reduce tax receipts by $3 million beginning in 2006-07 and thereafter. Enactment of this bill is necessary to implement the 2006-2007 Executive Budget and its fiscal implications are reflected in the Financial Plan.

Part N – Decrease the maximum and minimum limitations on the franchise tax applicable to life insurance companies.

This bill would reduce tax receipts by $15 million in fiscal year 2006-07 and thereafter. Enactment of this bill is necessary to implement the 2006-07 Executive Budget and its fiscal implications are reflected in the Financial Plan.

Part O – Increase the sales tax vendor credit from a State only base to a State and local base as well as increasing the quarterly cap from $150 to $250 over three years.

Enactment of this bill is necessary to implement the 2006-2007 Executive Budget.

Part P – Extend the Federal Gramm-Leach-Bliley Act provisions and make New York State and New York City Bank Tax Reform provisions permanent.

Enactment of this bill is necessary to implement the 2006-2007 Executive Budget and its fiscal implications are reflected in the Financial Plan.

Part Q – Authorize two sales tax free weeks for the purchase of Energy Star appliances and home weather stripping, caulking, and insulation products.

This bill would reduce State tax receipts by $6 million in 2006-07 and annually thereafter. Enactment of this bill is necessary to implement the 2006 Executive budget and its fiscal implications are reflected in the Financial Plan.

Part R – Provide a refundable credit to residents age 65 and older.

The bill will reduce tax receipts by $100 million in 2007-08. Enactment of this bill is necessary to implement the 2006-2007 Executive Budget and its fiscal implications are reflected in the Financial Plan.

Part S – Provide a refundable credit equal to 50 percent of the costs of upgrading or renovating a residential home heating system.

The bill will reduce tax receipts by $25 million in 2007-08. Enactment of this bill is necessary to implement the 2006-2007 Executive Budget and its fiscal implications are reflected in the Financial Plan.

Part T – Provide small business taxpayers and farmers with a refundable credit for energy costs.

This bill will reduce tax receipts by $60 million in 2007-08 and $60 million in 2008-09. Enactment of this bill is necessary to implement the 2006-2007 Executive Budget and its fiscal implications are reflected in the financial Plan.

Part U – Provide tax credits for the purchase of alternative fuel vehicles and for the production of alternative fuels.

The bill would have no impact in 2006-07 and would reduce tax receipts by $10 million annually when fully implemented. Enactment of this bill is necessary to implement the 2006-2007 Executive Budget and its fiscal implications are reflected in the Financial Plan.

Part V – Exempt the sale of alternative fuels (e.g., E85) from motor fuel and sales taxes.

This bill would reduce State revenues by a minimal amount in 2006-07 and approximately $3 million in 2007-08. Enactment of this bill is necessary to implement the 2006-2007 Executive Budget and its fiscal implications are reflected in the Financial Plan.

Part W – Improve the efficiency and implementation of the Brownfields program.

Enactment of this bill is necessary to implement the 2006-2007 Executive Budget and its implications are reflected in the Financial Plan.

Part X – Create a credit for the restoration of historic homes.

This bill will reduce receipts by $10 million annually starting in 2007-08. Enactment of this bill is necessary to implement the Financial Plan included in the 2006-07 Executive Budget and its fiscal implications are reflected in the Financial Plan

Part Y – Create a new credit for farmers for property tax paid on land related to conservation easements.

This bill would have no impact in 2006-07 and would reduce tax receipts by $1 million annually when fully implemented. Enactment of this bill is necessary to implement the 2006-2007 Executive Budget and its fiscal implications are reflected in the Financial Plan.

Part Z – Make the clothing exemption permanent for purchases up to $250 for 2 weeks annually.

This bill would reduce State tax receipts by $21 million in 2006-07 and would secure $605 million thereafter. Enactment of this bill is necessary to implement the 2006-2007 Executive Budget and its fiscal implications are reflected in the Financial Plan.

Part AA – Extend LLC fees.

This bill has no impact on 2006-07 State tax receipts, and would increase State tax receipts by $30 million annually in 2007-08, 2008-09 and 2009-10. Enactment of this bill is necessary to implement the Executive Budget and its fiscal implications are reflected in the Financial Plan.

Part BB – Extend the additional fixed dollar minimum brackets.

Enactment of this bill is necessary to implement the 2006-2007 Executive Budget.  The bill increases corporate franchise tax receipts by $40 million annually in State fiscal years 2006-07 through 2008-09.

