New York: State implications of federal tax reform | KPMG | US
close
Share with your friends

New York: State implications of federal tax reform for taxpayers

New York: State implications of federal tax reform

The New York Department of Taxation and Finance issued a preliminary report addressing New York’s conformity to the recently enacted federal tax reform legislation and how the federal changes will affect New York taxpayers. The report—a “preliminary report” presented to Governor Cuomo—outlines certain actions that the state may want to take in light of federal tax reform, and reflects that extensive analysis may be warranted as the tax agency considers how best to respond to federal tax reform.

1000

Related content

Individual tax

Certain of the options presented were directed by the governor and are intended to address the repeal of the uncapped state and local tax deduction and to provide relief to New York residents adversely affected by the federal changes. In particular, the report outlines several options for converting some or all of the individual income tax to an “employer compensation expense” tax (a payroll tax) as a means of retaining the deductibility of that portion of the individual (personal) income tax converted to the payroll levy. 

The report also identifies options for offering a tax credit to offset some percentage of charitable contributions made to state-operated charities as a means of converting a non-deductible state tax levy to a deductible item at the federal level.

Business tax

The report also addresses how New York business taxpayers are affected by the federal tax reforms, including how amounts included in income under the deemed mandatory repatriation will be treated in New York and whether or how the state would tax the global intangible low-taxed income (GILTI).  

Under New York law, subpart F income is “other exempt income” excluded from the entire net income tax base. Thus, amounts deemed repatriated as subpart F income will not be taxable in New York. However, the report notes that an interest expense that is attributable to exempt income that is deducted at the federal level is required to be added back in computing entire net income and that this addback will indirectly increase taxable business income in New York. 

  • The report notes that a deduction allowed under new IRC section 965(c) effectively reduces the rate of tax that will be imposed on the deemed repatriated amounts. The report notes that New York may want to enact a specific addback for the new 965(c) deduction to avoid taxpayers getting both an exemption for the subpart F income and a deduction. 
  • With respect to GILTI, the report notes that if no action is taken, New York will tax a portion of GILTI income. Only a portion will be taxed in New York because the state will conform to the new deduction for GILTI under IRC section 250. 
  • The report addresses the effect on New York (due to the state’s current “rolling conformity” rule) of numerous other business tax changes. 

 

Read a January 2018 report prepared by KPMG LLP

© 2018 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

KPMG International Cooperative (“KPMG International”) is a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.

The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.

Connect with us

 

Request for proposal

 

Submit