Cuomo budget: changes could affect CPAs and their clients

By:
RICHARD KORETO
Published Date:
Feb 4, 2014

In his budget speech on Feb. 21, Gov. Andrew M. Cuomo pointed out that under his administration, the state has passed three budgets in a row on-time—something that hadn’t happened in more than
30 years. Now, he said, he’s going for four in a row, which New York hasn’t achieved since Nelson Rockefeller was governor and many current legislators were still learning how to walk. His speech was upbeat—in fact, he had already mapped much of his tax strategy, so there wasn’t much in the way of surprise in that area—but that doesn’t mean there won’t be any push-back as the state’s fiscal year draws to a close on March 31.

The governor outlined his proposals in two documents: a 12-page summary and an 89-page Executive Budget Briefing Book. The summary highlighted eight tax-reform items, some of which clearly came out of the Tax Reform and Fairness Commission and the Tax Relief Commission, both of which released reports late last year. CPAs should look for these possible changes to tax issues that affect their employers and their individual and corporate clients:

• Corporate tax reform. Not only a reduction of the tax rate on net income to
6.5 percent, but a combination of the corporate franchise and bank taxes to provide simplification and improve voluntary compliance.
• A 20 percent real property tax credit for manufacturers. A refundable credit equal to 20 percent of property taxes paid by manufacturers who own property.
• Elimination of the net income tax rate on upstate manufacturers. Cuomo’s proposal lowers the tax rate on income for upstate manufacturers from the current 5.9 percent to zero in 2014 and thereafter.
• Elimination of Tax Law Section 18-a temporary assessment for industrial customers, and acceleration of phase out  for  others. This is slated to disappear by March 2017, but Cuomo proposes moving that up to the next fiscal year and accelerating the phase out for all other customers.
• Using the Real Property Tax Freeze as a personal income tax credit. Proposed late last year and widely discussed, this proposal would freeze property taxes for two years for many homeowners, but only in jurisdictions that meet extensive and strict standards for fiscal discipline and savings.
• Establishment of the residential real property personal income tax credit. The governor estimates that this progressively distributed refundable tax, which would provide property tax relief based on an individual homeowner’s ability to pay, would yield an average benefit of $500 per homeowner.
• Establishment of a renter’s personal income tax credit. Homeowners aren’t the only ones seeing a break: Cuomo is proposing a refundable credit for renters. He estimates that the average benefit for a family of four in New York City with income of less than $50,000 would be about $410.
• Estate tax reform. Much sought after by taxpayers, Cuomo’s proposal would raise the current state exclusion threshold from $1 million to “eventual conformity” with the federal exemption amount—while reducing the top rate from 16 percent to 10 percent over four years.

Cuomo goes into more details on how these proposals might work in the Briefing Book. Especially relevant to CPAs is a section titled, “Tax Reform, Revenue Actions and STAR.”

Among the items receiving more attention is estate tax reform. Cuomo noted that New York is one of only 15 states that imposes an estate tax, and has particularly low exemption levels and high rates. According to the Briefing Book, the state’s current policies encourage elderly New Yorkers to leave and makes transfers of small family-owned businesses problematic. Cuomo said he is also suggesting that the value of gifts be added back to the estate and that the state close loopholes that allow certain trusts to avoid paying New York taxes.

Cuomo also lists various tax simplification proposals, including increasing the personal income tax (PIT) filing income threshold from the current $4,000—set in 1987—to the amount of the taxpayer’s standard deduction. This would eliminate the need to file for some 270,000 filers.

Another proposal is the repeal of article 12 of the Tax Law, which covers tax collections on stock sales transfers from financial service companies. Cuomo said these are fully and immediately rebated and that this tax exists only as “an alternative source to repay New York City Municipal Assistance Corporation Bonds,” which have long been retired.

CPAs will be particularly interested in two filing changes that the governor is suggesting. One is modifying signature requirements on professionally prepared e-filed returns. Preparers would no longer have to obtain a signed signature document from clients, but could use a electronic certification.

For CPAs who have self-employed clients, the budget includes a provision to let these clients file and pay Metropolitan Transportation Authority (MTA) mobility taxes while they file their personal incomes taxes, simplifying compliance.

Those who want to read the proposed budget, can do so on the state’s Division of the Budget site. 

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