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New York State 2023-2024 Budget – Tax Updates

New York State lawmakers came to an agreement about this fiscal year’s budget, allowing Gov. Kathy Hochul to finalize and sign it into law. With the $229 billion budget, legislators plan to address mental health care, crime and gun violence, invest in education, public transit and clean energy and raise the minimum wage in NYS, NYC, Long Island and Westchester while avoiding personal income tax increases. The legislation includes the following tax updates: 

General Tax Updates 

  • Franchise Tax Rates – The legislation extends the corporate tax rate at 7.25% for taxpayers with an income base of over $5 million through January 1, 2027 while keeping the current tax rate for other taxpayers at 6.25%. The 0.1875% capital base tax rate will be extended for the next three years, and will be discontinued after January 1, 2027. 
  • PTET Updates – The bill further defines pass-through entity tax for NYS and NYC PTET programs to exclude deductions for PTET paid when computing state and city PTET incomes, correcting a previous “circular” mathematical computation. It also clarifies election dates for NYS and NYC PTET. 
  • Metropolitan Commuter Transportation Mobility Tax (MCTMT) – The MCTMT, a payroll tax for employers and individuals who engage within the metropolitan commuter transportation district, will increase from 0.34% to 0.60% of payroll expense greater than $437,500 for employers who do business in the Bronx, Kings, New York, Queens and Richmond counties. Employers who do business in Dutchess, Nassau, Orange, Putnam, Rockland, Suffolk and Westchester counties will keep their current payroll tax rates: 
  • 0.11% of payroll expense up to $375,000 (same for Bronx, Kings, New York, Queens and Richmond counties) 
  • 0.23% of payroll expense greater than $375,000 but less than $437,500 (same for Bronx, Kings, New York, Queens and Richmond counties) 
  • 0.34% of payroll expense greater than $437,500  

It also clarifies that taxpayers directly or indirectly involved in in the management of operations of a partnership, enough to not be considered passive investors, are not considered limited partners for the purpose of meeting requirements to be excluded from the MCTMT. 

  • Metropolitan Transportation Business Tax Surcharge – The surcharge will remain at a rate of 30% of a taxpayer’s franchise tax liability. 
  • Real Property – The bill will extend a charge on natural gas and oil producers to establish unit production values through March 31, 2027. 
  • Real Estate Transfer Tax – The bill will extend the real estate transfer tax for qualifying conveyances of real property to existing real estate investment funds to August 31, 2026. 
  • Sales and Use Tax – The legislation will extend the current tax exemption for certain food and drink items sold via vending machines to May 1, 2024. 
  • Cigarette Tax – With the bill, cigarette tax will be increased a dollar to $5.35 for 20 cigarettes and $1.33¾ for each 5 cigarettes for packages with more than 20 cigarettes 
  • Suffolk County Drinking Water Protection Tax – The bill will extend the 0.25% sales tax that funds Suffolk County’s drinking water protection program to 2060. 
  • Appeals & Provisions – With the bill, the Commissioner of Taxation and Finance now has the authority to review Tax Appeal Tribunal decisions and postpone certain deadlines up to 90 days. 

Tax Credit Updates 

  • New Childcare – A childcare credit may be provided for qualifying businesses with childcare programs for employees if they meet certain guidelines for infant and toddler childcare seats. 
  • Brownfield Redevelopment – The site preparation costs and tangible property credit element of the Brownfield Redevelopment credit will be extended and may apply to more taxpayers.  
  • Alcoholic Beverage Production – The bill will extend the alcoholic beverage production credit to cider, wine and liquor produced in New York, ranging from $0.14 per gallon to $6.44 per gallon, depending on the alcohol. 
  • NYC Musical & Theater Production – The legislation will extend the New York City musical and theatrical production credit for qualified musical and theatrical production companies, created to support tourism and the NYC entertainment industry, to January 1, 2026. 
  • Film Production – The bill will increase the Empire State film production credit to 30% and extend it through 2034 to strengthen the film production industry in the state and positively impact the economy. 
  • COVID-19 Capital Costs – Taxpayers will be allowed to submit an application for the COVID-19 capital costs tax credit through September 30, 2023. 
  • Rehabilitation of Historic Properties – The legislation will extend the historic properties tax credit through January 1, 2030. 
  • Commercial Production – The commercial production credit, which incentivizes qualified production companies to produce commercials in the state, will be extended through January 1, 2029.  
  • Grade No. 6 Heating Oil Conversion – The bill will extend the grade no. 6 heating oil conversion credit, created to help businesses convert from no. 6 heating oil to biodiesel heating oil or geothermal systems, through December 31, 2023.  

While the updated budget does not include considerable tax updates for many New York State residents, it may affect certain aspects of your business. We will continue to monitor tax implications of the budget and keep you informed of any updates. If you have questions about the bill and how it may impact your business, reach out to your Janover professional or contact a Janover representative today.  

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