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A09433 Summary:

BILL NOA09433
 
SAME ASSAME AS S08600
 
SPONSORPaulin
 
COSPNSR
 
MLTSPNSR
 
Amd §§860, 861, 865 & 612, Tax L
 
Relates to pass-through entity tax for electing resident and standard S corporations.
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A09433 Actions:

BILL NOA09433
 
03/07/2022referred to ways and means
08/17/2022enacting clause stricken
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A09433 Memo:

NEW YORK STATE ASSEMBLY
MEMORANDUM IN SUPPORT OF LEGISLATION
submitted in accordance with Assembly Rule III, Sec 1(f)
 
BILL NUMBER: A9433
 
SPONSOR: Paulin
  TITLE OF BILL: An act to amend the tax law, in relation to pass-through entity tax for electing resident and standard S corporations   PURPOSE: To clarify that where all shareholders of the S corporation are resi- dents, the that pass-through entity tax (PTET) tax base can be computed based on the S corporations' total income, not just New York source income.   SUMMARY OF SPECIFIC PROVISIONS: Section one amends subsection (d) and adds new subsections (j) and (k) to section 860 of the tax law to provide definitions for electing resi- dent S corporation and electing standard S corporation. Section two amends paragraph 2 of subsection (h) and adds a new para- graph 3 to section 860 of the tax law to allow an electing resident S corporation to include the sum of all items of income, gain, loss, or deduction to the extent they are included in the taxable income of a shareholder. Section three amends subsection (c) and adds a new subsection (d) to section 861 of the tax law relating to certifications. Section four amends of subsection (h) of section 865 of the tax law relating to shareholder information. Section five adds a new subparagraph (c) to paragraph 3 of subsection (b) of section 612 of the tax law relating to the pass-through entity tax deduction for S corporations. Section six sets forth relevant timeframes. Section seven provides the effective date.   JUSTIFICATION: Many New York residents are not receiving the full benefit of New York's PTET because of a technical limitation applicable only to S corpo- rations. Specifically, the tax base for S corporations includes only New York source income, which for many New York-based businesses is low, due to New York's market-sourcing apportionment rules. The same limitation does not apply to partnerships or other entities subject to the PTET. Those entities enjoy the PTET benefit on all income flowing through to New York residents, even non-New York sourced income. This bill would amend the law to clarify that where all shareholders of the S corpo- ration are residents, the PTET tax base can be computed based on the S corporations' total income, not just New York source income. Twenty-one other states have enacted pass-through entity tax similar to New York's, and this change will bring New York in line with how S corporations' income is treated in those states.   PRIOR LEGISLATIVE HISTORY: New bill.   FISCAL IMPLICATION: None.   EFFECTIVE DATE: This act shall take effect immediately and shall apply to taxable years beginning on or after January 1, 2022.
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