On January 16, 2018, New York State (NYS) Governor Cuomo released his proposed Fiscal Year 2018-19 Executive Budget Bill and on February 15, 2018, released his 30-day amendments to the Budget Bill (collectively, "Governor's Bill") (see Tax Alerts 2018-0154 and 2018-0452). The Governor's Bill includes provisions addressing New York State's conformity to the federal Tax Cuts and Jobs Act (P.L. 115-97) (TCJA) and other tax law changes. Key provisions of the Governor's Bill include:

— Part H — extending the statute of limitations on amended tax returns
— Part M — closing the carried interest loophole (provided certain other states enact similar provisions)
— Part N — expanding the NYS Department of Taxation and Finance (Department) appeal rights
— Part S — deferring certain business-related tax-credit claims
— Part AA — imposing an internet fairness conformity tax (sales and use tax) for marketplace providers
— Part JJ — decoupling from certain individual income tax provisions of the TCJA
— Part KK — addressing the federal deemed repatriation under IRC Section 965, as amended by the TCJA
— Part LL — establishing charitable gift trust funds
— Part MM — imposing a new employer compensation expense tax (ECET)

On March 12 and 13 of 2018, the NYS Assembly and Senate, respectively, introduced their own separate versions of the revenue legislation (i.e., A. 9509-B (Assembly Bill) and S. 7509-B (Senate Bill)), including some of the changes introduced in the Governor's Bill, either as proposed or with amendments. The Assembly Bill and the Senate Bill, however, each also omit various provisions that were included in the Governor's Bill while including various new provisions of their own. For example, both the Assembly Bill and the Senate Bill include provisions that would decouple the New York Tax Law from certain individual income tax provisions of the TCJA that are also contained in the Governor's Bill but both omit the changes related to the Department's appeal rights and deferral of business related tax-credit claims. That said, the Assembly Bill and the Senate Bill are quite different from one another. For example, the Assembly Bill includes the provision in the Governor's Bill to close the carried interest loophole (without amendments), a modified version of the internet fairness conformity tax for marketplace providers, and the ECET (with slight amendments that control how an employer election into the ECET is made). In addition, the Assembly Bill includes new business tax surcharges, among other provisions, not included in the Governor's Bill. The Senate Bill, however, excludes these additional provisions but includes, among others, a provision addressing the Global Intangible Low-Taxed Income(GILTI) provisions contained in IRC Section 951A and the corresponding GILTI deduction in IRC Section 250, provisions decoupling New York Tax Law from IRC Sections 163(j) (business interest expense limitations)¹ and 162(r) (limitations on the FDIC deduction), and a new provision that would require a two-thirds majority vote to enact or increase tax revenue.

Attached is a chart comparing key tax provisions in the Governor's Bill, the Senate Bill and the Assembly Bill, and showing whether a similar amendment was proposed in the New York City Administrative Code. Ultimately, the final Budget Bill must be approved by the Senate, the Assembly and the Governor. It is expected that a final Budget Bill will be presented to the Governor for signature on or around March 31, 2018. We will be monitoring Budget Bill developments closely given the potential quarter-end timing for calendar-year taxpayers.

EY also is tracking legislative developments across the states and can help you understand how these potential changes will impact your business.

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ENDNOTES

¹ While the intent of the Senate Bill appears to be to decouple New York Tax Law from IRC section 163(j), it appears that technical corrections to that bill are necessary in order to achieve that intended result.

Budget Bill, Assembly Bill and Senate Bill Comparison Chart

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New York Comparison Chart