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Home / Expert Opinion / Keeping Your Balance: Taxation highlights in the 2014-15 state budget

Keeping Your Balance: Taxation highlights in the 2014-15 state budget

James P. Schnell

James P. Schnell

Most of us are aware that New York state recently passed its 2014-2015 budget on time. There were several key aspects related to matters of taxation, some of which are long awaited and cause for much celebration by the individuals or companies who stand to benefit.

Estate taxes

A perfect example of this is raising the threshold for triggering estate taxes, which some residents, farmers and many others have lobbied in favor of for years. It follows nicely in the footsteps of a similar enactment on the federal level when Congress passed the American Taxpayer Relief Act on Jan. 3, 2013.

The NYS legislation sets new exemption amounts for estates at the following levels. These changes are meant to bring the state estate tax requirements more in line with federal ones.

If a person passes away between:

• April 1, 2014 and March 31, 2015, an estate of $2,062,500 is exempt;

• April 1, 2015 and March 31, 2016, an estate of $3,125,000 is exempt;

• April 1, 2016 and March 31, 2017, an estate of $4,187,500 is exempt; and

• April 1, 2017 and Dec. 31, 2019, an estate of $5,250,000 is exempt.

Corporate taxes

With regards to specific corporate taxation matters, the corporate tax rate on net income is reduced from 7.1 percent to 6.5 percent, the lowest rate since 1968.

A 20 percent real property tax credit for qualified manufacturers has been established. This, hopefully, is another much needed step towards lowering the cost of doing business for manufacturers and will also make New York a more attractive place for firms to locate and create jobs. In addition, the income tax rate on upstate manufacturers is reduced from the current 5.9 percent to zero in 2014 and thereafter.

The new budget eliminates 18-a utility assessments for industrial customers and accelerates phase out of assessments for all others. New Yorkers pay some of the highest energy bills in the nation and this issue became a point of emphasis in the budget. The temporary utility assessment (18-a) exacerbates this burden on struggling businesses and families.

The temporary assessment on utilities is scheduled to be fully eliminated by March 2017, but is immediately eliminated on industrial customers. The phase-out is anticipated to save businesses and residents $600 million over the next three years.

Simplify the tax code

The budget eliminates nuisance provisions which are costly to enforce, provide little revenue and complicate doing business in New York. For example, the new budget will include increasing the personal income tax filing threshold, which was last increased in 1987.

The income threshold for when a tax filing is required has been raised from the current $4,000 to the amount of the taxpayer’s standard deduction. The increase will eliminate the need to file a return for about 270,000 current filers. The new budget will also eliminate the personal income add-on minimum tax which is imposed on 200 taxpayers and generates only $200,000 annually.

Hopefully most residents and taxpayers will either directly benefit or perceive the communal benefit from these enacted budget provisions.

James P. Schnell, CPA/ABV, CVA is a tax and business valuation partner with Mengel, Metzger, Barr & Co LLP and may be reached at (585) 423-1860.