Modifications to Article 22 Personal Income Tax: Qualified New York manufacturers, qualified emerging technology companies, and cooperating housing corporations are exempt from Article 9-A’s alternative capital base tax rate increase. Tax liability under this method is capped at $5 million. The Budget Bill keeps the alternative capital base tax in place at the rate of 0.1875 percent for tax years beginning in 2021, 2022, and 2023, up from 0.038 percent in 20. New York’s 2015 tax reform legislation implemented a gradual capital base tax rate reduction and eliminated the capital base tax for tax years beginning in 2022 and later. The Budget Bill temporarily halts the phase-out of the alternative capital base tax and increases the rate for the next three years.Qualified New York manufacturers and qualified emerging technology companies are specifically exempt from the business income tax rate increase. The rate increase applies only for tax years beginning in 2021, 2022, and 2023.

Because “taxable income” is not defined in the legislation, the Legislature or New York Department of Taxation and Finance may need to clarify the term’s meaning in future legislation or guidance. The Budget Bill temporarily increases the tax rate on business income from 6.5 percent to 7.25 percent for taxpayers with “taxable income” over $5 million.Modifications to Article 9-A Corporate Franchise Tax: Tax Increases for Corporations and Individuals

The Budget Bill’s key provisions are summarized below. Specifically, the Budget Bill includes: (1) tax rate increases on both corporations and individuals (2) an elective pass-through tax to permit owners to deduct state and local taxes for federal income tax purposes (3) sales and use tax provisions and (4) relief provisions for taxpayers harmed by the pandemic. The Budget Bill is estimated to raise $2.5 billion in additional tax revenue in Fiscal Year 2022 and $4.3 billion in additional tax revenue in Fiscal Year 2023, while providing targeted relief to certain taxpayers.

New york state income tax brackets 2021