TAX ANALYSIS

Alcoholic Beverage Fees

Ways and Means
Executive
All
Funds
General
Fund
General
Fund Percent Change
All
Funds
General
Fund
General
Fund
Percent Change
1996-97 Actual
$30
$28
--
$30
$28
--
1997-98 Estimate
33
31
10.7
33
31
10.7
1998-99 Forecast
27
27
(12.9)
27
27
(12.9)
 
Distillers, brewers, wholesalers, retailers, and others who sell alcoholic beverages in New York State are required by Articles 4, 4-A, 5, and 6 of the Alcoholic Beverage Control Law to be licensed by the State Liquor Authority. Currently, 2,700 retail outlets and 20,100 bars and restaurants are licensed.

The fees vary, but most licenses are issued for a three-year period.

General Fund

The Committee Staff estimates receipts will total $31 million in State Fiscal Year 1997-98, an increase of 10.7 percent. This estimate is the same as the Executive.

Following normal patterns of collection, State Fiscal Year 1998-99 is a peak year — receipts are expected to increase significantly. However, legislation enacted in 1997 will have a $6 million negative effect on revenue. The Committee Staff forecasts receipts to total $27 million, a decline of 12.9 percent. This estimate is the same as the Executive.

All Funds

A portion of the Alcoholic Beverage Fees is dedicated to the Alcoholic Beverage Enhancement Account. For State Fiscal Year 1997-98, this portion is estimated to total $2.3 million. The Executive administratively proposes to discontinue this funding. Therefore, no dedication will occur in State Fiscal Year 1998-99.

Recent Legislative History

In 1997, the credit period offered to beer and wine retailers was decreased from 30 days to 15 days. Also, the payment period for licenses relating to liquor licenses for on-premise consumption, special on-premise consumption, and bottle club liquor licenses was changed from 3 years to 2 years, effective December 1, 1998. These actions are expected to reduce revenues by $6 million in State Fiscal Year 1998-99.
 

Alcoholic Beverage Tax

Ways and Means
Executive
General
Percent
General
Percent
Fund
Change
Fund
Change
1996-97 Actual
$193
--
$193
--
1997-98 Estimate
180
(6.7)
176
(8.8)
1998-99 Forecast
179
(0.6)
178
1.1
 
New York State, through Article 18 of the Tax Law, currently imposes a tax on various Alcoholic Beverages, including beer, wine, and other spirits. The tax rate varies depending on the alcohol content. All of the receipts are deposited in the General Fund.

General Fund

Alcohol consumption has been decreasing at a slow but steady rate every year as a result of increased health concerns tied to alcohol consumption, increased enforcement of DWI laws, and to a lesser extent in recent years, raising the legal drinking age to 21 in New York State. Year-to-date receipts as of January 1998, total $156 million, a decline of 7.4 percent from January 1997. Comparing consumption-to-date, liquor with an alcohol content greater than 24 percent has declined 6.9 percent, liquor with an alcohol content less than 24 percent has declined 5.3 percent, wine consumption has declined 7.0 percent, and beer consumption has declined 8.9 percent.

The Committee Staff estimate for State Fiscal Year 1997-98 is $180 million, representing a 6.7 percent decline over State Fiscal Year 1996-97. The large decline in receipts from State Fiscal Year 1996-97 is attributable to the repeal of the requirement that large taxpayers remit payment by Electronic Fund Transfer (EFT). The Committee Staff estimate is $4 million higher than the Executive.

The Committee Staff forecast for State Fiscal Year 1998-99 is $179 million, a decline of 0.6 percent. This forecast assumes a return to normal collection patterns since receipts will not be affected by changes in EFT rules.

In addition, consumption patterns are forecast to continue their decline. The Committee Staff estimate is $1 million higher than the Executive.

Recent Legislative History

In 1997, legislation was enacted that repealed 1996 legislation, which required payment by Electronic Funds Transfer (EFT). The Alcoholic Beverage Enforcement provisions, which were due to expire on October 31, 1997, were extended until October 1, 2002.

In 1996, legislation was enacted to require alcohol distributors with an annual tax liability of more than $5 million to remit payment by means of EFT.