Part CC – Make permanent $2 million in annual credits for investing in low income housing.

This bill reduces tax receipts by $2 million in State fiscal year 2006-07, and by an incremental $2 million each year thereafter. Enactment of this bill is necessary to implement the Executive Budget and its fiscal implications are reflected in the Financial Plan.

Part DD – Make permanent the partial sales tax exemption for admission charges to qualifying amusement parks.

This bill reduces State tax receipts by $500,000 in 2006-07 and $1 million annually thereafter. Enactment of this bill is necessary to implement the Executive Budget and its fiscal implications are reflected in the Financial Plan.

Part EE – Amend and make permanent the distribution of a portion of corporation and utility tax receipts to the Dedicated Highway and Bridge Trust Fund and the Mass Transportation Operating Assistance Fund.

Enactment of this bill is necessary to implement the 2006-07 Executive Budget because the revenue redistribution is necessary to support appropriations of operating aid to transit systems.

Part FF – Simplify the administration of the sales and use tax registration program for persons contracting with the State.

Enactment of this bill is necessary to implement the 2006-2007 Executive budget.

Part GG – Authorize competitive bidding on three additional licenses to operate a Video Lottery facility.

This proposal is an integral part of the Governor’s long-term education financing program. Although there are no receipts budgeted for this proposal in fiscal years 2006-07 or 2007-08, significant receipts resulting from this proposal are included in the Financial Plan for 2008-09 and later fiscal years. Enactment of this proposal is necessary to achieve the objectives of the 2006-07 Executive Budget since enactment with the Executive Budget will allow adequate time for the bidding and construction processes needed for completion of the licensed facilities in time to provide the out-year receipts included in the Financial Plan.

Part HH – Lower the dormancy period on travelers’ checks and money orders under the abandoned property law.

Enactment of this bill is necessary to implement the 2006-2007 Executive Budget. A one-time spin-up of $100 million is the estimated result from enactment of this bill.

Part II – Address deficiencies in existing law relating to the collection of taxes with respect to sales of goods and services on Indian reservations to non-Indians.

To be determined.

Part JJ – Save harmless NYC from the reduction of their cigarette tax from $1.50 to $0.50 per pack.

This bill will provide New York City with $53.4 million for compensation in 2006-07 for lost cigarette excise tax receipts due to the reduction in the City’s cigarette excise tax. Therefore, enactment of this bill is necessary to implement the 2006-07 Executive Budget.

Part KK – Make Quick Draw permanent and eliminate restrictions on food sales; hours of operation and reduce the minimum size of establishments that can offer Quick Draw.

Easing Quick Draw restrictions will provide estimated additional receipts of $38 million in 2006-07, while permanent reauthorization of Quick Draw will preserve receipts estimated at $144 million in 2006-07. These amounts have been included in the State's Financial Plan. Thus, enactment of this bill is necessary to implement the 2006-07 Executive Budget.

Part LL – Make the Empire State Film tax credit permanent and increase the maximum annual credit to $30 million.

This bill would have no impact in 2006-07 but would reduce receipts by $30 million annually beginning in 2009-10. Enactment of this bill is necessary to implement the 2006-2007 Executive budget and its fiscal implications are reflected in the Financial Plan.

Part MM – Establish a maximum bond limit to stay execution of a judgment for litigation under appeal by tobacco manufacturers and their affiliates.

Enactment of this bill is necessary to preserve future cash flows to the State and localities.

Part NN – Change the tax treatment of REITS and RICS under the Bank Tax.

This bill would increase tax receipts by $57.2 million in 2006-07, $85.7 million in 2007-08 and $114.3 million when fully implemented. Enactment of this bill is necessary to implement the 2006-2007 Executive Budget and its fiscal implications are reflected in the Financial Plan.

Part OO – Authorize joint custody of the Abandoned Property Fund.

Enactment of this bill is necessary to implement the 2006-2007 Executive Budget. This bill makes New York State’s fiscal situation more transparent and ensures agency to agency cooperation.

Part PP – Reform the tobacco products and cigarette taxes to remedy various compliance and enforcement problems.

This bill will result in minimal increases in cigarette and tobacco products tax receipts in 2006-07 and subsequent fiscal years. These additional receipts are included in the Financial Plan and, therefore, enactment of this bill is necessary to implement the 2006-07 Executive Budget.

Part QQ – Clarify treatment of the taxability of certain income for non-State residents.

Enactment of this bill is necessary to implement the 2006-2007 Executive Budget.

