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A04824 Summary:

COSPNSRThiele, Englebright, Sillitti, Darling, Griffin, Seawright, Gunther, Jacobson, Woerner, Gallagher, Colton, Nolan, DeStefano, Gandolfo, Montesano, Ra, Ashby, Buttenschon, Brabenec, Simpson, Angelino, Lunsford, Giglio JA
MLTSPNSRBlankenbush, Miller B, Tague
Add §45, amd §§209 & 612, Tax L
Relates to small business savings accounts; provides tax incentives for contributions and distributions.
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A04824 Text:

                STATE OF NEW YORK
                               2021-2022 Regular Sessions
                   IN ASSEMBLY
                                    February 8, 2021
        Introduced  by  M.  of A. STERN, THIELE, ENGLEBRIGHT, SILLITTI, DARLING,
          NEC, SIMPSON, ANGELINO, LUNSFORD -- Multi-Sponsored by  --  M.  of  A.
          BLANKENBUSH, B. MILLER, TAGUE -- read once and referred to the Commit-
          tee  on  Ways  and  Means  -- recommitted to the Committee on Ways and
          Means in  accordance  with  Assembly  Rule  3,  sec.  2  --  committee
          discharged, bill amended, ordered reprinted as amended and recommitted
          to said committee
        AN  ACT to amend the tax law, in relation to establishing small business
          savings accounts
          The People of the State of New York, represented in Senate and  Assem-
        bly, do enact as follows:
     1    Section  1.  Short  title. This act shall be known and may be cited as
     2  the "savings accounts for a variable economy (SAVE) for small businesses
     3  act".
     4    § 2. The tax law is amended by adding a new  section  45  to  read  as
     5  follows:
     6    §  45.  Small  business savings accounts. (a) General. (1) The commis-
     7  sioner shall establish  a program to administer small  business  savings
     8  accounts under this section.
     9    (2) The commissioner shall establish minimum standards for small busi-
    10  ness savings accounts and shall establish accounts, or enter into agree-
    11  ments  that  meet these standards to administer such accounts. In estab-
    12  lishing such standards  and  making  such  agreements  the  commissioner
    13  shall,  to  the extent practicable, seek to minimize fees, minimize risk
    14  of loss of principal, and ensure a  range  of  investment  risk  options
    15  available  to  account  beneficiaries.  Any  eligible small business may
    16  establish a small business savings account with respect to such business
    17  under terms which meet the requirements of this section.

         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.

        A. 4824--A                          2
     1    (b) Definition. For the purposes of  this  section,  the  term  "small
     2  business savings account" means a tax preferred savings account which is
     3  designated  at the time of establishment of the plan as a small business
     4  savings account. Such designation shall be made in such  manner  as  the
     5  commissioner may by regulation prescribe.
     6    (c) Contributions. (1) There shall be allowed as a deduction an amount
     7  equal  to  the contributions to a small business savings account for the
     8  taxable year.
     9    (2) The aggregate amount of contributions for any taxable year to  all
    10  small  business savings accounts maintained for the benefit of an eligi-
    11  ble small business shall not exceed an amount equal to  ten  percent  of
    12  the gross profits of the business for the preceding taxable year.
    13    (d)  Distributions.  (1) Any qualified distribution from a small busi-
    14  ness savings account shall not be includible in gross income.
    15    (2) Any amounts distributed out of a small  business  savings  account
    16  that  are  not qualified distributions shall be included in gross income
    17  for the taxable year of the distribution.
    18    (3) For purposes of this section:
    19    (A) The term "qualified distribution" means any amount:
    20    (i) distributed from a small business savings account during a  speci-
    21  fied period of economic hardship; and
    22    (ii) the distribution of which is certified by the taxpayer as part of
    23  a  plan which provides for the reinvestment of such distribution for the
    24  funding of worker hiring or financial stabilization for the purposes  of
    25  job retention or creation.
    26    (B) The term "specified period of economic hardship" means:
    27    (i) any one-year period beginning immediately after the end of any two
    28  consecutive quarters during which the annual rate of real gross domestic
    29  product (as determined by the Bureau of Economic Analysis of the Depart-
    30  ment of Commerce) decreases, or
    31    (ii)  any  period, in no event shorter than one year, specified by the
    32  commissioner for purposes of this section.
    33    (C) The commissioner may specify a period under clause (ii) of subpar-
    34  agraph (B) of this paragraph with respect to a  specified  area  in  the
    35  case  of  an  area determined by the governor to warrant assistance from
    36  the Federal Government under the Robert T. Stafford Disaster Relief  and
    37  Emergency Assistance Act.
    38    (D)  The  commissioner  shall,  for  each specified period of economic
    39  hardship establish a distribution limitation for qualified distributions
    40  from eligible small business accounts with respect to such  period.  The
    41  aggregate  qualified distributions for any such period from all accounts
    42  with respect to an eligible small business shall not exceed such limita-
    43  tion.
    44    (E) Any distribution not used in the manner certified  under  subpara-
    45  graph  (A)  of  this  paragraph shall be treated as a distribution other
    46  than a qualified distribution in the taxable year of such distribution.
    47    (F) Any amount contributed to a small business  savings  account  (and
    48  any  earnings  attributable  thereto),  once  distributed,  shall not be
    49  treated as a qualified distribution unless such distribution is made not
    50  later than eight years after the date of such contribution. For purposes
    51  of this subparagraph, amounts (and the  earnings  attributable  thereto)
    52  shall be treated as distributed on a first-in first-out basis.
    53    (e) Eligible small business. For purposes of this section:
    54    (1)  The  term  "eligible  small  business" means, with respect to any
    55  calendar year, any person if the  annual  average  number  of  full-time
    56  employees employed by such person during the preceding calendar year was

