The phrase “smoking gun” refers to the strongest of circumstantial evidence that one could have. One arrives at a crime scene to see a gunshot victim and a few feet away the holder of a gun with smoke emanating from the barrel, while not direct evidence of who shot the victim, nevertheless makes a compelling statement.
So what, if any conclusions, can we jump to regarding Governor Cuomo’s recently released budget? Certainly no tax relief for high-income taxpayers, despite the proposed legalization and corresponding twenty plus percent taxation of cannabis sold in New York State.
Remember, readers, the items below are the Executive Branch wish list for the coming fiscal year and still have a long way to go before becoming law. Some of the more interesting items include:
- Requiring internet marketplace providers to collect the State sales tax. A marketplace provider is defined as a person who collects the purchase price, and provides the forum, physical or virtual, where the transaction occurs.
- Nonresident taxpayers would now need to report winnings received in New York casinos as New York source income. This could result in double taxation where the winner’s resident state will not provide an offsetting credit for the tax paid to New York.
- Extend the soon-to-expire (tax years beginning after 2019) top Personal Income tax bracket of 8.82% and limitation on charitable contribution deductions for high income taxpayers through 2024.
- Since last year’s proposal was not enacted, once again introduce a provision to close the so-called carried interest loophole. Under current federal tax law, hedge fund managers and private equity investors can classify the distributive share of income received for management services as capital gain. As a result, non-resident recipients are not taxed on this income in New York State, but only their state of residence. If passed, the bill will only take effect if Connecticut, New Jersey, Massachusetts, and Pennsylvania enact legislation having a similar effect. The legislation would also impose what it calls “a special 17 percent carried interest fairness fee.”
Some breaks and good news is in order. The proposed Cannabis Regulation and Tax Act, in addition to legalizing certain adult use of cannabis, would establish a taxing infrastructure that is projected to bring $83 million to the State in its first year alone. Limitations on property tax increases would be extended and a new fund would be established to allow voluntary contributions for the ongoing care of retired racehorses.
If I have raised questions, contact me at WBerkowitz@BerdonLLP.com or your Berdon advisor.