Personal Income Taxes

Part TT of Chapter 60 of the Laws of 2016 provides a marginal income tax rate reduction for certain middle-income taxpayers with taxable incomes not over $300,000 ($250,000 for heads of household and $200,000 for single filers). The reduction will be phased in beginning in tax year 2018 and ending in tax year 2025, after which point the new rates will be made permanent. The corresponding brackets adhere to the current tables authorized under Chapter 56 of the Laws of the 2011 indexed by the cost of living percentage adjustments as computed for tax year 2017. The table below summarizes the phase-in schedule for married taxpayers filing jointly:

When fully phased in:

•  taxpayers with taxable incomes between $26,000 and $150,000 ($13,000 and $75,000 for single filers) will see their marginal rates reduced to 5.50%, and
•  taxpayers with taxable incomes between $150,000 and $300,000 ($75,000 and $200,000 for singles) will see their rates reduced to 6.00%.

In addition, the tax benefit recapture provisions as enacted under Chapter 56 of the Laws of 2011 will become permanent effective tax year 2018 and will be adjusted annually to reflect the reduced rates.

(Sections 601(a)(1)(B), 601(b)(1)(B), 601(c)(1)(B), 601(d-1)(2), and 601(d-1)(3) of Tax Law)

Part A of Chapter 60 of the Laws of 2016 gradually converts the school tax relief (STAR) program from a real property tax exemption benefit into a personal income tax credit. Beginning with the assessment rolls used to levy school taxes for the 2016-2017 school year, the current STAR exemption program will be closed to new applicants. Current recipients of STAR exemptions may keep those exemptions as long as they continue to own their current homes, but once their homes are transferred to new owners, the new owners would transfer to the new income tax credit. Current STAR recipients will also have the option of giving up their STAR exemptions if they wish to receive the income tax credit instead, but they will be under no obligation to do so.

The eligibility requirements for the new STAR income tax credit will be identical to those of the existing STAR exemption. Most notably:

i)     The applicants must own the property and the property must be their primary residence,
ii)    The applicants’ income must be less than the applicable limit ($500,000 for Basic STAR, and currently $84,550 for Enhanced STAR, which is annually adjusted for inflation), and
iii)    For Enhanced STAR, all owners must be at least 65 years of age, unless the owners are spouses or siblings, in which case at least one owner must be 65.

Likewise, the value of the STAR credit within each school district will be the same as the value of the tax savings under the STAR exemption. The special eligibility features that were part of the current STAR program (e.g., allowing co-op tenant-shareholders and trust beneficiaries to receive benefits even though they technically do not own property) will be carried over to the new income tax credit program.

By September 15the of each year, the Tax Commissioner will determine eligibility for the STAR credit and will mail an advance payment of the credit by September 30 or as soon as practicable. The Commissioner will notify school districts at least 30 days prior to the levy of school district taxes to place a statement on the tax bill that reads substantially as follows: “A STAR reimbursement check of $_ will be mailed to you upon issuance by the NYS Tax Department.”

New owners must apply to the Tax Department by July 1 in order to receive advance payment the following Fall.  Taxpayers who qualify for the credit, but do not apply for an advance payment by July 1 may apply at a later time.

For taxpayers who itemize deductions on their New York State returns and claim the deduction for real property taxes paid, the amount of the deduction is to be reduced by the amount of the STAR income tax credit.

These provisions become effective immediately and apply to tax years beginning on or after January 1, 2016.

(Sections 425.6(a), 425.16, 496.2, 520.3, and 1306-a.6 of the Real Property Tax Law; Sections 606 and 606(n-1)(2)(a) of the Tax Law)

Part E of Chapter 60 of the Laws of 2016 converts the existing New York City school tax relief (STAR) personal income tax credit into a New York State personal income tax credit for residents of New York City. As with the New York City credit in effect prior to 2016, New York City residents whose incomes are $250,000 or less will receive a school tax relief credit against their state income tax of $125 for married taxpayers filing jointly and $62.50 for all others. The proposal takes effect immediately and applies to taxable years beginning on or after January 1, 2016.

(Sections 606(eee), 1310(e)(1), and 1310(e)(2) of the Tax Law; Sections 11-1706(c)(1) and 11-1706(c)(2) of the Administrative Code of the City of New York)

Part G of Chapter 60 of the Laws of 2016 extends certain tax modernization provisions related to improved electronic filing and payment mandates and sales tax segregated accounts.

Legislation in 2011 reduced the threshold trigger for the preparer e-file requirement from preparation of more than 100 tax documents to preparation of more than five tax documents. In 2012, these requirements were changed for those who first became subject to the e-filing requirements after January 1, 2012 to a tax preparer that prepares authorized tax documents for more than 10 different taxpayers. These provisions were extended for a three-year period through December 31, 2019.

The 2011 legislation allowed the Commissioner to require sales tax vendors that failed to collect, truthfully account for, or pay over sales tax monies, or to file returns as required by law, to deposit their sales tax receipts into a separate bank account. These vendors must make electronic payments from this account at least every week to the Tax Department. These provisions were set to expire December 31, 2016 and this legislation extends them to December 31, 2019.

(Section 23 of Part U of Chapter 61 of the Laws of 2011)

Part M of Chapter 60 of the Laws of 2016 extends the expiration date for the current tax shelter disclosure and penalty provisions in the Tax Law to July 1, 2019. These provisions had been scheduled to expire on July 1, 2015.

Legislation in 2005 created reporting requirements and related administrative provisions concerning disclosing certain federal and NYS reportable transactions and related information relating to transactions that present the potential for tax avoidance (tax shelters).  This amendment extends the expiration date of those reporting requirements. Separate reporting requirements are imposed on those who utilize tax shelters and those who promote the use of tax shelters. The legislation also imposed penalties for nondisclosure and the underpayment of taxes due to participation in these transactions, extended the statute of limitations for assessments relating to these transactions, and created a voluntary compliance initiative to allow taxpayers to report and pay underreported tax liabilities and interest attributable to these transactions with a waiver of penalties.

 (Section 12 of Part N of Chapter 61 of the Laws of 2005)

Part L of Chapter 60 of the Laws of 2016 makes the enhanced earned income tax credit (EITC) for certain noncustodial parents permanent. The current credit was scheduled to expire on December 31, 2016. The new law makes the credit permanent.

To qualify for the enhanced EITC, claimants must:

•  be a resident taxpayer,
•  be age 18 and over, and
•  have a minor child with whom they do not reside.

The credit is equal to the greater of :

•  20 percent of the federal EITC that the taxpayer would otherwise be able to claim for one qualifying child (if he/she were a custodial parent), or
•  2.5 times the EITC for taxpayers without qualifying children.

Claimants must have a child support order in effect for at least half the tax year and have made their required support payments.

(Section 2 of Part I of Chapter 58 of the Laws of 2006)