NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A5215
SPONSOR: Niou TITLE OF BILL:
An act to amend the tax law, in relation to the imposition of tax on
certain financial transactions
PURPOSE OR GENERAL IDEA OF BILL:
The purpose of this bill is to raise additional tax revenues by taxing
the trading activities of financial services firms including investment
banks and hedge funds. .The tax applies at low rates to transfers of
stocks, bonds, and derivatives.
SUMMARY OF PROVISIONS:
Section 1 amends tax law by adding a new article 15 titled, "Tax on
Financial Transactions", containing the following sections:
-Section 340 is comprised of definitions for terms including "specified
base amount", "covered transaction", "security", "derivative financial
instrument", "specified index", "treatment of exchanges", "qualified
board or exchange", and "broker".
-Section 341 is titled "Imposition of Tax" and imposes a tax on each
covered transaction with respect to any security. The applicable
percentage of the specified base amount involves the trade of stocks,
bonds, and other financial instruments. Transfers of stock and other
equities are taxed at 0.5% of the trading value; transfers of bonds and
other debt instruments are taxed at 0.1% of trading value; transfers of
derivatives are taxed at 0.005% of the premium in the case of an option
(or similar instrument), any payment in the case of a forward contract
(or similar contract), and any payment in the case of a notional princi-
pal contract (or similar instrument).
-Section 342 is titled "Exceptions" and describes exceptions for certain
traded short-term indebtedness by way of a note, bond, debenture or
other like evidence. Initial issuances and lending agreements with a
maturity period of less than 60 days are exempt from the tax. -Section
343 is titled "Liability for tax" and describes the
directives of responsibility for facilities in New York State and
special rules for direct transactions in regard to payors and payees.
-Section 344 is titled "Administration and regulation" and describes the
role of the commissioner in providing guidance and prescribing regu-
lations as necessary.
-Section 345 is titled "Interest and civil penalties" and describes the
penalty of 20 percent of the amount of tax in addition to an interest
penalty which increases with each month of non-payment.
- Section 346 describes Criminal penalties. Section 2 is a severability
provision. Section 3 is the effective date.
JUSTIFICATION:
New York is an exceptionally wealthy state. Treated as a separate coun-
try, it would have one of the world's largest economies. With such a
strong economy, all New Yorkers should have fundamental economic rights:
access to high-quality education, affordable healthcare, guaranteed
housing, and basic social services and social insurance. New York must
also finance investments in green energy, green jobs, and green infras-
tructure in order to mitigate the catastrophic risks of climate change.
Unfortunately, New York is also the most unequal state in the nation.
In part this is because our tax system has not kept pace with changes in
the economy, leaving the many high-earning professionals and wealthy
families in this state undertaxed. Economic growth from recent decades
has overwhelmingly benefitted a small segment of elites, while infla-
tion-adjusted wages have stagnated for the vast majority of working
people since the 1970s. The state government, lacking adequate tax
revenues, has been unable to afford essential public investment and
social spending, including upgrading our infrastructure, repairing
public housing, protecting public education, and financing Medicaid.
The financial services industry is one of the largest sectors of New
York's economy. While the financial industry contributes substantially
to the economic dynamism of this state, it is also largely responsible
for growing economic inequality and the rising cost of living. Wall
Street bankers get richer every year, and their gains do not trickle
down. Corporate raiders and private equity firms engage in predatory
investing, laying off workers for the sake of short term profits. The
financial sector has also been responsible for routine crises resulting
from speculative and irrational behavior, with the most notorious exam-
ple being the global financial crisis. These crises require massive
government intervention to prevent economic collapse, but those who
caused the crisis never pay the price. The government bails out the
banks, leaving taxpayers holding the bag.
Countries have imposed taxes on stock trading for centuries, recognizing
that financial markets only exist because of government permission and
regulation. The United States itself imposed a tax on stock transfers
between 1914 and 1965, and New York had its own Stock Transfer Tax that
was imposed from 1905 through 1981. The United Kingdom has imposed a tax
on stock transfers since the 17th century, and this tax has not
prevented London from becoming a global financial center to rival New
York City.
Opponents of financial transaction taxes often object that they will
push the industry to move to a low tax state. The argument is fundamen-
tally confused about what makes it possible for a financial center to
exist. Wall Street cannot leave New York. Without urban infrastructure,
a highly educated workforce, sound government regulation, and a sophis-
ticated commercial environment, the financial sector cannot exist.
This bill establishes a modernized, comprehensive tax on financial tran-
sactions of stocks and other equities, bonds and other debt instruments,
and derivatives. The tax exempts initial issuances of securities and
short-term lending.
