New York State Department of Taxation and Finance

2010 Tax Law Updates and E-file News

www.nystax.gov

New York Itemized Deductions

Limit of itemized deductions • New York adjusted gross income over $1million and not more than

$10 million, the New York itemized deduction is limited to 50% of charitable contributions (Tax years 2010-2012).

• New York AGI over $10 million, the New York itemized deduction is limited to 25% of charitable contributions (Tax years 2010-2012).

Change in calculating itemized deductions • Beginning for tax year 1/1/2010, New York will no longer allow the

federal deduction for state and local sales tax in the computation of an individual’s New York itemized deduction.

TSB-M-10(8)I Amendments Affecting New York Itemized Deductions

Increase in New York City Income Taxes

The total tax rate for taxable income in excess of $500,000 has increased from 3.648 percent to 3.876 percent.

Effective for tax years beginning after 2009.

TSB-M-10(7) I - New York City Resident Tax Rates

New Contribution Lines

Volunteer Firefighting and Volunteer Emergency Services Recruitment and Retention Fund • Line 36 on IT-150• Line 60 on IT-201• Line 57 on IT-203

Limits the Basic STAR Exemption

Beginning with school year 2011-2012, the BASIC STAR real property tax exemption is eliminated to homeowners with affiliated income in excess of $500,000.

The law eliminates the STAR tax rate reduction for New York City income taxpayers with taxable income in excess of $500,000. The base rate for these taxpayers will increase from 3.2 to 3.4 percent for tax year 2010 and after.

Calculation of NYSource Income for a Nonresident

Beginning for taxable years on or after January 1, 2010, termination pay, covenants not to compete, and any other employment-related compensation for past services received by nonresidents is taxable to New York.

TSB-M-10(9)I Income Received by a Nonresident Related to a Business, Trade, Profession, or Occupation Previously Carried on Within New York State

Clarifying New York Source Income

Nonresident shareholders of an S corporations who make an election under §338(h)(10) or §453 of the Internal Revenue Code (IRC) are taxed in accordance with that election and the transaction is treated as producing New York Source Income. This provisions applies to taxable years beginning on or after January 1, 2007 for which the statute of limitations for seeking a refund or assessing additional tax is still open.

The Law requires that income received by nonresidents from installment sale contracts entered into before a New York S corporation terminated its taxable status in New York be included as New York source income. This provision applies to taxable years beginning on or after January 1, 2010.

TSB-M-10(10)I Amendments to the Treatment of Certain S Corporation Income by Nonresident Taxpayers

Build America Bond (BAB) Interest

Interest income from BABs will be treated the same as if the interest was from any other tax exempt obligation issued by a state or local government: • Issued by New York State or its local governments is not

subject to tax • Issued by states and local governments other than New York

State or its local governments, is subject to tax. • A subtraction is available for interest income attributable to a BAB

issued by New York State or its local governments.

Special condition code A-6 – if BAB interest is included in your federal adjusted gross income.

TSB-M-10(4)I, Treatment of Interest Income from Build America Bonds

Filing Requirement for Resident Trusts Not Subject to Tax

A resident trust that meets the conditions of section 605(b)(3)(D) of the Tax Law will be required to file a New York State fiduciary income tax return if it meets the filing requirements for resident trusts.

A New York State resident trust must file a New York State fiduciary income tax return if the trust:• is required to file a federal income tax return for the tax year; • had any New York taxable income for the year;• had tax preference items for minimum income tax purposes in excess

of the specific deduction; or • is subject to a separate tax on lump-sum distributions

New form IT-205-C, New York State Resident Trust Nontaxable Certification, to Form IT-205.

TSB-M-10(5)I - Filing Requirement for Resident Trusts Not Subject to Tax

Automatic 90 Day Extension for Certain Taxpayers

If your spouse died within 30 days before your return is due, you qualify for an automatic 90-day extension to file your return. (Chapter 429 – A7162B/S5789A)

Enter code D9 if you qualify for an automatic extension of time to file because of the death of your spouse.

NEW YORK CREDIT UPDATES

Low Income Housing Credit

The law Increases the statewide aggregate credit limit for the low-income housing credit from $24 million to $28 million.

Cap on Biofuel Production Credit and Qualified Emerging Technologies CreditFor tax years beginning on or after 1/1/2010, the law clarifies that the credit cap for the biofuel production credit and the qualified emerging technology company (QETC) facilities, operations, and training credit is applied at the entity level in the case of partnerships, S corporations, and limited liability companies. • cannot exceed $2.5 million for the biofuel credit

• cannot exceed $250,000 for the QETC credit.