On January 1, 1996, the State excise tax on beer was reduced from 21 cents to 16 cents per gallon.
 

Auto Rental Tax

Ways and Means
Executive
General
Percent
General
Percent
Fund
Change
Fund
Change
1996-97 Actual
$31
--
$31
--
1997-98 Estimate
33
6.1
33
6.1
1998-99 Forecast
35
6.1
35
6.1
 
The Auto Rental Tax, Article 28-A of the Tax Law, applies to the rental of any passenger car with a gross vehicle weight of 9,000 pounds or less that can seat up to a maximum of nine passengers. The tax is imposed at a rate of 5 percent on the charges incurred for any rental or use in New York State. The tax does not apply to leases of one year or more. All of the receipts are deposited in the General Fund.

General Fund

Based on historical collection patterns, the Committee Staff estimate for State Fiscal Year 1997-98 receipts is $33 million, a growth rate of 6.1 percent. This estimate is the same as the Executive.

The Committee Staff forecast for State Fiscal Year 1998-99 is $35 million, which also represents growth of 6.1 percent. This estimate is the same as the Executive.
 

Bank Tax

Ways and Means
Executive
General
Percent
General
Percent
Fund
Change
Fund
Change
1996-97 Actual
$640
--
$640
--
1997-98 Estimate
702
9.7
675
5.5
1998-99 Forecast
729
3.8
704
4.3
 
The Bank Tax, Article 32 of the Tax Law, imposes a tax on banking corporations for the privilege of operating a banking business in a corporate manner, employing capital, owning or leasing property, or maintaining an office in New York State. The tax is assessed at a rate of 9 percent of Entire Net Income, allocated or attributable to New York, after credits. One of the three alternative bases, allocated capital, alternative minimum income, or fixed dollar minimum, must be used if it results in a greater amount of tax owed. All of the receipts are deposited into the General Fund.

General Fund

The Committee Staff estimates that State Fiscal Year 1997-98 receipts will total $702 million, representing an increase of 9.7 percent. The Committee Staff estimate accounts for the first full year without a Business Tax Surcharge, a return to more normal audit patterns, and the positive effects associated with strong growth in corporate profits. This estimate is $27 million higher than the Executive.

The Committee Staff forecast for State Fiscal Year 1998-99 is $729 million, an increase of 3.8 percent. This forecast reflects a continued effort by banks to streamline operating costs and moderate growth in profits. This estimate is $25 million higher than the Executive.

Recent Legislative History

In 1997, two measures were enacted affecting the Bank Tax. First, the tax was extended for 4 years, with an expiration date of December 31, 2001. In addition, banks, beginning in the year 2001, will be allowed a Net Operating Loss deduction, similar to that afforded to other corporations.
 

Cigarette Tax

Ways and Means
Executive
General
Percent
General
Percent
Fund
Change
Fund
Change
1996-97 Actual
$667
--
$667
--
1997-98 Estimate
669
0.3
667
0.0
1998-99 Forecast
651
(2.7)
651
(2.4)
 
The Cigarette Tax, Article 20 of the Tax Law, is levied at a rate of 56 cents per package of 20 cigarettes on the sale of cigarettes within the State. All of the receipts are deposited in the General Fund.

The State levies a tax on all other tobacco products equal to 20 percent of the wholesale price of such products. In addition, there is an annual license fee of $100 for all retail establishments and $25 for every vending machine that sells cigarette and/or tobacco products.

General Fund

The Committee Staff estimates Cigarette Tax receipts in State Fiscal Year 1997-98 to total $669 million, an increase of 0.3 percent over State Fiscal Year 1996-97. Despite seeing a decrease in cigarette consumption as a result of increasing health concerns related to the use of tobacco products, the increasing popularity of cigars results in an increase in receipts from tobacco products. In addition, the overall increase in Cigarette Tax collections is attributable to increased cigarette enforcement. The Committee Staff estimate is $2 million higher than the Executive.

The Committee Staff forecasts revenues of $651 million in State Fiscal Year 1998-99, which represents a 2.7 percent decline. Further State and Federal restrictions on cigarette advertising and expanded public health laws will aid in the decline. In addition, enforcement measures will not have as large of an impact on State Fiscal Year 1998-99 collections. The Committee staff estimate is the same as the Executive.