Social Justice Impact: By way of creating additional revenue for public
services in New York State, this legislation would fund and enforce New
Yorkers' rights to high-quality public education, affordable healthcare,
guaranteed housing, and basic social services and social insurance. In
addition, this bill would create a more progressive tax structure for
New York State.
LEGISLATIVE HISTORY:
This is a new bill.
FISCAL IMPLICATIONS:
This tax will raise between $12 billion and $29 billion annually in new
revenue.
EFFECTIVE DATE:
This bill is effective immediately upon passage.
STATE OF NEW YORK
________________________________________________________________________
5215
2021-2022 Regular Sessions
IN ASSEMBLY
February 12, 2021
___________
Introduced by M. of A. NIOU -- read once and referred to the Committee
on Ways and Means
AN ACT to amend the tax law, in relation to the imposition of tax on
certain financial transactions
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. The tax law is amended by adding a new article 15 to read
2 as follows:
3 ARTICLE 15
4 TAX ON FINANCIAL TRANSACTIONS
5 Section 340. Definitions.
6 341. Imposition of tax.
7 342. Exceptions.
8 343. Liability for tax.
9 344. Administration and regulation.
10 345. Interest and civil penalties.
11 346. Criminal penalties.
12 § 340. Definitions. 1. Specified base amount. For purposes of this
13 article, the term "specified base amount" means:
14 (a) except as provided in paragraph (b) of this subdivision, the fair
15 market value of the security (determined as of the time of the covered
16 transaction); and
17 (b) in the case of any payment described in subparagraph four, five,
18 or six of paragraph (a) of subdivision three of this section, the amount
19 of such payment.
20 2. Covered transaction. For purposes of this section, the term
21 "covered transaction" means:
22 (a) except as provided in paragraph (b) of this subdivision, any
23 purchase if:
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD08795-01-1
A. 5215 2
1 (1) such purchase occurs or is cleared on a qualified board or
2 exchange located in the state, or is executed by a broker in the state;
3 or
4 (2) the purchaser or seller is a New York state resident or business
5 with a taxable presence in the state; and
6 (b) any transaction with respect to a security described in subpara-
7 graph four, five, or six of paragraph (a) of subdivision three of this
8 section, if:
9 (1) such security is traded or cleared on a qualified board or
10 exchange located in the state, or is executed by a broker in the state;
11 or
12 (2) any party with rights under such security is a New York state
13 resident or business with a taxable presence in the state.
14 3. Security and other definitions. For purposes of this section:
15 (a) The term "security" means:
16 (1) any share of stock in a corporation;
17 (2) any partnership or beneficial ownership interest in a partnership
18 or trust;
19 (3) any note, bond, debenture, or other evidence of indebtedness,
20 other than a state or local bond the interest of which is excluded from
21 gross income under section 103(a) of the internal revenue code;
22 (4) any evidence of an interest in, or a derivative financial instru-
23 ment with respect to, any security or securities described in subpara-
24 graph one, two, or three of this paragraph;
25 (5) any derivative financial instrument with respect to any currency
26 or commodity including notional principal contracts; and
27 (6) any other derivative financial instrument any payment with respect
28 to which is calculated by reference to any specified index.
29 (b) The term "derivative financial instrument" includes any option,
30 forward contract, futures contract, notional principal contract, or any
31 similar financial instrument.
32 (c) The term "specified index" means any one or more of any combina-
33 tion of:
34 (1) a fixed rate, price, or amount; or
35 (2) a variable rate, price, or amount, which is based on any current
36 objectively determinable information which is not within the control of
37 any of the parties to the contract or instrument and is not unique to
38 any of the parties' circumstances.
39 (d) (1) An exchange shall be treated as the sale of the property
40 transferred and a purchase of the property received by each party to the
41 exchange.
42 (2) In the case of a distribution treated as an exchange for stock
43 under section 302 or 331 of the internal revenue code, the corporation
44 making such distribution shall be treated as having purchased such stock
45 for purposes of this section.
46 (e) The term "qualified board or exchange" has the meaning given such
47 term by section 1256(g)(7) of the internal revenue code.
48 (f) The term "broker" has the meaning given such term by section
49 6045(c)(1) of the internal revenue code.
50 § 341. Imposition of tax. 1. There is hereby imposed a tax on each
51 covered transaction with respect to any security.
52 2. The tax imposed under subdivision one of this section with respect
53 to any covered transaction shall be the applicable percentage of the
54 specified base amount with respect to such covered transaction.
55 The applicable percentage shall be:
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1 (a) one-half of one percent in the case of a security described in
2 subparagraph one or two of paragraph (a) of subdivision three of section
3 three hundred forty of this article;
4 (b) one-tenth of one percent in the case of a security described in
5 paragraph (a) of subdivision three of section three hundred forty of
6 this article; and
7 (c) five thousandths of one percent in the case of a security
8 described in subparagraph four, five, or six of paragraph (a) of subdi-
9 vision three of section three hundred forty of this article.
