New York Tax Minutes: Final SALT Regs and 2 Post-Budget Changes

This article originally appeared in Law360 and is reprinted with permission.

The Fourth of July fireworks may be over but there’s still plenty to see on the New York tax front. In this month’s edition of NY Tax Minutes, we take a look at the Internal Revenue Service’s final state and local tax, or SALT, regulations addressing potential workarounds to the SALT deduction cap. We also highlight two noteworthy post- budget changes to New York’s tax law and look in on the past month’s important state tax decisions and opinions.

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NYS Offers a GILTI Exemption and Increases its Economic Nexus Threshold

On June 20, 2019, both the NYS Assembly and Senate passed bills that made significant changes to the state’s treatment of two hot tax issues: the taxation of global intangible low-taxed income (“GILTI”), and the state’s threshold for establishing economic nexus for sales tax purposes. According to the Senate and Assembly websites, the legislation was signed into law by Governor Cuomo on June 24th.

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Report on Connecticut Biennial Budget FY 2020-2021

On June 4, 2019, Gov. Ned Lamont announced that Connecticut’s Democrat-controlled Assembly passed the $43.35 billion FY 2020 Budget (the “Budget Plan”). The Final Bill (H.B. 7424) which cleared the Senate on June 4 and the House on June 3, is available here. It aims to resolve a $3.7 billion multi-billion dollar deficit largely through tax and revenue hikes, increasing spending by 1.7% in fiscal year 2020 and by 3.4% in 2021. As of June 13, it has not been signed by the Governor. This is just a formality as he stands behind this Budget Plan.

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New York Issues Economic Nexus FAQs

The New York State Division of Taxation and Finance (the “Department”) issued information entitled “FAQs related to registration requirement for businesses with no physical presence in NYS” (“FAQs”) on May 1, 2019 to address questions concerning sales tax collection by businesses without a physical presence in New York.

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NY Tax Minutes: Marketplace Guidance, Tax Return Bill

This article originally appeared in Law360 and is reprinted with permission.

We’re back after a brief one month hiatus. One of your authors celebrated the birth of his first child in April, which led to some last- minute calls to duty on the home front. Your other author was at the ready to fill in, but he has 12 kids already (no joke), so we decided to dedicate April to our dependents (new and old), and to our clients. We’ll leave it to readers to guess which author has one mouth to feed and which has 12.

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New Jersey Income Tax Planning Opportunity: Delaware Trusts

A significant benefit of using trusts is the ability to minimize state level income taxes. The availability of this strategy depends on the residence of the trust creator (the “settlor”); the residence of the trustee; the residence of the trust beneficiaries; the type of assets owned by the trust; and the type of income earned by the trust. When all of the factors align correctly, the trust settlor can minimize, or even eliminate, state level income tax on the trust assets.  

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Federal Court Rules Refunded NYS Brownfield Tax Credits Are Taxable Federally

New York’s Brownfield Cleanup Program (“BCP”) is one of the more effective tax-based incentive programs offered by the state.  The BCP allows participants to remediate a contaminated piece of real property in exchange for tax credits that can total up to 50% of the qualified remediation costs incurred to clean the property, and 24% of the qualified construction costs incurred to develop the property after it has been remediated.  These tax credits can be the difference between a lucrative development and one that is economically unfeasible. 

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A Two Percent Property Tax Cap But No Pied-A-Terre Tax in New York: Gov. Andrew Cuomo's Recently Released Fiscal Year 2020 Budget

https://www.hodgsonruss.com/practices-State_Local_Tax.htmlGovernor Cuomo announced that New York lawmakers passed the $175.5 billion FY 2020 Budget (the “Final Bill”) on April 1, 2019.  There’s a lengthy list of spending packages in the budget as described here but I’m circling back to two real property tax issues. Although Gov. Cuomo floated the idea of a pied-a terre tax on large mansions which I wrote about here, and an increased real estate transfer tax on conveyances where the consideration “for the entire conveyance” is $5 million or more, which my colleagues wrote about here, neither of these items made the final cut. Instead, the budget features: a permanent property tax increase cap of 2% and a “mansion tax,” a variation of the proposed pied-a terre tax. The State Assembly and State Senate on March 31 approved the budget’s revenue bill (S. 1509-C/A. 2009-C) soon after legislative leaders and Gov. Andrew Cuomo reached an eleventh-hour agreement on the state budget, one day before the start of the fiscal year.

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Report on Executive Budget FY 2020

On April 1, Governor Cuomo announced that New York lawmakers passed the $175.5 billion FY 2020 Budget (the “Final Bill”).  The Final Bill (S. 1509-C / A. 2009-C) is available here.  As of this writing, it has not been signed by the Governor.  We have been following the evolution of the budget since Governor Cuomo released his proposal on January 15^th, which we covered here.   The tax and revenue highlights of the Final Bill, along with the omissions or differences from the Governor’s original proposals, are summarized below.  Other aspects of the Final Bill, including criminal justice reform, MTA reforms, and changes to the Public Authority Law, are not discussed. 

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New York’s High Court Halts Wynne Challenges

Last week, New York’s highest court issued a disappointing blow to our New York “Wynne challenges,” the two cases brought to challenge the double taxation scheme that applies to taxpayers who are dual residents in New York and another state. In both cases, Chamberlain and Edelman (previously covered here), we argued that the U.S. Supreme Court’s 2015 decision in Comptroller v. Wynne upended New York’s prior precedent on this issue (Tamagni v. Tax Appeals Tribunal). But the Court declined to hear the taxpayers’ appeals from the lower court decisions, and did so by way of two two-sentence orders with no analysis or explanation.

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