BILL NUMBER: S1487
SPONSOR: O'MARA
 
TITLE OF BILL:
An act to amend the tax law and the administrative code of the city of
New York, in relation to business income base and certain small business
taxpayers
 
PURPOSE OR GENERAL IDEA OF BILL:
Reduces the amount small businesses and farms must pay in taxes by
increasing the corporate tax threshold from $390,000 to $500,000 and
lowering the rate to 2.5%. Expands the small business exemption to all
PIT businesses regardless of whether they have employees, increases the
threshold to $500,000, increases the exemption to 15%, and increases the
exemption to 20% for farmers.
 
SUMMARY OF SPECIFIC PROVISIONS:
Section 1. amends the tax law to increase the threshold for which corpo-
rations are considered small corporations from $290,000 to $400,000
while reducing the tax rate for small corporations from 6.5% to 2.5%.
The transition threshold from the small business rate to the full corpo-
rate rate will increase from $390,000 to $500,000.
Section 2. amends the tax law to expand the business tax exemption to
partnerships, LLCs, and S-corporations. The requirement that the busi-
ness have at least one employee is eliminated. The exemption is
increased from 5% to 10% for tax year 2022 and to 15% for tax years
beginning on or after 2023. The exemption for farm businesses is
increased from 5% to 20% for tax.
Section 3 makes corresponding changes to the New York City personal
income tax code.
 
JUSTIFICATION:
The FY 2014 Enacted Budget included a Senate sponsored Personal Income
Tax exemption for small businesses and small farms. The exemption is
equal to five percent of net income in 2018 and beyond. To qualify, the
business must be a sole proprietor or farm (regardless of how the busi-
ness is structured, sole proprietor, LLC, etc.), have less than $250,000
in net business income and employ at least one employee. This bill
increases the exemption, expands on the taxpayers eligible for the
exemption, provides a rate cut for small businesses filing under the
Corporate Franchise Tax and will help New York's small businesses and
family farms remain an integral part of the State's economy for gener-
ations to come.
 
PRIOR LEGISLATIVE HISTORY:
2015:S7235
2017:S2120
2019:S943
2021:S5441
2023:S4236
 
FISCAL IMPLICATIONS:
SFY 2023: $302 million. When fully effective, the annual tax savings to
small businesses will be $464 million.
 
EFFECTIVE DATE:
This act shall take effect immediately and apply to tax years beginning
on or after January 1, 2027.