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Posted by Tarra Curran on Fri, Apr 23, 2021 @ 11:38 AM

The landmark Statue of Liberty against the impressive New York City skyline.

On April 19, 2021, New York Governor Andrew Cuomo signed the FY2022 New York State (NYS) budget bill (“the Bill”)(S.2509-C/A.3009-C). which among other items, includes various temporary tax increases and provisions affecting certain individuals, pass-through entities, and corporations operating in the state. Below is a recap of the most significant tax provisions included in the comprehensive budget legislation.

Significant Tax Changes

The more significant provisions of the Bill include:

Temporarily extends the top rate of personal income tax for high-income earners

Effective for tax years beginning on or after Jan. 1, 2021 through Dec. 31, 2027, the bill increases the personal income tax rates on high-income earners from 8.82% to new rates outlined below:

Tax Bracket

Tax Rate

$2,155,350 to $5 million (married filing jointly)

9.65%

$1,616,450 to $5 million (head of household)

$1,077,550 to $5 million (single/married filing separately)

Over $5 million to $25 million (for all filing statuses)

10.30%

Over $25 million (for all filing statuses)

10.90%

 

Establishes an elective pass-through entity tax

A much-anticipated provision in the Bill is the creation of a new pass-through entity (PTE) tax election under Article 24-A of the Tax Law. The new election permits owners and partners of partnerships, limited liability companies treated as partnerships for federal income tax purposes and New York S corporations to elect to pay taxes at the entity level, and receive a federal deduction for such taxes. In addition, a credit is allowed for the tax paid at the entity to the individual owners. The IRS has confirmed the federal deduction in guidance issued late in 2020.  

PTE tax elections can be made for tax years beginning on or after Jan. 1, 2021, rates are outlined below:

PTE Income

Tax Rate

Up to $2 million

6.85%

$2 million to $5 million

$137,000 plus 9.65% (over $2 million)

$5 million to $25 million

$426,500 plus 10.30% (over $5 million)

Over $25 million

$2,486,500 plus 10.90% (over $25 million)

 

Temporarily increases corporate income tax rate

The corporate tax rate for general corporations, financial institutions and S corporations temporarily increases from 6.5% to 7.25%, effective for tax years beginning on or after Jan. 1, 2021 and before Jan. 1, 2024.

Extension of capital base tax through 2024

The business capital base tax (originally set to phase out in 2021) for general corporations, financial institutions, and S corporations is extended until 2024. A 0.1875% rate applies for tax years beginning on or after Jan. 1, 2021 and before Jan. 1, 2024.

For More Information

The Bill is estimated to save New York taxpayers $2.2 billion in 2021 and $4.2 billion per year by 2025, while providing targeted relief to certain taxpayers. For more information on how this Bill may impact you and your business, please contact us.

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Headshot_Tarra-CurranTarra Curran, CPA is the Private Company Tax Leader and Leader of the State and Local Tax Practice in New England. She can be reached at tcurran@cbiz.com or 401.626.3240.
 
 
 
 
 
 
 

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Copyright © 2021 CBIZ & MHM (Mayer Hoffman McCann P.C.). All rights reserved. CBIZ and MHM are separate and independent legal entities that work together to serve clients. CBIZ is a leading provider of tax and consulting services. MHM is an independent CPA firm providing audit and other attest services. This article is protected by U.S. and international copyright laws and treaties. Use of the material contained herein without the express written consent of the firms is prohibited by law. Material contained in this alert is informational and promotional in nature and not intended to be specific financial, tax or consulting advice. Readers are advised to seek professional consultation regarding circumstances affecting their business.

Tags: Tarra Curran, Cuomo’s Budget Proposal, New York Tax Reform, New York, Cuomo's Budget Bill

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