•  Summary 
 
•  Actions 
 
•  Committee Votes 
 
•  Floor Votes 
 
•  Memo 
 
•  Text 
 
•  LFIN 
 
•  Chamber Video/Transcript 

A05962 Summary:

A05962 Actions:

A05962 Committee Votes:

A05962 Floor Votes:

There are no votes for this bill in this legislative session.

A05962 Memo:

NEW YORK STATE ASSEMBLY
MEMORANDUM IN SUPPORT OF LEGISLATION
 submitted in accordance with Assembly Rule III, Sec 1(f)



 
BILL NUMBER: A5962A
 
SPONSOR: Schimminger

 
TITLE OF BILL:  An act to amend the tax law, in relation to exempting
from tax a portion of global intangible low-taxed income
 
 
PURPOSE OF THE BILL:
 
To enact a 95% exemption on global intangible low-taxed income for the
purposes of state taxation.
 
 
SUMMARY OF SPECIFIC PROVISIONS:
 
Section 1 amends paragraph (b) of subdivision 6-a of section 208 of the
tax law, defining 95% of global intangible low-taxed income as defined
in subsection (a) of section 951A of the IRS code as Exempt CFC income
not to be treated as exempt unitary corporate dividends
 
§ 2 adds a new subparagraph 25 is added to paragraph (b) of subdivision
9 of section 208 of the tax law having companies add back the 50%
deduction they can claim on federal taxes for global intangible low-
taxed income.
 
§ 3 amends the recently enacted subdivision 5-a of section 210-A of the
tax law, to conform the new apportionment rules to this exemption.
 
§ 4 adds two new subparagraphs (U) and (V) to Paragraph 1 of subdivision
(b) of section 1503 of the tax law to exempt 95% of global intangible
low-taxed income as defined in subsection (a) of section 951A of the IRS
code form the insurance franchise tax
 
§ 5 adds a new subparagraph (Y) to Paragraph 2 of subdivision (b) of
section 1503 of the tax law having companies add back the 50% deduction
they can claim on federal taxes for global intangible low-taxed income.
 
§ 6 amends subparagraph (H) of paragraph 2 of subdivision (b) of section
26 1503 of the tax law, which regards the treatment of dividends or
loses from the newly defined income.
 
§ 7 adds an effective date.
 
 
DIFFERENCE BETWEEN ORIGINAL AND AMENDED VERSION:
 
Various changes made to match S.6542.
 
 
JUSTIFICATION:
 
As explained by the Brookings Institute Tax Policy Center:
 
"Before the 2017 Tax Cuts and Jobs Act (TCJA), the United States gener-
ally taxed its firms and residents on their worldwide income.  However,
US firms could defer the tax on foreign subsidiaries' active business
earnings until those earnings were repatriated to the United States as
dividends. After the TCJA, the United States generally exempts earnings
from active businesses of US firms' foreign subsidiaries, even if the
earnings are repatriated. (The United States still taxes the income from
passive investments of foreign subsidiaries.)
 
 
But Congress worried that completely exempting US multinationals'
foreign earnings might exacerbate the incentive to shift profits to
low-tax jurisdictions abroad. So, Congress added a new 10.5 percent
minimum tax on global intangible low-taxed income (GILTI) to discourage
such profit shifting. GILTI is intended to approximate the income from
intangible assets (such as patents, trademarks, and copyrights) held
abroad. Congress considered intangible assets highly mobile-and sought
to discourage US firms from shifting these assets offshore."
 
Prior to the 2017 Tax Cuts and Jobs Act this kind of business income was
exempted from taxation at the State level. When the federal government
made the changes above, they moved the references in the IRS code refer-
ring to this income. When this was done, the references in our State law
no longer matched the federal references, and this income became taxa-
ble. In 2018 the Executive chose not to make changes in the budget that
would have fixed this change and left this as exempt income. The Execu-
tive added $37 million to the financial plan from this change.
 
