Tax Law Blog | IRS Tax Attorneys

The Paterson administration wants to change the way New York businesses get tax breaks for job creation, proposing credits for research and development, capital investment and payroll costs for new jobs in high technology, biotechnology, clean energy, finance and manufacturing.

The proposed Excelsior Jobs Program would replace the Empire Zones Program, which provides tax incentives for 8,116 businesses in exchange for promises to retain or create jobs, which didn’t always materialize. That program is set to expire this summer.

The administration also proposed a $25 million seed fund to help university research on new technology bridge the gap to actual business applications.

The Empire Zones Program, with credits for businesses located in 85 zones statewide, is set to end June 30, a date the administration said it accelerated by a year.

“Unfortunately, our enterprise zone program is no longer working,” Paterson said in a speech to lawmakers Wednesday. “It’s their last year, so we’re going to put it where it belongs, in the past. We are no longer going to provide tax credits for businesses that do not provide the jobs we were promised.”

However, its cost is projected to rise from $538 million this year to $551 million in the next fiscal year starting April 1, according to the Budget Division. “There are legacy costs associated with past commitments,” division spokesman Matt Anderson said.

Empire State Development, due to statutory changes this year, required businesses to get recertified, reporting in December that it issued retention certificates to more than 6,600 businesses while sending notices to decertify 544. The agency said the 30-year-old program then had more than 8,700 businesses employing more than 344,000.

Basic benefits can include tax credits per employee ranging from $1,500 to $3,000 annually for up to five years, investment tax credits of 10 percent, a 25 percent tax credit for certain investments up to $100,000 and a state sales tax refund on building materials for construction or expansion.

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We do our best to stay up to date on reverse mortgage legislation but every once and a while something slips by and the Reverse Mortgage Fairness Act of 2009 is a perfect example.  New York’s Govenor signed A08305 in July and the bill became effective Oct. 26, 2009.

The bill amended Banking Law and Real Property Tax Law to prohibit proceeds received from reverse mortgage from being considered as income for the purpose of senior citizens’ partial property tax exemption authorized by section 467 of the Real Property Tax Law.

The bill also states that monies used to repay a reverse mortgage may not be deducted from income, and further that any interest or dividends realized from the investment of reverse mortgage proceeds shall be considered income.

“We wanted to create a system where seniors could better utilize the equity in their homes and remain eligible for vital tax exemptions,” said New York State Senator Hiram Monserrate.

“As we try to recover from this national economic slowdown, we need to better protect homeownership and reward property owners who have planned for the golden years the right way,” added Monserrate.

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As many Americans gird themselves for the Black Friday shopping crush, we can think of a lot of reasons to stay home and do holiday shopping online. Not having to pay sales taxes should not be one of them.

Online retailers who do not collect sales tax enjoy a significant and unfair advantage over rivals who must add the tax to their prices. They also cost the states billions of dollars a year in lost sales tax revenue — money that cash-starved states cannot afford to forgo.

New York’s Legislature made the right decision in 2008 when it passed a law requiring Amazon.com and other Internet retailers to collect taxes on sales to New York customers. Amazon challenged the law in a lower court, and lost in January. A New York appeals court is expected to rule soon. New Yorkers will be well served if it upholds the lower court’s ruling. And other states would be wise to look to New York as a model.

Sales taxes for any state are legally due on online purchases that would be taxable if the items were bought in a local store. If the retailer does not collect the taxes, the buyer is supposed to remit them to the state.

As a practical matter, unless the taxes are collected by retailers, they are virtually never paid. As online shoppers well know, some Internet retailers collect sales tax and some do not. The deciding factor is whether the retailer has a physical presence in the state where the customer is located. If so, the retailer is obligated to collect the tax. If not, not.

Those rules are based on a 1992 Supreme Court ruling that it would be unduly burdensome for retailers to collect other states’ sales taxes. Of course, that was before online shopping was so widespread and before software and other support services made collecting easy.

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A state proposal to add a 4% tax for downloading movies and music will also apply to Internet porn.

Gov. Paterson recently suggested the so-called iPod tax to help close a $15 billion budget deficit, but few realized the levy would also apply to XXX-rated material.

The skin industry denounced the move as a cheap political stunt.

“The last thing any of us need isan additional tax,” said Steven Hirsch, the CEO of Vivid Entertainment Group and self-proclaimed King of Porn. “These are very difficult times and nobody can afford to lose even one customer.”

The new tax technically isn’t a sin tax, since it applies to all “digitally delivered entertainment services.”

