Frequently Asked Questions

What measures does the New York Budget Bill take to address changes in federal tax law?

The New York Budget Bill, passed in 2018, was designed to address several changes in federal tax law brought about by the Tax Cuts and Jobs Act. The Bill's primary objective was to mitigate the effects of the federal act's limitations on deductible expenses. This is crucial because New York's tax laws use federal taxable income as the basis for calculating state taxable income. Therefore, any changes in the amount of taxable income on federal tax returns directly impact state and local taxes. The Budget Bill introduced several measures to address these changes. Firstly, it declared certain earnings taxed by the Transition Tax, an IRS-imposed tax on some foreign corporations, as tax-exempt on state and city returns. It also reduced the penalty for underpaying estimated taxes during the year. Secondly, the Bill disallowed the deduction of Foreign Derived Intangible Income received by a U.S. Corporation, a deduction that the Tax Cut and Jobs Act had increased.