On March 31, 2014, New York Governor Andrew Cuomo signed into law the budget for fiscal year 2014-2015 (S 6359D/A 8559D). The Final Bill features comprehensive tax reform that affects both individual and business taxpayers. The following summarizes some of the significant changes impacting corporate tax, property tax, and estate tax.

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April 16, 2014
New York Enacts Significant Tax Reform
On March 31, 2014, New York Governor Andrew Cuomo signed into law the budget for fiscal year 2014-2015 (S
6359D/A 8559D). The Final Bill features comprehensive tax reform that affects both individual and business taxpayers.
The following summarizes some of the significant changes impacting corporate tax, property tax, and estate tax.
Corporate Tax Reform
Some of the corporate tax reform highlights include:
• The repeal of the bank franchise tax and its merger into the corporate franchise tax;
• The reduction in the corporate franchise tax rate from 7.1 percent to 6.5 percent for taxable years beginning on
or after January 1, 2016. The tax rate for manufacturers will be reduced to zero percent in 2014 and thereafter;
• The adoption of economic nexus which will generally impose corporate franchise tax filing obligations on
businesses having receipts within New York of $1 million or more in a taxable year;
• The adoption of mandatory combined reporting for unitary groups;
• The elimination of the minimum taxable income base;
• The elimination of tax on subsidiary capital;
• The implementation of caps on the capital base tax and a gradual phase out over six years beginning in 2016;
• The permanent adoption of the MTA surcharge coupled with a rate increase from 17 percent to 25.6 percent for
taxable years beginning after 2014 and before 2016. For subsequent years, the rate is to be adjusted by the
commissioner;
• The adoption of customer-based receipt sourcing rules for apportionment purposes with specific rules for
receipts from digital products and financial instruments/transactions;
• The creation of a refundable income tax credit for qualified manufacturers equal to 20 percent of real property
tax paid;
• The creation of the prior net operating loss (“PNOL”) conversion subtraction to complement the existing net
operating loss deduction; and
• The adoption of 'effectively connected' income as the starting point for the corporate tax base calculation for
non-U.S. corporations.
The legislation also implements several other corporate tax changes. Unless otherwise stated, most of the provisions
will become effective on January 1, 2015, which should give businesses sufficient time to grasp the significant overhaul
of the corporate tax system.
The reforms appear to achieve the Governor’s goals of simplifying and modernizing the corporate tax system in New
York. For example, the elimination of the minimum taxable income base and the tax on subsidiary capital should
simplify the computation of the franchise tax. However, other provisions such as the customer-based sourcing rules
and the NOL provisions are rather complex and will require careful analysis by taxpayers and tax practitioners.
New York-based taxpayers will clearly benefit from the corporate tax rate reductions. However, the plan may place a
higher tax burden on out-of-state taxpayers. The adoption of economic nexus will force taxpayers who otherwise do not
have physical presence to begin filing if they derive more than $1 million in receipts from the state. Further, the
adoption of customer-based sourcing will also increase the tax base of out-of-state taxpayers since the apportionment
rules will focus on the location of the customers rather than on the location of the taxpayer’s property and payroll.

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Financial institutions and manufacturers will also be subject to major changes. The new legislation will no longer require
banks and other financial institutions to file using a three factor apportionment formula. After 2014, financial institutions,
like other corporations, will file under the corporate franchise tax which apportions income solely on a receipts factor.
Meanwhile, manufacturers will benefit greatly from a zero tax rate and a refundable credit for property tax paid.
Accordingly, the changes to the corporate tax system will impact a variety of taxpayers who conduct business within the
state’s borders. All such businesses should carefully evaluate the implications of the new legislation.
Property Tax Reform
Key to Governor Cuomo’s tax plan is property tax reform. New Yorkers have traditionally paid some of the highest
property tax in the country and it is not surprising that the property tax cuts represent the largest dollar value tax cuts.
Some of the significant changes include:
• Implementation of the new Property Tax Credit whereby New York home owners will be eligible for a rebate via
a credit on their personal income tax return if local governments stay within the two percent tax cap threshold
and submit plans that would result in savings of at least one percent to their municipality; and
• Refundable personal income tax credit for renters and low-income home owners in New York City earning less
than $200,000.
Estate Tax Reform
The enacted legislation also brings estate tax relief to high net-worth individuals in New York by raising the state’s
estate tax exemption from its current level of $1 million to the federal exemption amount of $5.25 million over the course
of four years. The state’s estate tax was notoriously known as the “Move to Die” tax as it created an incentive for many
New York residents to leave the state to avoid subjecting their assets to the state’s estate tax. This increase in the
exemption should go a long way toward removing the incentive for New York residents to leave the state due to estate
tax concerns.
Although New York does not currently impose gift taxes, included in this legislation is an estate tax provision which will
add back to the New York estate New York gifts made on or after April 1, 2014 through December 31, 2018 and within 3
years of death. "New York gifts" are defined as either a gratuitous transfer made by a New York resident or a gratuitous
transfer by a non-resident of real property or tangible personal property located in New York.
CBIZ Observations
First, New York City has not conformed to these changes, which may result in disparaging treatment between city and
state corporate income taxes. This will likely increase the administrative burden for taxpayers who face the prospect of
now determining their state and local tax liabilities under two very different regimes. Additionally, taxpayers should be
aware that the new legislation was enacted on March 31, 2014, thereby making it a first quarter financial statement
event for calendar year taxpayers.
Contact Us
CBIZ will be closely following tax law developments in both New York State and New York City. If you have any
questions regarding tax law changes in New York or any other state, please contact your local CBIZ MHM tax advisor
who can connect you with one of our state and local tax specialists.
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