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As more legislatures adjourn, several key states, including New York, are still debating their budgets for the upcoming year. New York's ongoing budget negotiations have put two significant tax proposals on the table that could impact the retail real estate industry.
The New York State Senate and Assembly are advancing budget proposals that would reduce the value of the pass-through entity tax (PTET) credit for businesses operating as partnerships and joint ventures. The PTET credit was originally enacted to help businesses preserve the federal deductibility of state and local taxes following the implementation of the federal SALT deduction cap.
Under the proposed changes included in both the Senate (NY S 9009) and Assembly (NY A 10009) one-house budget bills, the New York State PTET credit would be reduced to 90% and the New York City PTET credit to 75% of taxes paid. These proposed changes would increase personal income tax liability on partnership income. These partnership and joint venture structures are common in the retail real estate industry among property owners, developers and investors. Changes to this credit would disadvantage businesses in New York by increasing their tax burdens and potentially discouraging investment in New York.
Additionally, both chambers’ amendments increase the corporate income tax, although the specifics differ. The Assembly bill would increase the corporate tax rate to 9.25% for businesses with a business income base of more than $10 million, and the Senate version would increase the rate to 9% for businesses with a base of more than $5 million. There are several sticking points between the Governor and legislature, including easing emission mandates by delaying a 2024 regulatory deadline to 2030, and overhauling the environmental review process to ease housing approvals.
New York has missed the March 31 budget deadline, and negotiations are expected to continue for several weeks. The legislature briefly returned this week to pass a second one-week budget extender to keep the state government running through April 14 as lawmakers and Governor Kathy Hochul (D) continue budget discussions.
For more information contact gpp@icsc.com.