Part RR – Hold MTA harmless for certain corporate tax reductions.

This bill directs corporate franchise and bank tax receipts to be deposited into the MTOAF. Enactment of this bill is necessary to implement the 2006-2007 Executive Budget and its fiscal implications are reflected in the Financial Plan.

Part SS – Increase the minimum mark-ups under the Cigarette Marketing Standards Act.

This bill will result in a minimal increase in sales tax receipts starting in 2006-07. Enactment of this bill is necessary to implement the 2006-2007 Executive Budget and its fiscal implications are reflected in the Financial Plan.

Part TT – Limit amount that can be offset for the Earned Income Tax Credit.

This bill has no fiscal impact. Enactment of this bill is necessary to implement the 2006-2007 Executive Budget.

EFFECTIVE DATE:

Part A – Eliminate the marriage penalty by increasing the standard deductions and increasing the rate recapture threshold.

This act would take effect immediately.

Part B – Reduce the top personal income tax (PIT) rate from 6.85 percent to 6.75 percent and increase the bracket to which the top rate applies.

This act would take effect immediately and apply to tax years beginning after 2006.

Part C – Expand the current exemption for members of organized militia to persons called to service in New York State by the Federal government.

The bills takes effect immediately and retroactively apply to years beginning on or after January 1, 2004.

Part D – Provide a new refundable credit for primary and secondary tuition and other instructional expenses.

This act would take effect immediately and apply to taxable years beginning on and after January 1, 2006.

Part E – Phase out and eliminate the estate tax by conforming State exemptions to Federal levels.

This act shall take effect January 1, 2007, and sections one through three of this act shall apply to estates of decedents dying on or after such date.

Part F – Expand the Empire Zone Program.

This bill is effective immediately.

Part G – Eliminate the additional Corporate Franchise Tax imposed on subsidiary capital.

The bill would take effect immediately.

Part H – Eliminate the Alternative Minimum base.

The bill would take effect immediately.

Part I – Provide for immediate expensing for business assets placed in service in New York.

The bill takes effect immediately and applies to taxable years beginning on or after January 1, 2008.

Part J – Reduce the rate imposed under the Entire Net Income Tax (ENI) base from 7.5 to 6.75 percent.

The bill would take effect immediately.

Part K – Eliminate the Capital and Asset base.

The bill would take effect immediately.

Part L – Eliminate the S-Corporation differential tax.

This bill takes effect immediately.

Part M – Reform the manner in which life insurance companies calculate their taxes when more than 95 percent of their total premiums consist of annuity premiums.

The bill would take effect immediately and apply to taxable years beginning on or after January 1, 2006.

Part N – Decrease the maximum and minimum limitations on the franchise tax applicable to life insurance companies.

The bill would take effect immediately.

Part O – Increase the sales tax vendor credit from a State only base to a State and local base as well as increasing the quarterly cap from $150 to $250 over three years.

This bill would take effect on the first day of the sales tax quarterly period next commencing at least 90 days after the date the bill is enacted. The vendor credit, as amended by the bill, would apply to returns required to be filed for quarterly periods beginning on and after that date, and, for longer periods, to returns required to be filed after such date. However, the Tax Department would continue to issue vendor credit vouchers for the quarterly periods ending before the date this bill would take effect and any outstanding vendor credit vouchers or credits must be used on a return for a quarterly or longer period ending on or before February 28, 2007, and would thereafter be void and of no value.

Part P – Extend the Federal Gramm-Leach-Bliley Act provisions and make New York State and New York City Bank Tax Reform provisions permanent.

This bill will take effect immediately.

Part Q – Authorize two sales tax free weeks for the purchase of Energy Star appliances and home weather stripping, caulking, and insulation products.

This act would take effect immediately and would apply to sales made and uses occurring during the two seven-day exemption periods on or after such date in accordance with the applicable transitional provisions of sections 1106 and 1217 of the Tax Law.

Part R – Provide a refundable credit to residents age 65 and older.

This bill would provide that shall take effect immediately and would apply for tax years beginning after 12/31/2005 and before 1/1/2007.

Part S – Provide a refundable credit equal to 50 percent of the costs of upgrading or renovating a residential home heating system.

This bill would take effect immediately.

Part T – Provide small business taxpayers and farmers with a refundable credit for energy costs.

This bill will take effect immediately.

Part U – Provide tax credits for the purchase of alternative fuel vehicles and for the production of alternative fuels.