Recent Legislative History

Chapter 629 of the Laws of 1996 enacted strict Cigarette and Tobacco Tax enforcement measures, which were aimed at curbing the sale of bootlegged cigarettes in New York State. The increased enforcement provisions are estimated to increase State Fiscal Year 1997-98 revenues by $13 million.
 

Container Tax

Ways and Means
Executive
General
Percent
General
Percent
Fund
Change
Fund
Change
1996-97 Actual
$25
--
$25
--
1997-98 Estimate
26
4.0
26
4.0
1998-99 Forecast
18
(30.8)
18
(30.8)
 
New York State, under Article 18-A of the Tax Law, levies a tax on the sale of all nonrefillable soda containers at a rate of 1 cent per container. All of the receipts are deposited in the General Fund.

General Fund

The Committee Staff estimates receipts in State Fiscal Year 1997-98 will total $26 million, a growth rate of 4.0 percent. This estimate is the same as the Executive.

The Committee Staff forecast for State Fiscal Year 1998-99 is $18 million, which represents a decline of 30.8 percent. This decline is the result of the repeal of the Container Tax, effective October 1, 1998. This estimate is the same as the Executive.

Recent Legislative History

In 1997, legislation was enacted which repealed the remaining 1-cent tax per container, effective October 1, 1998.

In 1995, the Container Tax was reduced from 2 cents to 1 cent per container.
 

Corporate Franchise Tax

Ways and Means
Executive
General
Percent
General
Percent
Fund
Change
Fund
Change
1996-97 Actual
$2,067
--
$2,067
--
1997-98 Estimate
1,997
(3.4)
1,978
(4.3)
1998-99 Forecast
2,037
2.0
2,012
1.7
 
The Corporation Franchise Tax is comprised of Articles 9-A and 13 of the Tax Law. Article 9-A imposes a tax on corporations for the privilege of operating a business in a corporate form in New York State. The tax is assessed at a rate of 9 percent of Entire Net Income (ENI), allocated or distributed to New York, after credits. One of the three alternative bases (allocated capital, alternative minimum income, or fixed dollar minimum) must be used if any of the three results in a greater amount of tax owed. Article 13 authorizes the tax on unrelated business income. This is a tax on the business income of not-for-profit corporations and other organizations whose activities are otherwise tax-exempt. All of the receipts are deposited in the General Fund.

General Fund

The Committee Staff projects receipts for State Fiscal Year 1997-98 to total $1,997 million. This estimate represents a decline of 3.4  percent. Although the Committee Staff forecasts strong profits from large securities firms, collections are expected to decline in State Fiscal Year 1997-98 as a result of the complete elimination of the Business Tax Surcharge and one-time transactions, such as amnesty, which will not occur this fiscal year. This estimate is $19 million higher than the Executive.

The Committee Staff forecast for State Fiscal Year 1998-99 is $2,037 million, representing growth of 2.0 percent. This forecast is the result of growth in corporate profits (pre-tax) of 5.7 percent. This estimate is $25 million higher than the Executive.

Recent Legislative History

In 1997, various tax reductions were enacted, which will affect Corporate Franchise Tax collections when fully implemented. Among these measures were an extension of the Investment Tax Credit carry-forward period from 10 to 15 years, a tax credit for employers that hire workers with disabilities, and a new credit for companies that purchase alternative fuel vehicles. These measures will have no fiscal impact until State Fiscal Year 1999-00.

In 1996, three measures were enacted which impact the Corporate Franchise Tax. The Farmer Protection and Farm Preservation Act provides a refundable credit equal to the amount of school property taxes attributable to qualified agricultural property. The revenue impact began in Tax Year 1997, and is minimal. Second, Historic Barns can receive an Investment Tax Credit and Economic Development Zone Credit equal to 25 percent of the taxpayer’s qualified rehabilitation expenditures. This revenue impact also began in Tax Year 1997, and is also minimal.

