On April 19, 2021, New York Governor Andrew Cuomo signed the FY2022 New York State (NYS) budget bill (the Bill)(S.2509-C/A.3009-C), which among other items, includes various temporary tax increases and provisions affecting certain individuals, pass-through entities, and corporations operating in the state. Below is a recap of the most significant tax provisions included in the comprehensive budget legislation.
Personal Income Tax
The Bill temporarily increases the top personal income tax rate for high-income earners. Effective for tax years beginning on or after Jan. 1, 2021 through Dec. 31, 2027, the Bill raises the personal income tax rates on high-income earners from 8.82% to new rates outlined below:
| Filing Status | Threshold | Tax Rate |
| Married Filing Jointly | $2,155,350- $5 million | 9.65% |
| Head of Household | $1,616,450 - $5 million |
| Single/Married Filing Separately | $1,077,550 - $5 million |
| All | $5 million -$25 million | 10.3% |
| All | >$25million | 10.9% |
Pass-Through Entity Tax
A much-anticipated provision in the Bill is the creation of a new pass-through entity (PTE) tax election under Article 24-A of the Tax Law. The new election permits owners and partners of partnerships, limited liability companies treated as partnerships for federal income tax purposes, and New York S corporations to elect to pay taxes at the entity level, and receive a federal deduction for such taxes. In addition, a credit is allowed for the tax paid at the entity to the individual owners. The IRS has confirmed the federal deduction in guidance issued late in 2020.
PTE tax elections can be made for tax years beginning on or after Jan. 1, 2021, rates are outlined below:
| Pass-Through Entity Taxable Income | Tax Rate |
| Up to $2 million | 6.85% |
| $2 million to $5 million | $137,000 plus 9.65% (over $2 million) |
| $5 million to $25 million | $426,500 plus 10.30% (over $5 million) |
| Over $25 million | $2,486,500 plus 10.90% (over $25 million) |
Corporate Income Tax Rate
The corporate tax rate for general corporations, financial institutions and S corporations temporarily increases from 6.5% to 7.25%, effective for tax years beginning on or after Jan. 1, 2021 and before Jan. 1, 2024. The increase would apply to any taxpayer with a business income base of more than $5 million for the tax year.
Extension of Capital Base Tax
The business capital base tax (originally set to phase out in 2021) for general corporations, financial institutions, and S corporations is extended until 2024. A 0.1875% rate applies for tax years beginning on or after Jan. 1, 2021 and before Jan. 1, 2024.
For More Information
The Bill is estimated to save New York taxpayers $2.2 billion in 2021 and $4.2 billion in annual savings is projected by 2025, while providing targeted relief to certain taxpayers. For more information on how this Bill may impact you and your business, please contact us.
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