This bill will take effect immediately.

Part V – Exempt the sale of alternative fuels (e.g., E85) from motor fuel and sales taxes.

This bill would take effect June 1, 2006, and would apply to sales made and uses occurring on or after such date.

Part W – Improve the efficiency and implementation of the Brownfields program.

This bill will take effect immediately and shall be applicable to persons who submit applications to the Department of Environmental Conservation to participate in the Brownfield Cleanup Program on or after February 1, 2006. It would also apply to persons eligible for the brownfield credits due to the purchase of a qualified site on or after February 1, 2006.

Part X – Create a credit for the restoration of historic homes.

This bill is effective immediately and applies to taxable years beginning on or after January 1, 2006.

Part Y – Create a new credit for farmers for property tax paid on land related to conservation easements.

This act will take effect immediately and apply to taxable years beginning on or after January 1, 2006.

Part Z – Make the clothing exemption permanent for purchases up to $250 for 2 weeks annually.

This bill would take June 1, 2006, but sections 7 and 8 would take effect immediately. The bill would apply in accordance with the usual sales and use tax transitional rules in sections 1106 and 1217 of the Tax Law.

Part AA – Extend LLC fees.

Immediately.

Part BB – Extend the additional fixed dollar minimum brackets.

This bill would take effect immediately.

Part CC – Make permanent $2 million in annual credits for investing in low income housing.

The bill takes effect immediately.

Part DD – Make permanent the partial sales tax exemption for admission charges to qualifying amusement parks.

This act takes effect immediately.

Part EE – Amend and make permanent the distribution of a portion of corporation and utility tax receipts to the Dedicated Highway and Bridge Trust Fund and the Mass Transportation Operating Assistance Fund.

This bill takes effect on April 1, 2006.

Part FF – Simplify the administration of the sales and use tax registration program for persons contracting with the State.

The bill would take effect immediately and apply to contracts resulting from solicitations to purchase issued by procuring agencies on or after the date the bill became a law. However, if a contract resulting from a solicitation to purchase issued by a covered agency on or after January 1, 2005 but before the date the date the bill becomes a law is awarded, amended, extended or assigned on or after the date the bill becomes a law, then the provisions of the bill would apply to such contract.

Part GG – Authorize competitive bidding on three additional licenses to operate a Video Lottery facility.

The bill takes effect immediately.

Part HH – Lower the dormancy period on travelers’ checks and money orders under the abandoned property law.

This act shall take effect on April 1, 2006.

Part II – Address deficiencies in existing law relating to the collection of taxes with respect to sales of goods and services on Indian reservations to non-Indians.

This act would take effect immediately except for the sections pertaining to the Indian export decal system. Those sections will be effective on March 1, 2007.

Part JJ – Save harmless NYC from the reduction of their cigarette tax from $1.50 to $0.50 per pack.

This bill will take effect immediately.

Part KK – Make Quick Draw permanent and eliminate restrictions on food sales; hours of operation and reduce the minimum size of establishments that can offer Quick Draw.

This bill is effective immediately.

Part LL – Make the Empire State Film tax credit permanent and increase the maximum annual credit to $30 million.

This bill would take effect immediately.

Part MM – Establish a maximum bond limit to stay execution of a judgment for litigation under appeal by tobacco manufacturers and their affiliates.

This bill takes effect 30 days after enactment, and applies to any pending or future cause of action.

Part NN – Change the tax treatment of REITS and RICS under the Bank Tax.

This act will take effect immediately and apply to taxable years beginning on or after January 1, 2006.

Part OO – Authorize joint custody of the Abandoned Property Fund.

This act shall take effect immediately.

Part PP – Reform the tobacco products and cigarette taxes to remedy various compliance and enforcement problems.

This bill will take effect on the first day of the first month occurring 90 days after becoming law and will apply to sales made on or after that date.

Part QQ – Clarify treatment of the taxability of certain income for non-State residents.

This bill will take effect immediately.

Part RR – Hold MTA harmless for certain corporate tax reductions.

This bill would take effect immediately.

Part SS – Increase the minimum mark-ups under the Cigarette Marketing Standards Act.

This bill will take effect June 1, 2006; provided, however, that the Commissioner of Taxation and Finance will be authorized on and after the date this bill is enacted to take steps necessary to implement the provisions of this bill on its effective date.

Part TT – Limit amount that can be offset for the Earned Income Tax Credit.

The bill takes effect immediately.

^ Top