New York State's enacted fiscal year 2020 budget bill A2009C/S1509C extends the top income tax rate (known as the millionaire's tax) of 8.82% for five additional years, through calendar year 2024. The rate was scheduled to sunset at the end of 2019. (Governor's news release.)

The budget also allows the gradual decrease in the middle-class income tax rates to continue. Enacted in 2016, and effective January 1, 2018, the fiscal year 2017 budget bill A9009C/S6409C gradually lowers income tax rates for taxpayers earning less than $150,000 to 5.5% when the tax cut is fully phased in. (EY Payroll Newsflash Vol. 17, 053, 4-5-2016.)

New employer tax credits

The fiscal year 2020 budget bill also creates two new employer tax credits, the NYS Employer-Provided Child Care Credit and the Employer Recovery Hiring Tax Credit.

Like the federal tax credit, the NYS Employer-Provided Child Care Credit allows employers to take a credit for qualifying expenditures paid or incurred in providing child-care alternatives for their employees. The credit will be equal to 25% of qualified child-care expenditures related to a child-care facility located in New York, plus 10% of qualified child-care resources and referral expenditures, attributable to employees working in New York, and, like the federal credit, is capped at $150,000 per taxable year. The tax credit applies to taxable years beginning on or after January 1, 2020. (Part L of A2009C/S1509C.)

The Employer Recovery Tax Credit, to be administered by the Office of Alcoholism and Substance Abuse Services, will provide tax incentives to certified employers for employing eligible individuals in recovery from a substance use disorder to work in part-time and full-time positions. The bill authorizes the allocation of $2 million in refundable tax credits computed on a $1-per-hour-worked per eligible employee basis, with a minimum requirement for each employee of 500 creditable hours worked and a cap for each employee of 2,000 creditable hours worked. Qualifying employers must have a formal working relationship with a local recovery community organization and eligible employees must demonstrate they have completed a course of treatment for a substance use disorder and are in a state of wellness. The credit may be claimed only one time for each eligible employee. The credit applies to employees hired after January 1, 2020. (Part W of A2009C/S1509C.)

For more information, see the New York State Assembly's budget memo. See also the New York State budget website and Highlights of the fiscal year 2020 budget.

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EY Payroll News Flash