Empire State Film Production Credit

The Laws of 2010 allocates an additional $2.1 billion in film credits for tax years 2010 through 2014($420 million annually)

Law Includes amendments to the eligibility rules.

New Empire State Film POST Production CreditThirty-five million dollars of the total allocation of the film production credit ($7 million annually) is devoted to a new post production tax credit. Companies that are ineligible for the film credit may qualify for the post production credit.

Contact the Governor’s Office for Motion Picture and Television Development http://www.nylovesfilm.com

Empire Zone Technical Amendments

Empire State Development (ESD) Review and Decertification• Decertification resulting from ESD review are in effect for tax

years beginning on or after January 1, 2008.

Boundary Revisions and Regionally Significant Projects• Gives ESD discretion to approve boundary revisions and

regionally significant projects after program expires.

Empire Zone Public Report • New report (June 30, 2011) will contain the name of every entity

claiming EZ/QEZE credits and corresponding amounts.

Sales Tax Amendments• Localities opt into the refund/credit• Sales tax QEZE applications no longer accepted.

Empire Zone Technical Amendments

Empire Zone Investment Tax Credit (EZ-ITC) and Employment Incentive Credit (EIC) • Qualified investment projects certified prior to expiration of zone are

deemed certified and can earn EZ-ITC for nine more years.• Other certified businesses can earn EZ-ITC until 4/1/2014.• The EIC is allowed three years following the EZ-ITC.

QEZE Real Property Tax Credit (RPTC) and Special Assessments • RPTC do not include charges for local benefits for specific properties.

This amendment codifies existing Department policy.

Empire Zone Capital Credit • Extends credit through 3/31/2014 for contributions certified by the

Commissioner of ESD to Community Development projects in fulfillment of a pledge made to the project before the zones expired.

Historic Homeownership Rehabilitation Credit

Amendments to Historic Homeownership Rehabilitation Credit:• The definition of a qualified historic home has been revised• The credit limitation per year has been increased from $25,000 to

$50,000 for most taxpayers, and• The credit is now refundable for certain taxpayers.

TSB-M-10(2)C, (3)I, The Rehabilitation of Historic Properties Credit and the Historic Homeownership Rehabilitation Credit.

Rehabilitation of Historic Properties Credit

Amendments to the Historic Properties Credit:• The definition of a certified historic structure has been revised, • the credit amount has been increased from 30% of the federal

credit amount allowed to 100%, and• The credit limitation per structure has been increased from

$100,000 to $5,000,000.

TSB-M-10(2)C, (3)I, The Rehabilitation of Historic Properties Credit and the Historic Homeownership Rehabilitation Credit

Excelsior Jobs Program Credit

The Excelsior Jobs Tax Credit: A credit of up to $5,000 per new job to cover a portion of the associated payroll cost.

The Excelsior Investment Tax Credit: Valued at two percent of qualified investments.

The Excelsior Research and Development Tax Credit: A ten percent credit for new investments based on the Federal Research and Development credit.

The Excelsior Real Property Tax Credit: Available to firms locating in certain distressed areas and to firms in targeted industries that meet higher employment and investment thresholds.

Program Eligibility: A business must apply to Empire State Development Corporation(ESDC) with its plan for expansion or growth. ESDC will calculate the maximum potential tax credits over a 5-year period for tax years 2011 through 2015. Credits are refundable.

http://www.empire.state.ny.us/searchResults.asp

Deferral of Credits

Effective for tax years beginning on or after January 1, 2010, and before January 1, 2013, certain tax credits will be subject to a temporary deferral if the total amount of these credits is in excess of $2 million.

Taxpayers will be allowed to claim the deferred credit amounts starting with tax years beginning on or after January 1, 2013.

No interest will be paid on the amounts of credit deferred.

TSB-M-10(5)C, (11)I Temporary Deferral of Certain Tax Credits

MISCELLANEOUS UPDATES

Estate Tax

Eliminates the reference to the unified credit in effect in the IRC on the decedent’s date of death and fixes the credit at the amount that would be allowed if the federal unified credit did not exceed the tax due on an estate of $1 million.

This provision preserves the New York unified credit for the estates of decedents dying on or after January 1, 2010.

Power of Attorney

Power of Attorney technical corrections bill (A. 8392-C) was signed into law 8/13/2010 and becomes effective 30 days after it becomes law.

Form POA-1, Power of Attorney, should be used by taxpayers as evidence that they have authorized an individual or individuals to represent them for tax matters administered by the New York State Tax Department, the New York City Department of Finance, or both.