A three-month amnesty program was established between November 1, 1996 and January 31, 1997. Under the program, certain taxpayers could apply for a waiver of penalties relating to certain unpaid tax liabilities for taxable periods ending on or before December 31, 1994. The program generated more than $40 million in gross revenues in State Fiscal Year 1996-97.

In addition, the S-Corp differential was frozen at the 1994 Tax Year level of 7.875 percent for 1995. This resulted in a one-time revenue loss of $3.5 million and was effective for Tax Years beginning on January 1, 1995.
 

Estate & Gift Tax

Ways and Means
Executive
General
Percent
General
Percent
Fund
Change
Fund
Change
1996-97 Actual
$889
--
$889
--
1997-98 Estimate
1,034
16.3
1,013
13.9
1998-99 Current Law
981
(5.1)
950
(6.2)
1998-99 Proposed Law
978
(5.4)
947
(6.5)
 
Articles 26 and 26-A of the Tax Law impose taxes on the transfer of property among individuals. Transfers of property upon death are taxed under the Estate Tax Law (Article 26), and transfers of property during an individual’s lifetime are taxed under the Gift Tax Law (Article 26-A). All of the receipts are deposited into the General Fund.

General Fund

The Committee Staff projects State Fiscal Year 1997-98 receipts will total $1,034 million. This represents growth of 16.3 percent. This estimate is comprised of $930 million from the Estate Tax and $104 million from the Gift Tax. This estimate reflects the receipt of several large Estate Tax payments in the first half of the Fiscal Year, as well as the recent upward trend in the stock market, since stock represents the largest component of estates subject to the tax. This estimate is $21 million higher than the Executive.

The Committee Staff current-law forecast for State Fiscal Year 1998-99 is $981 million, which represents a decrease in overall Estate and Gift Tax receipts of 5.1 percent. The forecast for Gift Tax receipts in State Fiscal Year 1998-99 is $107 million, an increase of 2.9 percent. This estimate is $31 million higher than the Executive.

Legislation submitted with the Executive Budget would update and modify Estate and Gift Tax laws by conforming the State Tax Law to corresponding Federal provisions as amended by various Federal enactments, particularly the Taxpayer Relief Bill of 1997. This legislation would also eliminate a $10 fee for obtaining certain releases of liens under the Estate Tax. Based on these proposals, the Committee Staff proposed-law forecast for State Fiscal Year 1998-99 is $978 million, a decline of 5.4 percent.

Recent Legislative History

In 1997, legislation was enacted which phased in a reduction of the Estate and Gift Tax. As of October 1, 1998, estates valued under $300,000 will be exempt from Estate Taxes. As of February 1, 2000, the exemption will increase to the Federal exemption of $600,000. Should the Federal government increase its exemption threshold above $600,000, the State will automatically conform as long as the exemption does not exceed $1 million. In addition, as of January 1, 2000, the Gift Tax will be repealed.

In 1996, legislation made a technical correction to a 1994 amendment, which resulted in unintended tax increases for certain taxpayers. The legislation limited the liability to that which would have resulted absent the 1994 Tax Law change.

In 1995, legislation was adopted that provided a new deduction equal to a maximum of $250,000 of assets that represent equity in the decedent’s principal residence. By reducing the tax on such assets, this legislation facilitates the transfer of homes from decedents to their heirs. In effect, when combined with the unified credit, as much as $365,000 of assets are now exempt from tax.

In 1994, legislation was enacted that increased the maximum unified credit from $2,750 to $2,950, thereby effectively increasing the exemption equivalent from $108,333 to $115,000. This legislation also established a new credit equal to five percent of the first $15 million of assets in a closely-held business (for estates where such assets constitute 35 percent or more of the estate), up to a maximum credit of $750,000. This reduces the tax burden on the transfer of small businesses to heirs upon an owner’s death.
 

Highway Use Tax

Ways and Means
Executive
All
Funds
General Fund
General Fund Percent Change
All
Funds
General Fund
General Fund Percent Change
1996-97 Actual
$157
$0
--
$157
$0
--
1997-98 Estimate
167
0
0.0
163
0
0.0
1998-99 Forecast
168
0
0.0
166
0
0.0
 
Article 21 of the Tax Law imposes a Highway Use Tax for the privilege of operating any vehicle on the highways of New York State. Three component taxes are imposed upon the operation of trucks, tractors, trailers and semi-trailers for their use of the highways:

General Fund

All Highway Use Tax receipts are dedicated to the Highway and Bridge Trust Fund.