10 3. Except as otherwise provided by the commissioner, any payment with
11 respect to a security described in subparagraph four, five, or six of
12 paragraph (a) of subdivision three of section three hundred forty of
13 this article shall be treated as a separate transaction for purposes of
14 this section, including:
15 (a) any net initial payment, net final or terminating payment, or net
16 periodical payment with respect to a notional principal contract (or
17 similar financial instrument);
18 (b) any payment with respect to any forward contract (or similar
19 financial instrument); and
20 (c) any premium paid with respect to any option (or similar financial
21 instrument).
22 § 342. Exceptions. 1. No tax shall be imposed under this article on
23 any covered transaction with respect to the initial issuance of any
24 security described in subparagraph one, two, or three of paragraph (a)
25 of subdivision three of section three hundred forty of this article.
26 2. A note, bond, debenture, or other evidence of indebtedness which:
27 (a) is traded on a trading facility located in the United States; and
28 (b) has a fixed maturity of not more than sixty days, shall not be
29 treated as described in subparagraph three of paragraph (a) of subdivi-
30 sion three of section three hundred forty of this article.
31 (c) No tax shall be imposed under this article on any covered trans-
32 action with respect to which gain or loss is not recognized by reason of
33 section 1058 of the internal revenue code.
34 § 343. Liability for tax. 1. The tax imposed by this article shall be
35 paid by:
36 (a) in the case of a transaction which occurs or is cleared on a
37 facility located in the state, such facility; and
38 (b) in the case of a purchase not described in paragraph (a) of this
39 subdivision which is executed by a broker in the state, the broker.
40 2. In the case of any transaction to which subdivision one of this
41 section does not apply, the tax imposed by this article shall be paid
42 by:
43 (a) in the case of a transaction described in paragraph (a) of subdi-
44 vision two of section three hundred forty of this article:
45 (1) the purchaser if the purchaser is a New York state resident or
46 business with a taxable presence in New York; or
47 (2) the seller if the purchaser is not a New York state resident or
48 business with a taxable presence in New York; and
49 (b) in the case of a transaction described in paragraph (b) of subdi-
50 vision two of section three hundred forty of this article:
51 (1) the payor if the payor is a New York state resident or business
52 with a taxable presence in New York; or
53 (2) the payee if the payor is not a New York state resident or busi-
54 ness with a taxable presence in New York.
55 § 344. Administration and regulation. 1. The party liable for the tax
56 imposed pursuant to this article shall file a return, in the form and
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1 manner and containing such information, as shall be prescribed by the
2 commissioner.
3 2. The commissioner shall:
4 (a) provide guidance regarding such information reporting and other
5 relevant matters concerning covered transactions as the commissioner
6 deems appropriate; and
7 (b) prescribe such regulations as are necessary or appropriate to
8 prevent avoidance of the purposes of this article and otherwise carry
9 out its purposes.
10 § 345. Interest and civil penalties. Any person failing to file a
11 return or to pay any tax within the time required by this article shall
12 be subject to a penalty of twenty percent of the amount of tax due plus
13 an interest penalty of two percent of such amount for each month of
14 delay or fraction thereof after the expiration of the first month after
15 such return was required to be filed or such tax became due, such inter-
16 est penalty shall not exceed twenty-five per centum in the aggregate. If
17 the commissioner determines that such failure or delay was due to
18 reasonable cause and not due to willful neglect, the commissioner may
19 remit, abate or waive all of such penalty and such interest penalty.
20 § 346. Criminal penalties. The criminal penalties in sections eighteen
21 hundred one, eighteen hundred two, eighteen hundred three, eighteen
22 hundred four, eighteen hundred five, eighteen hundred six, eighteen
23 hundred seven and eighteen hundred seventeen of this chapter shall apply
24 to this article with the same force and effect as if the language of
25 those provisions had been set forth in full in this article except to
26 the extent that any provision is either inconsistent with a provision of
27 this article or is not relevant to the taxes imposed by this article.
28 § 2. Severability clause. If any clause, sentence, paragraph, subdivi-
29 sion, section or part of this act shall be adjudged by any court of
30 competent jurisdiction to be invalid, such judgment shall not affect,
31 impair, or invalidate the remainder thereof, but shall be confined in
32 its operation to the clause, sentence, paragraph, subdivision, section
33 or part thereof directly involved in the controversy in which such judg-
34 ment shall have been rendered. It is hereby declared to be the intent of
35 the legislature that this act would have been enacted even if such
36 invalid provisions had not been included herein.
37 § 3. This act shall take effect immediately.