N-10-7 Changes to Powers of Attorney

Form IT-113-X, Claim for Credit or Refund of Personal Income Tax, has been discontinued

Form IT-113X was previously used to report a net operating loss (NOL) carryback, file a protective claim, protest a partially or fully denied refund, or protest a paid-in-full bill.

If you want to protest a denied refund or paid-in-full bill, see the instructions contained in the Taxpayer Bill of Rights document that is included with all denied refunds and bills.

To file for a protective claim (use condition indicator P2) or a net operating loss (use condition indicator N3) you must file an amended return. Attach documentation supporting your claim.

SALES TAX UPDATES

Amends the Definition of Affiliated Nexus Provision

Provides that the in-state activities of an affiliate in providing accounting or legal services or advice to a seller, or in directing the activities of a seller do not make the seller a vendor.

This amendment is effective retroactively to June 1, 2009, and applies to sales or uses occurring on or after that date.

TSB-M-10(12)S - Amendment to the Definition of a Sales Tax Vendor for Out-of-State Sellers with Related Businesses in New York State

Sales Tax Clothing and Footwear Exemption

Clothing and footwear under $110: The sales tax exemption for clothing and footwear costing less than $110 per item would be temporarily suspended from October 1, 2010, through March 31, 2011.

Beginning April 1, 2011, the exemption would be reinstated for clothing and footwear costing less than $55 per item until March 31, 2012.

The exemption would revert back to $110 on April 1, 2012. Local governments would be given the option to maintain their current exemptions or opt into the new exemption schedule.

Note: Special rules apply to localities and MCTD.

Repeals Sales Tax Vendor Credit for Monthly Filers

Eliminates the sales tax vendor credit for vendors that file or are required to file monthly sales tax returns.

This change takes effect June 1, 2010 and applies to tax returns beginning with those due on September 20, 2010.

Repeals Sales Tax Bad Debt Provisions

Repeals sales tax bad debt provisions that allow a private label credit card lender to claim a credit/refund on accounts written off as uncollectible.

This act shall take effect immediately and shall apply to credits taken and refunds claimed on or after July 1, 2010.

TSB-M-10(11) – Sales Tax Credit or Refund No Longer Available for Bad Debt Accounts Held by Private Label Credit Card Lenders.

Impose Sales Tax on Charges by Hotel Room Remarketers

Requires room remarketers to collect state and local sales tax on their charges to their customers.

A “room remarketer” includes a person who reserves, arranges for, conveys, or furnishes occupancy to an occupant for rent in an amount determined by the room remarketer.

Effective September 1, 2010.

TSB-M-10(10)S Amendments Affecting the Application of Sales Tax to Rent Received for Hotel Occupancy by Room Remarketers

Sales Tax on Information Services

Clarifies the tax treatment of certain information services under sections 1105(c)(1) and 1105(c)(9) of the Tax Law.

Beginning on September 1, 2010:• The sale of an abstract of title to real property is the sale of a

taxable information service. This includes the sale of an abstract of title to either a prospective purchaser of real property or to an attorney representing a prospective purchaser.

• The sale of a service whose primary function is to provide risk management analysis reports is the sale of a taxable information service.

TSB-M -10(7)S - Sales and Compensating Use Tax Treatment of Certain Information Services

E-file Mandate for Tax Preparers

No changes in the article-22 mandate requirements:• You were subject to the mandate in a prior year, or

• You prepared more than 100 combined original individual, fiduciary and/or partnership returns for tax year 2009 in calendar year 2010, and you use tax preparation software.

E-file Mandate for Tax Preparers

No changes in the business tax mandate requirements:• You must e-file all general business and New York State S corporation

returns (Article 9-A) and extensions (Articles 9, 9-A, 32 and 33) and e-file all monthly sales tax returns (ST-809 and ST-810) and PrompTax sales tax returns (Form ST-810) if you're a tax return preparer and:

• you were subject to the mandate in a previous period, or

• you prepared more than 100 combined original sales tax and corporation tax documents in calendar year 2010, and use tax preparation software.

Mandates: New for January 2011

Clients can no longer opt-out of e-file.• Forms TR-800 Taxpayer Opt-Out and Reasonable Cause

Record for Tax Return Preparers are eliminated.

You cannot charge a separate fee for e-file.• You must bundle e-file into your return preparation fee.• You can charge a separate fee for paper returns.

We have established a mandate compliance program.

We will offer a check/voucher option for Corporation Tax returns and extensions.