The business community has noted that this income had never before been
taxed at the State level, and that many other states that saw similar
situations where the income was no longer exempted because of how the
federal government had changed its code had moved to exempt the income
again. States like Massachusetts, Connecticut, Illinois, Georgia, and
Hawaii, among others, took steps to make GILTI income fully or mostly
exempt.
 
This proposal to exempt 95% of GILTI income from State taxation, though
the State would force the taxpayers to add back any deductions they took
on this income when figuring out this 5% that is to be taxed. The appor-
tionment rules added in the FY20 enacted budget are amended to reflect
this new tax treatment. In continuing to tax a small portion of the
GILTI income the state will be able to account for this type of income
so we can in the future precisely estimate what is going on.
 
 
PRIOR LEGISLATIVE HISTORY:
 
This is a new bill.
 
 
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:
 
This will lower state revenue by $27 million annually starting in tax
year 2019.
 
 
EFFECTIVE DATE:
This act shall take effect immediately and apply to taxable years begin-
ning on or after January 1, 2019.

A05962 Text:

 
                STATE OF NEW YORK
        ________________________________________________________________________
 
                                         5962--A
 
                               2019-2020 Regular Sessions
 
                   IN ASSEMBLY
 
                                    February 20, 2019
                                       ___________
 
        Introduced  by  M.  of  A.  SCHIMMINGER -- read once and referred to the
          Committee on Ways and Means --  committee  discharged,  bill  amended,
          ordered reprinted as amended and recommitted to said committee
 
        AN ACT to amend the tax law, in relation to exempting from tax a portion
          of global intangible low-taxed income

          The  People of the State of New York, represented in Senate and Assem-
        bly, do enact as follows:
 
     1    Section 1. Paragraph (b) of subdivision 6-a of section 208 of the  tax
     2  law,  as  amended  by  section 1 of part KK of chapter 59 of the laws of
     3  2018, is amended to read as follows:
     4    (b) "Exempt CFC income" means (i) except to the  extent  described  in
     5  subparagraph  (ii) of this paragraph, the income required to be included
     6  in the taxpayer's federal gross income pursuant  to  subsection  (a)  of
     7  section  951  of  the internal revenue code, received from a corporation
     8  that is conducting a unitary business  with  the  taxpayer  but  is  not
     9  included  in a combined report with the taxpayer, [and] (ii) such income
    10  required to be included in the taxpayer's federal gross income  pursuant
    11  to  subsection  (a)  of such section 951 of the internal revenue code by
    12  reason of subsection (a) of section 965 of the internal revenue code, as
    13  adjusted by subsection (b) of section 965 of the internal revenue  code,
    14  and  without  regard  to subsection (c) of such section, received from a
    15  corporation that is not included in a combined report with the taxpayer,
    16  and (iii) ninety-five percent of the income required to be  included  in
    17  the  taxpayer's  federal  gross  income  pursuant  to  subsection (a) of
    18  section 951A of  the  internal  revenue  code,  without  regard  to  the
    19  deduction  under section 250 of the internal revenue code, received from
    20  a corporation that is not included in a combined report with the taxpay-
    21  er, less, [(iii)] (iv) in the discretion of the commissioner, any inter-
    22  est deductions directly or indirectly attributable to  that  income.  In
    23  lieu  of  subtracting  from  its  exempt  CFC income the amount of those
    24  interest deductions, the taxpayer  may  make  a  revocable  election  to
 
         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.
                                                                   LBD09762-02-9
        A. 5962--A                          2
 
