ON April 3, 2020, Governor Andrew M. Cuomo signed into law the New York State 2020/21 Budget, which contains several key tax measures related to the impact of the coronavirus (COVID-19) pandemic.

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Decoupling from Recent Tax Legislation

One of the major provisions in the budget includes decoupling from the Internal Revenue Code (IRC) changes made by the Federal Coronavirus Aid, Relief, and Economic Security (CARES) Act. Specifically, New York is decoupling from an increase to the limitation on the business interest deduction contained in IRC section 163(j)(10)(A)(i) and from personal income tax changes to the IRC enacted after March 1, 2020, for taxable years beginning before 2022.

New York State 2020/21 Legislative Changes

Long-term insurance credit.

For tax years beginning on or after January 1, 2020, the long-term care insurance credit amount has been reduced to $1,500. Only taxpayers with a New York adjusted gross income (AGI) of less than $250,000 are eligible.

Hire-a-veteran credit.

The Hire-A-Vet credit relating to the Article 9-A franchise tax on business corporations, Article 22 personal income tax, and Article 33 franchise taxes on insurance corporations has been extended to April 1, 2022 (formerly April 1, 2021).

Excelsior Jobs Program.

A new category has been added to the Excelsior Jobs Program for “green” projects, as defined. The refundable credits provide a higher benefit for qualifying green projects:

  • The Excelsior Jobs credit is available up to 7.5%, instead of 6.85% of gross wages paid per new job.
  • The investment credit is equal to 5%, instead of 2% of the cost or other basis for federal income tax purposes of the qualifying investment.
  • The research and development credit on qualifying expenditures attributable to activities conducted in New York is 8%, instead of 6%.

Film credits.

The film production and post-production credits have been reduced from 30% to 25% of qualifying production costs, and the availability of such credits is extended to 2025. Various changes were also made to the definitions related to these credits.

Financial institution data match program.

The financial institution data match program for state tax collection purposes has been extended to April 1, 2025 (formerly April 1, 2020). These limitations are effective immediately and apply to taxable years beginning on or after January 1, 2020.

Service of income executions with respect to individual income tax debtors without filing a warrant.

The Department of Taxation and Finance’s (DTF) ability to serve an income execution with respect to individual income tax debtors without filing a warrant has been extended to April 1, 2025 (formerly April 1, 2020).

Earned income credit.

If the DTF determines that a taxpayer is eligible to receive New York’s earned income credit and has not claimed the credit, the DTF shall compute the taxpayer’s tax liability utilizing the credit and refund the amount of the allowable credit.

Deductions.

If the DTF determines that a taxpayer has elected to itemize his deductions, but the standard deduction produces a lower tax liability, the DTF shall compute the taxpayer’s tax liability utilizing the standard deduction and notify the taxpayer.

Tobacco products tax.

The term “wholesale price” has been redefined as “the price for which a manufacturer or other person sells tobacco products to a distributor, including the federal excise taxes paid by the manufacturer or other person.”

Taxes on alcoholic beverages.

The tax on liquors containing not more than 2% alcohol by volume has been reduced to zero (formerly 1 cent per liter).

New York City 2020/21 Legislative Changes

Earned income credit.

If the DTF determines that a taxpayer is eligible to receive New York City’s earned income credit and has not claimed the credit, the DTF shall compute the taxpayer’s tax liability utilizing the credit and refund the amount of the allowable credit.

Household credit.

If the DTF determines that a taxpayer is eligible to receive New York City’s household credit and has not claimed the credit, the DTF shall compute the taxpayer’s tax liability utilizing the credit and refund the amount of the allowable credit.

Extension of period for enrollment in STAR income verification program.

Effective immediately, the DTF may, at its discretion, extend the School Tax Relief (STAR) Program income verification registration period for any property owner who received the enhanced STAR exemption in 2019, but failed to enroll in time to qualify for the enhanced STAR exemption in 2019. The DTF is authorized, where appropriate, to send the property owner the difference between the enhanced STAR exemption and the basic STAR exemption that the property owner would be entitled to receive.

Extended Due Dates due to the COVID-19 Pandemic

The DTF and New York City’s Department of Finance (DOF) also issued significant relief in the form of extended due dates because of the impact of the COVID-19 pandemic.

New York State.

New York has extended all state personal income tax and corporation tax returns originally due on April 15, 2020, to July 15, 2020. In addition, all related tax payments due on April 15, 2020, may be deferred to July 15, 2020, without penalties or interest, regardless of the amount owed.

On March 7, 2020, Governor Andrew M. Cuomo declared a State Disaster Emergency for all of New York due to the impact of the pandemic. Governor Cuomo subsequently issued an executive order expanding the Tax Commissioner’s authority to extend quarterly sales and use tax filings and remittances with a due date of March 20, 2020, to May 19, 2020, to abate late filing and payment penalties, and to abate interest on quarterly sales and use tax filings and remittances with a due date of March 20, 2020, for those who were unable to timely file and pay as a result of the pandemic, such as the following:

  • Taxpayers who were unable to meet tax filing, payment, or other deadlines because key employees were treated or suspected to have COVID-19
  • Taxpayers whose records necessary to meet tax filing, payment, or other deadlines are not available due to the pandemic
  • Taxpayers who have difficulty in meeting tax filing, payment, or other deadlines because of closure orders or similar business disruptions directly resulting from the pandemic
  • Taxpayers whose tax practitioners were unable to complete work to meet tax filing, payment, and other deadlines on behalf of their clients due to the pandemic.

New York City.

The DOF announced that it will waive penalties for DOF-administered business and excise taxes due this spring as a result of the pandemic. Taxpayers and return preparers affected by the pandemic may request to have the penalties waived on a late-filed extension or return, or in a separate request, for taxes due between March 16 and April 25, 2020.

The DOF also announced that the deadline for filing Form NYC-1127 (return for nonresident employees of the City of New York hired on or after January 1973) has been extended to July 30, 2020, in response to the pandemic.

An Ongoing Crisis

CPAs need to understand how these changes impact New York taxpayers, including those based outside of New York. More changes are likely to follow as the COVID-19 pandemic continues, so tax professionals should keep up to date on the latest developments.

Corey L. Rosenthal, JD, is a principal at CohnReznick LLP, New York, N.Y.
Arvinder Kaur, CPA, is a state and local tax manager at CohnReznick.
Mark H. Levin, CPA, MST, is an adjunct assistant professor at York College/CUNY, Jamaica, N.Y.