All Funds

The Committee Staff estimates that receipts in State Fiscal Year 1997-98 will total $167 million, an increase of $10 million over State Fiscal Year 1996-97. This increase is primarily due to a higher demand for trucking services. This estimate is $4 million higher than the Executive.

The Committee Staff forecasts Highway Use Tax receipts will total $168 million in State Fiscal Year 1998-99, an increase of $1 million, due to continued economic strength for trucking services. This estimate is $2 million higher than the Executive.

Recent Legislative History

New York State complied with Federal legislation requiring conformity with the International Fuel Tax Agreement (IFTA) with respect to the reporting and collection of taxes relating to fuel use by a single base state, and the proportional sharing of revenue among the states where a commercial motor vehicle is operated.
 

Hotel/Motel Tax

Ways and Means
Executive
General
Percent
General
Percent
Fund
Change
Fund
Change
1996-97 Actual
$1
--
$1
--
1997-98 Estimate
0
-100.0
0
(100.0)
1998-99 Forecast
0
0.0
0
0.0
 
On September 1, 1994, the State repealed the State Special Hotel Occupancy Tax, which was imposed at a rate of 5 percent on the daily charge for hotel or motel rooms and/or suites. Permanent residents and rooms for which the daily rate was less than $100 were exempt from the tax.

Insurance Tax

Ways and Means
Executive
General
Percent
General
Percent
Fund
Change
Fund
Change
1996-97 Actual
$653
--
$653
--
1997-98 Estimate
692
6.0
689
5.5
1998-99 Forecast
719
3.9
714
3.6
 
The Insurance Taxes are contained in Articles 33 and 33-a of the Tax Law, and Articles 11 and 12 of the Insurance Law. Article 33 of the Tax Law imposes an income and premiums tax on insurance companies. Article 33-a imposes a tax on independently procured insurance. Articles 11 and 12 impose retaliatory taxes and a tax on excess line brokers (brokers authorized to procure insurance from out-of-state carriers not authorized to do business in New York). The Franchise Tax on insurance corporations consists of a tax measured by allocated Entire Net Income (or one of three alternative bases, if a higher tax would result), plus a tax on subsidiary capital and an additional Franchise Tax based on gross premiums less certain deductions. All of the receipts are deposited into the General Fund.

General Fund

The Committee Staff projects receipts in State Fiscal Year 1997-98 will total $692 million, an increase of 6.0 percent. An increase in Insurance Tax receipts is projected despite the complete elimination of the Business Tax Surcharge, effective in State Fiscal Year 1997-98. This estimate reflects strong Wall Street activity, which has allowed strong growth in insurance company portfolios. The estimate also assumes moderate growth in Property and Casualty premiums. These factors have helped to offset the loss of revenues from the complete elimination of the Business Tax Surcharge. This estimate is $3 million higher than the Executive.

The Committee Staff forecast for State Fiscal Year 1998-99 is $719 million, representing an increase of 3.9 percent above the current Fiscal Year estimate. The increase reflects an estimated $25 million revenue gain due to the law change effective March 1, 1999, which raises the prepayment from 25 percent to 40 percent and larger realizations in corporate portfolios. The estimate is $5 million higher than the Executive.

Recent Legislative History

In 1997, three Insurance Tax measures were instituted to help maintain the competitiveness of this industry in New York State. First, beginning in 1998, life insurance companies will receive a reduction in their premium tax rate from 0.8 percent to 0.7 percent, and an increase in their March estimate payment from 25 percent to 40 percent. In addition, two other provisions enacted will allow for the formation of captive insurance companies and allow for investment in Certified Capital Corporations (CAPCOs). A captive insurance company is generally a company that primarily insures the risks of a parent or its parents’ affiliated companies. Captive insurers will be subject to a special premiums tax in lieu of the premiums and "income-base" tax that applies to other insurance companies. Insurance companies that invest in CAPCOs will be able to claim a credit for 100 percent of their investments.
 