     1  reduce  its  total  exempt  CFC income by forty percent. If the taxpayer
     2  makes this election, the taxpayer must also make the elections  provided
     3  for  in  paragraph  (b) of subdivision six of this section and paragraph
     4  (c)  of  this  subdivision.  If  the  taxpayer subsequently revokes this
     5  election, the taxpayer must revoke the elections provided for  in  para-
     6  graph  (b)  of subdivision six of this section and paragraph (c) of this
     7  subdivision. A taxpayer which does not make this election because it has
     8  no exempt CFC income will not  be  precluded  from  making  those  other
     9  elections. The income described in [subparagraph] subparagraphs (ii) and
    10  (iii)  of  this  paragraph  shall not constitute investment income.  The
    11  income described in subparagraph  (iii)  of  this  paragraph  shall  not
    12  constitute exempt unitary corporation dividends.
    13    §  2.  Paragraph (b) of subdivision 9 of section 208 of the tax law is
    14  amended by adding a new subparagraph 25 to read as follows:
    15    (25) The amount of any federal deduction allowed pursuant  to  section
    16  250(a)(1)(B)(i) of the internal revenue code.
    17    §  3.  Subdivision  5-a  of  section 210-A of the tax law, as added by
    18  section 1 of part C of chapter 59 of the laws of  2019,  is  amended  to
    19  read as follows:
    20    5-a.  [Net  global]  Global  intangible low-taxed income. (a) Notwith-
    21  standing any other provision of this section,  [net]  global  intangible
    22  low-taxed  income  shall  be  included  in the apportionment fraction as
    23  provided in this subdivision. [Receipts constituting net]
    24    (b) For New York C corporations, global  intangible  low-taxed  income
    25  shall  not  be  included in the numerator of the apportionment fraction.
    26  [Receipts constituting net] Five percent of global intangible  low-taxed
    27  income  shall  be included in the denominator of the apportionment frac-
    28  tion.
    29    (c) For New York S corporations, global  intangible  low-taxed  income
    30  shall  not  be  included in the numerator of the apportionment fraction.
    31  Global intangible low-taxed income shall be included in the  denominator
    32  of the apportionment fraction.
    33    (d)  For purposes of this subdivision, the term "[net] global intangi-
    34  ble low-taxed income" means the amount required to be  included  in  the
    35  taxpayer's  federal  gross  income pursuant to subsection (a) of section
    36  951A of the internal revenue code [less  the  amount  of  the  deduction
    37  allowed under clause (i) of section 250(a)(1)(B) of such code].
    38    §  4. Paragraph 1 of subdivision (b) of section 1503 of the tax law is
    39  amended by adding two new subparagraphs (U) and (V) to read as follows:
    40    (U) To the extent not excluded from income  pursuant  to  subparagraph
    41  (A)  of this paragraph, ninety-five percent of the income required to be
    42  included in the taxpayer's federal gross income pursuant  to  subsection
    43  (a)  of section 951A of the internal revenue code, without regard to the
    44  deduction under section 250 of the internal revenue code, that is gener-
    45  ated by a corporation that is not included in a combined report with the
    46  taxpayer.
    47    (V) To the extent not excluded from income  pursuant  to  subparagraph
    48  (A)  or (B) of this paragraph, any amount treated as a dividend received
    49  by the taxpayer under section 78 of the internal revenue  code  that  is
    50  attributable  to  the  income  required to be included in the taxpayer's
    51  federal gross income pursuant to subsection (a) of section 951A of  such
    52  code.
    53    §  5. Paragraph 2 of subdivision (b) of section 1503 of the tax law is
    54  amended by adding a new subparagraph (Y) to read as follows:
    55    (Y) The amount of the federal deduction allowed  pursuant  to  section
    56  250(a)(1)(B) of the internal revenue code.
        A. 5962--A                          3
 
     1    §  6.  Subparagraph  (H)  of paragraph 2 of subdivision (b) of section
     2  1503 of the tax law, as amended by section 4-e of part KK of chapter  59
     3  of the laws of 2018, is amended to read as follows:
     4    (H)  in  the  discretion  of  the commissioner, any amount of interest
     5  directly or indirectly and any other amount directly attributable  as  a
     6  carrying  charge  or otherwise to subsidiary capital or to income, gains
     7  or losses from  subsidiary  capital,  or  to  the  income  described  in
     8  [subparagraph]  subparagraphs  (S), (U) and (V) of paragraph one of this
     9  subdivision;
    10    § 7. This act shall take effect immediately and apply to taxable years
    11  beginning on or after January 1, 2019.