New York—Corporate, Personal Income Taxes: Legislation Revising Rates and Adding Credits Enacted

New York Gov. Andrew M. Cuomo has signed legislation containing new credit provisions and modifications to the corporate franchise and personal income tax rates, including a restructuring of the individual income tax brackets. The legislation also contains property tax provisions, which are reported separately.

Individual Income Tax Changes

Under the legislation, for joint filers in taxable years beginning after 2011 and before 2015, taxpayers with New York taxable income of $40,000 to $150,000 will be taxed at 6.45% (previously, 6.85%); taxpayers with New York taxable income of $150,000 to $300,000 will be taxed at 6.65% (previously, 6.85%); taxpayers with New York taxable income of $300,000 to $2 million will be taxed at 6.85% (previously, 7.85% to 8.97%); and taxpayers with New York taxable income over $2 million will be taxed at 8.82% (previously, 8.97%).

For taxpayers with other filing statuses, the top 8.82% rate will apply to head of household filers with New York taxable income over $1.5 million and to single filers with New York taxable income over $1 million. The legislation also provides for a cost of living adjustment to the brackets and the standard deduction.

The Department of Taxation and Finance has announced that it is developing new withholding tables that will be effective on January 1, 2012.

Metropolitan Commuter Transportation Mobility Tax

Metropolitan commuter transportation mobility tax (MCTMT) provisions are amended to exclude certain small businesses from the tax. Specifically, the legislation modifies the definition of "employer" to provide that payroll expense must exceed $312,500 (previously, $2,500) in any calendar quarter. The definition is also amended to exclude eligible educational institutions.

In addition, the MCTMT, previously imposed on employers at the rate of 0.34%, is imposed at the following rates: 0.11% for employers with payroll expense no greater than $375,000 in any calendar quarter; 0.23% for employers with payroll expense no greater than $437,500 in any calendar quarter; and 0.34% for employers with payroll expense exceeding $437,500 in any calendar quarter. For self-employed individuals, tax at the rate of 0.34% applies if earnings attributable to the Metropolitan Commuter Transportation District exceed $50,000 (previously, $10,000) for the tax year.

The MCTMT amendments applicable to employers take effect for the quarter beginning on April 1, 2012.

Corporate Franchise Tax on Manufacturers

The legislation provides a 50% rate reduction under the corporate franchise tax for eligible qualified New York manufacturers, for taxable years beginning after 2011 and before 2015.

The Commissioner of Taxation and Finance is required to establish guidelines and criteria specifying the requirements for a manufacturer to be classified as an eligible qualified New York manufacturer. The criteria may include factors such as regional unemployment, the economic impact that manufacturing has on the surrounding community, population decline within the region, and median income within the region.

Credits

The legislation creates the Youth Works Tax Credit Program, under which credits are available for employing at-risk youths in part-time and full-time positions. Qualified employers are entitled to a credit of $500 (full-time) or $250 (part-time) per month for up to six months for each qualified employee. Employers are also entitled to $1,000 (full-time) or $500 (part-time) for each qualified employee who is retained for an additional six months. Qualified employees must start their employment on or after January 1, 2012, and no later than July 1, 2012. Up to $25 million in tax credits may be allocated under this program.

The legislation also creates the Empire State Jobs Retention Program, which provides credits to targeted businesses harmed by a natural disaster. Participants in the program must (1) be located in a county in which an emergency has been declared by the governor on or after January 1, 2011, (2) demonstrate substantial physical damage and economic harm resulting from the event leading to the emergency declaration, and (3) retain at least 100 full-time equivalent jobs in the county. The credit equals 6.85% of the wages of retained jobs.