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NYS Budget Decouples from Beneficial CARES Act Tax Provisions

cuomo 1024x695 - NYS Budget Decouples from Beneficial CARES Act Tax Provisions

With little fanfare, New York State adopted and Governor Andrew M. Cuomo signed the New York 2020-2021 Budget {“The Budget”} in April that contains significant New York State tax ramifications, especially for those New York taxpayers for which the CARES Act provides potential federal tax benefits.

The Budget’s amendments to New York Corporate and Personal Income tax as well as New York City Business and Personal Income tax provisions present New York taxpayers with numerous complexities with respect to their New York State and City tax compliance.  In addition, The Budget’s tax provisions pose significant tax planning issues as well as pitfalls that require any affected New York taxpayers’ immediate attention.

The following is a first of several posts that will present an initial summary of the most significant tax amendments contained in the budget.

Summary – NY Decouples from Rolling Conformity with Internal Revenue Code

Prior to the 2020-2021 New York Budget, New York conformed to the Internal Revenue Code (IRC) on a rolling basis; i.e. as the IRC is changed, New York State adopted such changes unless the State specifically decoupled from such changes through adoption of decoupling legislation.  However, The Budget, as set forth in the final revenue bill (A. 9508B/S. 7508B) at Part WWW, contains provisions whereby New York State will temporarily not adopt the IRC on a rolling basis {“Decoupling”}.

The Decoupling from the IRC is for tax years beginning before January 1, 2022 with respect to the amendments made to the IRC after March 1, 2020, i.e. the CARES Act.

What further complicates New York’s Decoupling is that The Budget effects the Decoupling through several specific provisions that affect New York State Corporate tax, New York State Personal Income Tax, New York City Corporate and Business Taxes and New York City Personal income tax provisions on a specific basis.

Significant Ramifications of New York State Decoupling

The State’s Decoupling has the following significant ramifications, specifically with respect to the beneficial provisions contained within the CARES Act as summarized below:

  1. Decoupling the New York State and New York City personal income tax provisions from CARES Act amendments;
  2. Decoupling from a specific CARES Act amendment to IRC section 163(j) for New York State and New York City Corporate and Business income tax purposes;
  3. Decoupling the New York State and New York City Net Operating Loss (NOL) provisions from the CARES Act amendments that will have potentially significant onerous personal income tax consequences.

Take Away – The Decoupling Will Have Immediate & Long Term Costs to NY Taxpayers

The CARES Act tax provisions potentially provide significant personal as well as business tax benefits to American taxpayers.  New York’s Decoupling significantly limits, defers and/or eliminates the New York State and City tax benefits arising from the CARES Act for New York State and City Personal and Business taxpayers.  The Decoupling poses complex issues for any New York taxpayer who is considering pursuing the numerous tax benefits provided by the CARES Act.

As with so many demanding aspects of today’s complicated world, the Decoupling demands your immediate attention to fully address the potentially significant New York State and City tax costs arising from The Budget’s Decoupling.

In our upcoming posts, we will provide additional insights into the complex ramifications of the State and City’s Decoupling.

Until then, from all of us at MWE: be safe and well.

NEXT: NYS Budget Decoupling from Beneficial CARES Act Provisions Creates NOL and Excess Business Loss Complexities

NEXT: NYS Decoupling from CARES Act – Section 163(j) Limitation – How to Make Complicated More Complicated

Read: Significant Tax Provisions of the CARES Act