        A. 4824--A                          3
     1  twenty-five  or  fewer  and such person has an annual net income of less
     2  than two hundred fifty thousand dollars. For purposes of this paragraph,
     3  a preceding calendar year may be taken into account only if  the  person
     4  was in existence throughout the year.
     5    (2)(A)  The term "full-time employee" means, with respect to any year,
     6  an employee who is employed on average at least forty hours  of  service
     7  per week.
     8    (B)  The  commissioner  shall  prescribe  such regulations, rules, and
     9  guidance as may be necessary to determine the hours  of  service  of  an
    10  employee,  including  rules  for  the application of this subdivision to
    11  employees who are not compensated on an hourly basis.
    12    (f) Effect of pledging account as security.  If,  during  any  taxable
    13  year  of  the  eligible  small  business for whose benefit an account is
    14  established, the account or any portion thereof is pledged  as  security
    15  for  a loan, the portion so pledged shall be treated as distributed in a
    16  distribution other than a qualified distribution.
    17    (g) Annual report. The commissioner shall prepare and deliver an annu-
    18  al report on the efficacy of small  business  savings  accounts  to  the
    19  temporary  president of the senate and the speaker of the assembly. Such
    20  report shall include, but not be limited to, an evaluation as to whether
    21  small business savings accounts contribute to financial stabilization of
    22  the small business during times of economic hardship, job  retention  or
    23  creation.
    24    § 3. Section 209 of the tax law is amended by adding a new subdivision
    25  13 to read as follows:
    26    13.  For  any  taxable  year  beginning on or after January first, two
    27  thousand twenty-one, any  eligible  small  business,  as  such  term  is
    28  defined  pursuant to section forty-five of this chapter, shall be exempt
    29  from all taxes imposed pursuant to this article for any contribution  to
    30  and  qualified distribution from a small business savings account estab-
    31  lished pursuant to section forty-five of this chapter,  subject  to  the
    32  limits  set  forth in such section. If a taxpayer files for and receives
    33  an exemption from the tax imposed under this  section  pursuant  to  the
    34  provisions  of  this subdivision and the funds withdrawn, or any portion
    35  thereof, are not expended for a  qualifying  purpose  as  set  forth  in
    36  section  forty-five  of  this chapter, then the amount of such exemption
    37  claimed by the taxpayer shall be added back to tax in the next  succeed-
    38  ing taxable year or in the year in which the exemption is disallowed.
    39    § 4. Subsection (c) of section 612 of the tax law is amended by adding
    40  a new paragraph 46 to read as follows:
    41    (46) Any qualified contribution to and any qualified distribution from
    42  a  small business savings account established pursuant to section forty-
    43  five of this chapter.  If a taxpayer files for and receives an exemption
    44  from the tax imposed under this section pursuant to  the  provisions  of
    45  this  paragraph and are not a qualifying contribution or distribution as
    46  set forth in section forty-five of this chapter, then the amount of  any
    47  such exemption claimed by the taxpayer shall be added back to tax in the
    48  next succeeding taxable year.
    49    § 5. This act shall take effect immediately and shall apply to taxable
    50  years beginning after such date.
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