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A03554 Summary:

BILL NOA03554
 
SAME ASSAME AS S01991
 
SPONSORAubry
 
COSPNSRBichotte, Brindisi, Ryan, Ortiz, Stirpe, Pichardo, Miller MG, Mosley, Lifton, Cook, Blake, Abinanti, Jaffee, Hyndman, Cahill, Gottfried, Hooper, Joyner, Peoples-Stokes, Jean-Pierre, Sepulveda, Steck, Rosenthal L, Fahy, Bronson, Magnarelli, Davila, Wallace, Jenne, Skoufis, Simon, De La Rosa, O'Donnell, Wright, Colton, Arroyo, Walker, Dickens, Richardson, Taylor, Niou, Raia, Pellegrino
 
MLTSPNSRBarron, Carroll, Cymbrowitz, Dinowitz, Glick, Hevesi, Lentol, Magee, Nolan, Ramos, Skartados, Thiele, Weinstein, Woerner
 
Amd 208, 210, 617, 631 & 632, Tax L
 
Relates to investment management services to a partnership or other entity.
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A03554 Memo:

NEW YORK STATE ASSEMBLY
MEMORANDUM IN SUPPORT OF LEGISLATION
submitted in accordance with Assembly Rule III, Sec 1(f)
 
BILL NUMBER: A3554
 
SPONSOR: Aubry (MS)
  TITLE OF BILL: An act to amend the tax law, in relation to investment management services to a partnership or other entity   PURPOSE: This bill aims to close the Carried Interest Tax Loophole on the State level by taxing the Carried Interest Income of hedgefund and private equity investors as traditional ordinary earned income.   SUMMARY OF PROVISIONS: Section 1: of the bill amends the tax law by adding (a) (i) The term "investment income" means income, including capital gains in excess of capital losses, from investment capital, to the extent included in computing entire net income, less, any of capital gain included in federal taxable income that has to be recharacterized as business income Section 2: of the bill adds the net operating loss deduction allowed under section one hundred seventy-two of the internal revenue code shall for purposes of this Paragraph be determined taking into consideration the re-characterization of income Sections 3: of the bill provides a special rule Special rule for corpo- rate partners performing investment management services. Section 4: of the bill provides rules for investment management services to a partnership or other entity. Section 6: clarifies that this subsection shall not apply to a partner or shareholder performing investment management services Subsection 7: of the bill amends the tax law by adding the definition of the teem 'Investment Management Services' and 'Specified assets Section 8: of the bill amends the Tax Law by adding a special rule for partners performing investment management services. Section 10: subjects income from investment management services as defined in subsection (h) of section 631 of the tax law, will be subject to a 19% "carried interest tax fee" payable to the state of New York. Section 11: provides that this act shall take effect upon enactment into law by the states of Connecticut, New Jersey and Massachusetts of legis- lation having an identical effect with this act, but if the states of Connecticut, New Jersey and Massachusetts shall have already enacted such legislation, this act shall take effect immediately; provided that the commissioner of taxation and finance shall notify the legislative bill drafting commission upon the enactment of such legislation by the states of Connecticut, New Jersey and Massachusetts in order that such commission may maintain an accurate and timely effective data base of the official text of the laws of the state of New York in furtherance of effectuating the provisions of section 44 of the legislative law and section 70-b of 19 the public officers law.   JUSTIFICATION: Currently the Carried Interest Tax Loophole in the federal tax code allows hedge fund investment managers and private equity billionaires to declare as carried interest a percentage of their investment fee to get a lower tax rate. The returns from these fees which can be sizeable-typ- ically qualify as long-term capital gains - and as such are treated much differently and are taxed at a much lower rate than ordinary income. This essentially enables these private equity and hedge fund managers to pay a substantially lower tax rate - 20 percent instead of 39 percent - this is fundamentally unfair. With the considerable gridlock at the federal level on nearly every issue facing the American people, New York Legislators recognize the power that New York can wield in eliminating the preferential tax treat- ment that hedge fund managers enjoy. New York's private equity and hedge funds earn $18.9 billion per year in under-taxed carried interest, using conservative estimates. It is unconscionable that money managers in New York pay a lower tax rate on income that they earn by investing other people's money than hard working New Yorkers in every city and town from Long Island to Buffalo. Closing this loophole on the state level will benefit the economy far beyond the more than $3.7 billion in tax revenue it would raise for New York State. It would generate significant tax receipts (with projections ranging from $1.8 to $18 billion a year nationwide) and serve as a sign to the rest of the country that the New York State Legislature is able to create reasonable comprehensive tax reform that does not seek to further enrich members of the economic elite on the backs of everyday working Americans.   LEGISLATIVE HISTORY: A.9459 was referred to ways and means in 2016.   FISCAL IMPLICATIONS: None.   EFFECTIVE DATE: This act shall take effect upon enactment into law by the states of Connecticut, New Jersey and Massachusetts of legislation having an iden- tical effect with this act, but if the states of Connecticut, New Jersey and Massachusetts shall have already enacted such legislation, this act shall take effect immediately; provided that the commissioner of taxa- tion and finance shall notify the legislative bill drafting commission upon the enactment of such legislation by the states of Connecticut, New Jersey and Massachusetts in order that such commission may maintain an accurate and timely effective data base of the official text of the laws of the state of New York in furtherance of effectuating the provisions of section 44 of the legislative law and section 70-b of 19 the public officers law.
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