New York enacts new treatment of GILTI and changes to SUT economic nexus threshold has been saved
Analysis
New York enacts new treatment of GILTI and changes to SUT economic nexus threshold
Multistate Tax alert | July 31, 2019
This tax alert summarizes the above New York State tax law changes, included in S.B. 6615.
Overview
On June 24, 2019, Governor Andrew Cuomo of New York signed into law S.B. 6615.1 Applicable for tax years beginning on or after January 1, 2019, S.B. 6615 amends the New York State’s tax treatment of certain federal tax provisions enacted in the Tax Cuts and Jobs Act of 2017 (federal tax reform).2 Specifically, these changes affect the State’s treatment of Global Intangible Low-Taxed Income (GILTI).3 S.B. 6615 also amends New York State’s sales and use tax economic nexus thresholds for out-of-state vendors.
Please see our alert providing information on the 2019–2020 Budget Act (S1509C/A2009C) (the Budget Act).4
Corporate income tax
New law treats 95 percent of IRC section 951A(a) (GILTI) inclusion as exempt income under corporation franchise tax
Applicable for tax years beginning on or after January 1, 2019, S.B. 6615 revises New York’s treatment of certain provisions under federal tax reform for Article 9-A corporation franchise taxpayers. The new law essentially treats 95 percent of the Internal Revenue Code (IRC) section 951A(a) inclusion (i.e., unreduced by the GILTI deduction under IRC section 250(a)(1)(B)(1)), as exempt controlled foreign corporation (CFC) income.5 The GILTI deduction under IRC section 250(a)(1)(B)(1) may not be taken into account in determining the taxpayer’s New York taxable income.6
S.B. 6615 additionally provides that for New York subchapter C corporations, GILTI is not included in the numerator of the apportionment fraction (consistent with prior law changes included in the Budget Act), and 5 percent of the IRC section 951A(a) inclusion, unreduced by the GILTI deduction under IRC section 250(a)(1)(b)(1)), is included in the apportionment fraction denominator.7
For New York subchapter S corporations, the 95 percent exclusion generally does not apply under the S.B. 6615 amendments; similarly, GILTI is not in the numerator of the apportionment fraction (consistent with prior law changes included in the Budget Act) and there is full IRC section 951A(a) inclusion in the denominator of the apportionment fraction.8 As with other exempt income in New York, the 95 percent GILTI exclusion under S.B. 6615 is subject to New York’s interest attribution rules or the 40 percent safe-harbor election.9
S.B. 6615 provides for a similar "95 percent GILTI exclusion rule" under New York’s Article 33 franchise tax on insurance corporations.10 Similar legislation was not enacted for the New York City Business Corporation Tax, General Corporation Tax or Banking Corporation Tax.
Sales and use taxes
New law increases component of remote vendor economic nexus threshold
S.B. 6615 also revises New York’s economic nexus thresholds for out-of-state vendors (i.e., including remote sellers and marketplace facilitators), requiring them to register for state sales tax purposes and collect and remit sales tax if, in the previous four sales tax quarters:
- The cumulative total of their gross receipts from sales made or facilitated of tangible personal property delivered into New York State exceeded $500,000 (previously, $300,000),11 and
- Such persons made or facilitated more than 100 sales of tangible personal property delivered in New York State (unchanged from prior law).
S.B. 6615 gives this change retroactive effect. The law amending the threshold related to vendors is applicable as of June 21, 2018, and the law amending the threshold related to marketplace facilitators is applicable as of June 1, 2019.12
Considerations
S.B. 6615 addresses certain changes to New York State taxes in response to federal tax reform, as well as changes to the State’s economic nexus provisions. Taxpayers impacted by the enactment of S.B. 6615 should reach out to their tax advisors.
Contacts:
If you have questions regarding S.B. 6615 or other New York State matters, please contact any of the following Deloitte professionals:
Jack Trachtenberg, principal—Multistate, Deloitte Tax LLP, New York, +1 212 436 4324
Abe Teicher, partner—Multistate, Deloitte Tax LLP, New York, +1 212 436 3370
Don Roveto, partner—Multistate, Deloitte Tax LLP, New York, +1 212 492 2276
Ken Jewell, managing director—Multistate, Deloitte Tax LLP, Parsippany, +1 973 602 4309
Dennis O’Toole, managing director—Multistate, Deloitte Tax LLP, New York, +1 212 436 6136
Phil Lee, managing director—Multistate, Deloitte Tax LLP, Jericho, +1 516 918 7809
Mary Jo Brady, senior manager—Multistate, Deloitte Tax LLP, Jericho, +1 516 918 7087
Multistate Tax alert archive
The Multistate Tax alert archive includes external tax alerts issued by Deloitte Tax LLP's Multistate Tax practice during the last three years. These external alerts highlight selected developments involving state tax legislative, judicial, and administrative matters. The alerts provide a brief summary of specific multistate developments relevant to taxpayers, tax professionals, and other interested persons.
View the list of archived Multistate Tax alerts.
References
1 Chapter 39, Laws of 2019.
2 Public Law 115-97.
3 IRC section 951A.
4 Chapter 59, Laws of 2019.
5 S06615, Part I, Section 1.
6 S06615, Part I, Section 2.
7 S06615, Part I, Section 3.
8 Id.
9 S06615, Part I, Section 1.
10 S06615, Part I, Section 4.
11 S06615, Part J, Section 1 for vendors and Section 2 for marketplace providers.
12 S06615, Part J, Section 4.
Recommendations
Corporate Income Tax Legislative update: What happened in 2016?
Inside Deloitte
