NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A4877
SPONSOR: Kelles TITLE OF BILL:
An act to amend the tax law, in relation to imposing a specific tax on
all corporate stock buybacks of issued shares
PURPOSE:
To impose a tax on corporate stock buybacks of issued shares.
SUMMARY OF PROVISIONS:
Section 1 - amends subdivisions 1 and 2 of section 270 of the tax law,
to Impose a tax on the reacquisition of stock by a corporation even if
such corporation subsequently cancels such stock.
Section 270 of the tax law is amended by adding a new section 2-a,
which sets the new tax on corporate stock reacquisition at one-half of
one percent of the value paid by such corporation for the shares.
Section 2 - effective date
DIFFERENCE BETWEEN ORIGINAL AND AMENDED VERSION:
EXISTING LAW:
Current law imposes a tax on the purchase, redemption, or other acquisi-
tion by a corporation of its stock, unless such shares are cancelled
pursuant to section 515 of the Business Corporation Law.
JUSTIFICATION:
Following the 2017 federal corporate tax cuts, corporations in the
United States spent a record $1 trillion in 2018 in corporate stock
buybacks. In 2019, corporations spent nearly $1 trillion again buying
back the stock of their shareholders. In the same year that AT&T
announced a three-year, $30 billion stock buyback plan, the company
revealed a third quarter 2019 employment cut of 5,950 jobs, bringing the
total job cuts by the company since the 2017 tax break to 33,778 jobs.
Corporations buy back their stock to inflate its value, enriching share-
holders and executives, whose compensation is often tied to share pric-
es. Trillions of dollars have been spent on stock buy-backs instead of
productive investment that could benefit workers, the economy, and
companies' long-term sustainable growth. A tax on these transactions
could help encourage productive investment while providing needed state
revenue to invest in public education and reduce the property tax burden
on New York's working families. The Roosevelt Institute estimates that a
tax of .5% could generate as much as $3.2 billion in revenues for the
state of New York.
LEGISLATIVE HISTORY:
2019-20: A9748/S7629 (Niou/Metzger) - Ways & Means / Budget & Revenue
2021-22: A2422/S4528 (Niou/May) - W&M/B&R
FISCAL IMPLICATIONS:
New tax revenue for the State
EFFECTIVE DATE:
This act shall take effect immediately
STATE OF NEW YORK
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4877
2023-2024 Regular Sessions
IN ASSEMBLY
February 24, 2023
___________
Introduced by M. of A. KELLES, GLICK, SIMON, FAHY, EPSTEIN, REYES,
SEAWRIGHT, DARLING, L. ROSENTHAL, CARROLL, DICKENS -- read once and
referred to the Committee on Ways and Means
AN ACT to amend the tax law, in relation to imposing a specific tax on
all corporate stock buybacks of issued shares
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. Subdivisions 1 and 2 of section 270 of the tax law, subdi-
2 vision 1 as amended by chapter 996 of the laws of 1963 and subdivision 2
3 as amended by chapter 827 of the laws of 1968, are amended and a new
4 subdivision 2-a is added to read as follows:
5 1. There is hereby imposed and shall immediately accrue and be
6 collected a tax, as herein provided, on all sales, or agreements to
7 sell, or memoranda of sales and all deliveries or transfers of shares or
8 certificates of stock, or certificates of rights to stock, or certif-
9 icates of interest in property or accumulations, or certificates of
10 deposit representing certificates taxable under this article, in any
11 domestic or foreign association, company or corporation, or certificates
12 of interest in business conducted by a trustee or trustees, made after
13 the first day of June, nineteen hundred five, whether made upon or shown
14 by the books of the association, company, corporation, or trustee, or by
15 any assignment in blank, or by any delivery, or by any paper or agree-
16 ment or memorandum or other evidence of sale or transfer, whether inter-
17 mediate or final, and whether investing the holder with the beneficial
18 interest in or legal title to said stock, or other certificates taxable
19 hereunder, or merely with the possession or use thereof for any purpose,
20 or to secure the future payment of money, or the future transfer of any
21 such stock, or certificates. The purchase, redemption or other reacqui-
22 sition of its own shares by a corporation is subject to tax under this
23 article [unless] regardless of whether such shares are cancelled on
24 reacquisition pursuant to the provisions of section five hundred fifteen
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD00472-01-3
A. 4877 2
1 of the business corporation law, or [unless] whether within one year of
2 the date of such purchase, redemption or other reacquisition, such
3 shares are cancelled by an appropriate amendment to the corporation's
4 certificate of incorporation or by action of the board of directors of
5 such corporation.
6 2. Except as otherwise provided by [section two hundred seventy-a of
7 this chapter] subdivision two-a of this section, the tax imposed by this
8 section shall be two and one-half cents for each share, except in cases
9 where the shares or certificates are sold, in which cases the tax shall
10 be at the rate of one and one-quarter cents for each share where the
11 selling price is less than five dollars per share; two and one-half
12 cents for each share where the selling price is five dollars or more per
13 share and less than ten dollars per share; three and three-quarters
14 cents for each share where the selling price is ten dollars or more per
15 share and less than twenty dollars per share and five cents for each
16 share where the selling price is twenty dollars or more per share.
17 2-a. Notwithstanding the provisions of subdivision two of this
18 section, the tax imposed by this section for the purchase, redemption or
19 other reacquisition of its own shares by a corporation shall be one-half
20 of one percent of the value paid by such corporation for such shares.
21 § 2. This act shall take effect immediately.
