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New York Taxpayer Post Labor Day Weekend Blues– New Announcements Could Necessitate Amending Previously Filed 2018 Returns

On September 3, 2019, the New York Department of Taxation and Finance issued three TSB-M announcements that summarize tax law changes adopted as the result of the State’s 2019-2020 Budget {“Budget”} that may affect New York taxpayers’ 2018 returns:

  • TSB- M-19(3)C, Summary of Corporation Tax Budget Legislation Enacted in 2019
  • TSB-M-19(4)I, Summary of Personal Income Tax Budget Legislation Enacted in 2019
  • TSB-M-19(4)C and (5)I, Summary of Tax Credit Budget Legislation Enacted in 2019

Since the announcements address some provisions that are effective for tax years beginning on or after January 1, 2018, New York corporate, fiduciary and individual taxpayers, as well as their advisors, should review the TSB-Ms to determine what potential ramifications, including possibly the amending of previous filed 2018 returns, may be required as a result of the State’s guidance provided in these TSB-M’s.

Significant Aspects of TSB- M-19(3)C’s Corporation Tax Summary and Changes

TSB-M-19(3)C notes that the Budget amended the following corporate tax provisions:

  • Contributions to the capital of a corporation
  • Entire net income for stock life insurance companies
  • License fee on certain co-ops
  • Unrelated business taxable income

Most notable of the above is the technical correction that was made to the effective date of a prior amendment to Tax Law § 292(a)(4) affecting Unrelated business taxable income. TSB-M-19(3)C indicates that:

As a result, a New York State subtraction is allowed from federal unrelated taxable income for any disallowed fringe, paid or incurred on and after January 1, 2018, that was included in federal unrelated business taxable income because of IRC § 512(a)(7). Fiscal year filers of the 2017 Form CT-13, Unrelated Business Income Tax Return, may be impacted by this change.

The TSB-M states that affected fiscal year 2017 CT-13 filers must file an amended return to report this subtraction on line 7 of the 2017 Form CT-13.”

In addition, TSB-M-19(3)C notes that the Budget extended the following:

  • Electronic filing and payment mandates
  • Tax Shelter provisions

Significant Aspects of TSB-M-19(4)I’s Personal Income Tax Summary and Changes

TSB-M-19(4)I notes that the Budget amended the following tax provisions with respect to New York personal income and fiduciary tax filers:

  • Charitable contributions itemized deduction
  • New York State driver’s license suspension program
  • Retroactive modifications for fiduciary filers
  • Treatment of certain gambling winnings

Of these items, New York personal income taxpayers and their advisors should be particularly sensitive to TSB-M-19(4)I’s discussion with respect to charitable contributions itemized deduction for New York State tax purposes. The TSB-M states that:

If your New York adjusted gross income (AGI) is over $1 million and no more than $10 million, or your New York AGI is over $10 million, your total New York itemized deduction (including charitable contributions) is limited to 50% or 25% of your federal deduction for charitable contributions, respectively.

It should be noted, as stated by the TSB-M, that this itemized deduction limitation for New York individual taxpayers with New York AGI in excess $10 million was set to expire but was extended through the 2024 tax year.

The TSB-M also reminds New York taxpayers and their tax advisors that the Budget extended New York’s top tax bracket, tax rate and tax table benefit recapture provisions though tax year 2024.

Significant Aspects of TSB-M-19(4)I’s Fiduciary Tax Summary and Changes

TSB-M-19(4)I makes note of retroactive modifications that may affect New York fiduciary tax filers. The TSB-M notes that for tax years beginning on or after January 1, 2018, estates and trusts in computing their New York fiduciary adjustment must take into account the following modifications:

  • Add back the qualified business income deduction allowed under IRC § 199A;
  • Subtract certain state and local taxes disallowed at the federal level; and
  • Subtract certain miscellaneous itemized deductions disallowed at the federal level.

The TSB-M further states that if you filed “your 2018 Form IT-205, Fiduciary Income Tax Return, without making these required modifications, then you must file an amended 2018 Form IT-205.”

In addition, TSB-M-19(4)I also notes that the Budget extended the following:

  • Electronic filing and payment mandates
  • Tax Shelter provisions

Significant Aspects of TSB-M-19(4)C and (5)I’s Summary of Tax Credit Changes

TSB-M-19(4)C and (5)I provides guidance on three new credits that were added by the Budget:

  • Employer-provided child care credit
  • Recovery tax credit
  • Central business district toll credit

The TSB-M also notes that several provisions were amended and extended, most notably the following credits were amended by the Budget:

  • Empire State commercial production credit
  • Employee training incentive program tax credit
  • Farm workforce retention credit
  • Historic homeownership rehabilitation credit
  • Rehabilitation of historic properties credit

The Take Away – For New York Taxpayers Summer of 2019 Is Officially Over

Just in case you were still wishing to extend the joys of your summer fun, New York’s TSB- Ms remind us that Summer Is Officially Over!

Recording: 2019 State & Local Tax Mid-Year Update Webinar

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