Tax Alert: New York State Budget Agreement Contains Numerous Tax Changes
4/22/2009
On April 7, 2009, New York Governor David Paterson signed the fiscal year 2009-10 revenue bill as part of New York’s 2009-10 budget package. The legislation included the following significant tax changes.
- Personal income tax rate increases – For the three-year-period 2009 – 2011, the prior top tax rate of 6.85 percent is increased to 7.85 percent for single filers with taxable income above $200,000, heads of household with taxable income above $250,000, and joint filers with taxable income above $300,000. The top rate is further increased to 8.97 percent on all taxpayers with taxable income above $500,000. This reflects an increase in the top tax rate of 31 percent.
- Limitation on itemized deductions – Starting in 2009, taxpayers with New York adjusted gross income over $1 million may not claim any itemized deductions except for 50 percent of charitable contributions.
- First corporate estimated tax installment – For taxable years beginning on or after January 1, 2010, the mandatory first installment payment is increased from 30 percent to 40 percent when the preceding year’s tax exceeded $100,000.
- Partnership filing fee – For taxable years beginning on or after January 1, 2009, the annual filing fee imposed on limited liability companies (LLCs) and limited liability partnerships (LLPs) is extended to general partnerships with $1 million or more of New York source gross income.
- Gain on sale of real estate entities – For sales made on or after May 8, 2009, a portion of the gain or loss from the sale of an interest in a partnership, LLC, S corporation, or privately held C corporation (with 100 or fewer shareholders) will be sourced to New York State (NYS) if on the date of the transaction the entity owns real property located in NYS with a fair market value of 50 percent or more of the total value of all assets owned by it for at least two years prior to the sale. The portion of the gain or loss attributed to NYS is determined by the ratio of the fair market value of the real property located in NYS on the date of sale bears to the total fair market value of all assets owned by the entity on the date of sale.
- Expanded sales tax vendor definition – Effective June 1, 2009, the term “vendor” is expanded to include an out-of-state seller who makes taxable sales in New York and is either: (1) affiliated with an in-state vendor who uses the same trademarks, service marks, or trade names as are used by the out-of-state seller or (2) affiliated with a person who undertakes activities in New York that assist the out-of-state seller in developing its market in New York, provided such activities are sufficient to satisfy nexus requirements under the U.S. constitution.
- Miscellaneous tax changes
- Limousines and other livery cab services become subject to sales tax.
- The rate of tax on passenger car rentals is increased from five percent to six percent.
- The rate of prepaid sales tax on cigarettes is increased form seven percent to eight percent.
- The excise tax on beer increased from 3 cents per gallon to 14 cents per gallon.
- The tax on wine is increased from 11 cents per gallon to 30 cents per gallon.
- The tax on cigars and tobacco products is increased from 37 percent to 46 percent (effective dates vary).
For more information, contact your J.H. Cohn service professional at 877-704-3500.
Circular 230 Notice: In compliance with U.S. Treasury Regulations, the information included herein (or in any attachment) is not intended or written to be used, for the purpose of i) avoiding penalties the IRS and others may impose on the taxpayer or ii) promoting, marketing or recommending to another party any tax related matters.