Lottery

Ways and Means
Executive
General
Percent
General
Percent
Fund
Change
Fund
Change
1996-97 Actual
$1,533
--
$1,533
--
1997-98 Estimate
1,536
0.2
1,525
(0.5)
1998-99 Forecast
1,559
1.5
1,530
0.3
 
The New York State Lottery is comprised of the Instant, Daily Numbers, Win 4, Pick 10, Take 5, Quick Draw, and Lotto 54 games. A percentage of the revenue derived from the sale of each game, ranging from 30 to 45 percent depending on the game, is dedicated to fund education. In addition, 15 percent of Lottery sales are placed into a Special Revenue account to cover the administrative expenses of the Lottery. The remaining revenues from each game’s sales are the prize payouts to Lottery players. The administrative expenses are appropriated by the Legislature each year as part of the State Operating Budget. Any revenue remaining, after paying the administrative costs of the Lottery, is then transferred back to the Lottery receipts account and dedicated to education.

General Fund

The Committee Staff projects State Fiscal Year 1997-98 revenues of $1,536 million, representing growth of 0.2 percent. This is $59 million lower than the Lottery Aid Guarantee for State Fiscal Year 1997-98. The estimate takes into consideration last year’s expansion of the Take 5 game. Quick Draw and Pick 10 are expected to decline once again. The Daily Numbers and Win 4 games, however, have appeared to recover from the introduction of Quick Draw. This estimate also reflects increased growth in the Instant Games and Lotto 54. Despite the introduction of the "New York Wired" Instant Ticket and the popularity of the Instant Games in general, they are projected to grow only marginally this year. The Instant Games never fully recovered from their annual summer dip in sales. While Lotto sales have increased from last year, this has been somewhat offset by the lack of sales at low jackpot levels. However, since sales at low jackpot levels are steadily declining, this paves the way for a greater number of high jackpot levels, which in turn fuels Lotto play. This is currently the driving force behind Lotto sales. Despite this trend, over the past three months both the occurrence of large jackpots and sales at all levels have declined. This estimate is $11 million higher than the Executive.

The Committee Staff forecast for State Fiscal Year 1998-99 is $1,559 million, representing growth of 1.5 percent. This forecast assumes that Lotto 54 sales will continue to disappoint overall, but that a more frequent rate of high jackpot levels will occur than in State Fiscal Year 1997-98, which will lead to an increase in revenue. The current public appetite for the Instant Games will continue. In addition, this forecast accounts for a moderation in Take 5. The Daily Numbers and Win 4 games will fully recover from the introduction of Quick Draw, which will begin to level out, and will display strong growth. The Pick 10 game will also begin to level out. The Division of the Lottery hopes that the television show, "New York Wired," will be an additional, and powerful, advertising tool for Lottery games. If this proves to be true, growth could actually be much higher. This estimate is $29 million higher than the Executive.

Recent Legislative History

In February 1997, the Division of the Lottery introduced a new Lotto game, "Lucky Day," to promote the 30th anniversary of the State Lottery. In this weekly game, players could select any calendar date from January 1, 1900 to December 31, 1999, and an additional "lucky number" from 1 to 30. This game came to an end in October 1997. Also in October 1997, the Lottery debuted the "New York Wired" television show. This show is being used to both promote the Lottery, and increase its player base, and to aid education. One-half of any money won on the show is either donated to a participating school or to the New York Scholars Program. Entrance to the show is granted via an associated Instant Ticket.

In January 1998, the Division of the Lottery introduced two new high-stakes Instant Games. The first, "Hit the Jackpot," is the State’s first $5 Instant Ticket. The second, called "Quarterly Dividends," was introduced to offer a "compromise" between "Win For Life," in which winners receive $1,000 per week for the rest of their life, and "Tax-Free Million," where winners can instantly win $1 million tax-free. Winners of "Quarterly Dividends" can win up to $10,000 every three months for the rest of their life, with a guaranteed payout of $1 million.

In January 1997, the number of weekly Take 5 drawings was increased from two to four.

White Book
[ Previous section ] [ Next section ]
New York State Assembly
[ Welcome Page ] [ Reports ]