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On
April 3rd, New York's legislature approved the 2009-2010 New York State
budget. The budget makes some significant changes to the Tax Law, the most
noteworthy of which are discussed below.
Business Related Taxes, Fees and
Credits
Filing
Fees. The filing fees previously imposed
only on LLCs and LLPs have been extended to all partnerships with $1
million or more in New York source gross income. The fees for
partnerships range from $1,500 to $4,500, depending on the amount of
New York source gross income earned by the partnership. This new fee is applicable for tax
years beginning on and after January 1, 2009.
Mandatory
First Installment. The new law requires that most
businesses make a mandatory first quarter estimated tax payment of 40%
of the tax imposed for the prior taxable year if the preceding year's
tax exceeded $100,000. This
change takes effect for tax years beginning on and after January 1,
2010.
Changes
to the Empire Zone Program. The new law requires the Commissioner
to conduct a review of all certified businesses to determine if they
retain their certification status.
There are three tests that will be used by the commissioner to determine
which businesses will be decertified.
Subsequent to the passage of the budget, NYS issued a TSB-M
which said that 2008 tax returns with 2008 empire zone credits will be
processed without the empire zone credits until the company is
recertified. Decertified
businesses will lose their empire zone benefits. For more details,
please check our website at www.bcpllc.com.
Effective
September 1, 2009, taxpayers first certified in zones prior to April 1,
2009, will be required to pay the sales tax and then claim a credit or
refund of the tax paid no more often than quarterly.
Other Miscellaneous Measures
· NYS will continue to aggressively pursue and
prosecute taxpayers who fail to timely file and timely pay payroll and
sales taxes, and has added various penalties to bolster this effort.
· Interest rates applicable to underpayments of tax
have been increased by 1.5%, with most changing from 6% to 7.5%.
· New York State may now enter into reciprocal
agreements with other states and the federal government to apply
refunds that are available with respect to those other jurisdictions
against New York tax liabilities and vice versa.
· Other revenue raisers include increased taxes on
tobacco products, cigarettes, beer and wine and car rentals, to name a
few.
Personal Income Tax
New
Higher Tax Rates. The new law adds two new tax rates
for tax years 2009 through 2011.
For joint return filers earning more than $300,000 but less than
$500,000, the highest tax rate is 7.85%. The 7.85% rate kicks in for unmarried
residents, married residents filing separately, and estates and trusts
at $200,000 and for a resident head of household at $250,000. For all filers, income in excess of
$500,000 is taxed at the rate of 8.97%.
Itemized
Deductions. The new law eliminates itemized
deductions from New Yorkers whose New York AGI exceeds $1 million,
although it exempts charitable contributions from the phase-out. Taxpayers must choose between the
standard deduction and 50% of their federal charitable
contribution.
Estimated
Taxes. For purposes of calculating 2009
estimated tax payment safe harbors, upper income earners must calculate
their 2008 liabilities as if the new tax rates and itemized deduction
phase-out had been in place for 2008.
New York City's personal income tax law contains similar
amendments. These estimated tax
payment provisions do not apply to any installment due earlier than May
22, 2009.
Gains
from the Sale of New York Property. The budget
amends the personal income tax to redefine the phrase "real
property located in this state" to include interests in a
partnership, limited liability company, S-corporation and closely held
C-corporation owning real property located in New York State if the
value of the real property exceeds 50% of the value of all of the
assets in the entity. For sales
occurring on and after May 7, 2009, any gain recognized upon the sale
of an interest in such an entity will be allocated among the assets in
the entity, and the amount allocated to New York real property will be
treated as New York source income.
Middle
Class STAR. Effective immediately, the middle
class STAR rebate program has been eliminated. The traditional STAR and enhanced
STAR programs will continue to offer exclusions to assessed property
values.
If you have questions
regarding how the budget will impact you, please contact our office at
(315) 234-1100.
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