It would also apply only to businesses located in New York State, leaving some to wonder if companies would relocate to avoid the tax.

A manager at DVD Video in Times Square said porn lures tourists to New York and helps boost the economy.

“When the tourists come, they come to us to buy things. We want to bring people here. We will make money, which is good for everyone,” the manager said.

A cashier at World of DVD in Times Square said business has been falling during the past year.

“Customers already say they have no money,” the cashier said.

Conservatives railed against the tax, but for a very different reason.

“By taxing it you’re legitimizing it,” said New York Conservative Party Chairman Michael Long, adding that government shouldn’t profit from porn. “If you’re taxing it - how can it be wrong? I don’t know how you can sink much deeper.”

State officials defended the proposed tax and said it has nothing to do with legitimizing porn.

“This is simply bringing the tax code in line with technology,” said Matt Anderson, a spokesman for the state Division of the Budget.

“Regardless of whether or not an item is purchased at a brick-and-mortar store or online, it would be treated consistently.”

Paterson also said last night that the rich will “share in the sacrifice” of closing New York’s budget gap.

Paterson, in language almost identical to that used by supporters of the so-called millionaire’s tax, said the wealthy will not be spared.

“Every New Yorker will share in the sacrifice to get this budget balanced,” he told the New York State Association of Black and Puerto Rican Legislators.

Paterson has previously argued that spending cuts - not a new tax on the wealthy - should be the priority. His spokesman said the governor’s new comments did not represent a shift in his position.

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Governor David A. Paterson today signed a bill to curb the sale of untaxed cigarettes to Indian retailers in violation of the cigarette tax laws of New York State. The New York State Department of Taxation will have 60 days to issue a certification form and prepare to receive the certifications that will be submitted. Governor Paterson signed bill A11258A/ S 8146-B at a ceremony in Utica.

Under Article 20 of the Tax Law, cigarettes sold by Indian retailers to non-Indians must be taxed. The bill signed by Governor Paterson today will prohibit cigarette manufacturers from selling unstamped cigarettes to stamping agents who have not provided them with a certification, under penalty of perjury, that the cigarettes will not be resold in violation of Article 20. Agents must provide the Tax Department with any certification they give to a manufacturer.

“This law has not been adequately applied for far too long giving non-Indians easy access to tax-free cigarettes both on the reservations and over the internet,” said Governor Paterson. “However, the signing of this bill should not be seen as anything other than enforcing the tax laws of New York in a fair and effective manner. My commitment to the sovereign powers of New York’s Indian Nations has not and will not waver and I will continue to seek a comprehensive negotiated solution with all of New York’s Indian Nations.”

Although cigarettes sold by agents to retailers for re-sale to non-Indian purchasers must bear tax stamps, the State has, for many years, adopted a policy of non-enforcement, and unstamped cigarettes continue to be sold by agents to Indian retailers who sell them to non-Indians at discount prices.

Governor Paterson added: “Tomorrow, I will present my 2009-2010 budget proposal and while we will continue to aggressively and responsibly address New York’s current budget crisis, this bill is not only about collecting revenue for the State of New York, it is also about protecting the health of our citizens. Smoking has long been a tragic public health crisis in New York and around the world. In recent years, the New York State cigarette tax has been one of our most effective tools in addressing this crisis. To the extent that the tax is undermined, our efforts to fight smoking are also undermined.”

Senator Michael Nozzolio, co-sponsor of the bill, said: “For far too long, retail businesses throughout our region have been harmed by an unfair tax policy, driving jobs out of the region and hurting small business owners. Today’s signing of Senate bill 8146 is a historic day for leveling the playing field for all of New York’s businesses and I thank Governor Paterson for ensuring that this important legislation will now be New York State law.”

Assemblyman Bill Magee, co-sponsor of the bill, said: “I am very pleased that New York will soon begin to collect taxes on cigarettes sold on or through Indian land to non-Indian purchasers. The State has long had the legal authority to collect this important revenue stream. We now have a proper mechanism in place that will assure that especially in these hard economic times, taxes on cigarettes are fairly collected. I thank Governor Paterson for signing this important legislation.”

Under the law, an agent who violates Article 20 of the Tax Law is subject to revocation or cancellation of its license. A false certification could be referred to a district attorney’s office for prosecution for perjury or filing a false instrument.

Additionally, this bill requires the Commissioner of Taxation and Finance to prescribe a form for the certification process and instructions on how to use the form within 60 days of the bill becoming law. The Tax Department must be prepared to receive certification forms in the same time frame.