Consumer Bill of Rights Regarding Tax Preparers

Increase consumer protections• Required distribution of Publication 135, Consumer Bill

of Rights Regarding Tax Preparers• Required registration of certain return preparers• Required the registration of (RAL) facilitators• Required creation of a Task Force• Provided additional consumer protection and disclosure

for RALS

Tax Preparer Registration

Tax return preparers exclude:Enrolled Agents (new!) See TSB-M-10 posted for all taxes.

Licensed CPAs and PAs

Attorneys

Employees of a CPA, PA, enrolled agent, or law firm who prepare tax returns under the direct supervision of a CPA, PA, enrolled agent, or attorney of that firm

employees of a business who prepare that business’s return or report

clerical employees

volunteer tax preparers

Tax Preparer Registration There will not be any bulk upload for 2011 registration year.

If you are not excluded from the preparer registration, you must register as a return preparer if you intent to prepare New York State income tax returns in 2010 as a tax return preparer.

You must pay a $100 registration fee if you are a commercial tax return preparer who:

• was paid to prepare 10 or more New York State tax returns in 2010, and will be paid to prepare at least one personal income tax return in 2011; or will be paid to prepare 10 or more tax returns in 2011.

Registration Requirement of Refund Anticipation Loan (RAL) facilitators

There is no exclusion from registering if you are facilitating a refund anticipation loan or refund anticipation check.

A facilitator is a person who individually or in conjunction or cooperation with another person:• solicits the execution of, processes, receives, or accepts an

application or agreement for a refund anticipation loan or refund anticipation check;

• serves or collects upon a refund anticipation loan or refund anticipation check; or

• in any other manner facilitates the making of a refund

Note: An individual who may meet one of the exclusions from being considered a tax return preparer, for registration purposes, can still be considered a facilitator and be subject to the registration requirements.

New York Tax Preparer Identification Number (NYTPRIN)

Tax return preparer/ facilitator issued a registration certificate which will include their NYTPRIN

If an individual acts as both a tax return preparer and a facilitator, one registration certificate and NYTPRIN indicating both activities will be issued.

Employer responsibility to ensure that any employees are properly registered.

Registration of a commercial tax return preparer is not complete until the fee is paid.

No fee for an individual who only meets the definition of a facilitator

2010 Registration Statistics

64,000 Total Registrations• 2,600 (4%) Facilitator only• 16,100 (25%) Preparer only• 45,300 (71%) Preparer/Facilitator

Preparers /Facilitators (71%)

Who May be Subject to Preparer Penalties

Tax return preparers (including commercial tax return preparers) and facilitators who fail to: • register or re-register for each year • sign a New York State tax return or report or refund anticipation

loan or refund anticipation check documentation when required • include the unique identification number assigned by the Tax

Department on any New York State tax return or report that requires the preparer’s signature, or on refund anticipation loan or refund anticipation check documentation that requires the facilitator’s signature

• ensure that tax return preparers they employ are registered • commercial tax return preparers who fail to pay the annual fee.

Online Services (formerly Online Tax Center)

In early 2011, we’ll be adding new features to our online services accounts.

• enhanced account view

• e-mail notifications

• respond to department notices online

• new Web site design (implemented mid-December)

We’ll notify taxpayers and practitioners of the improvements via email, subscription service, and paper notices.

Online Services (formerly Online Tax Center)

Account View:The new landing page will allow taxpayers to view a comprehensive

customized summary of their tax account. The page will include:

• List of recent messages from the Tax Department

• List of any recent tax bills, including tax type, date, and balance

• List of recent filings, including confirmation number and filing method (paper or e-file). Initially supporting Sales Tax and Individual Filings.

This page will include the taxpayer’s contact information, which will be easy to revise.

Online Services (formerly Online Tax Center)

E-mail Notifications:• Taxpayers can elect to receive email notifications of certain non-

statutory department notices, including assessments.

• This is the first time that the department is using email to communicate with taxpayers about their personal tax account.

• Taxpayer will receive an email with a prompt that they have an urgent message from the Tax Department. The e-mail won’t include any confidential tax information.

• Taxpayer then goes to their online account, and in a secure environment, can view an electronic version of the paper notice they would have received.

• NOTE: This will be the only notice the taxpayer receives. The department won’t be sending a paper notice.

Online Services (formerly Online Tax Center)

Respond to Department Notices: • Taxpayers will be able to respond online to selected department

notices.

• Whether the taxpayer received an electronic or traditional paper notice, they’ll be able to respond online.

• Only the selected non-statutory notices are eligible for this service.

• NOTE: The program won’t allow taxpayers to respond to notices that aren’t included in the program.

Online Services (formerly Online Tax Center)

Respond to Department Notices: First group of notices to use this service will include:

• Assessments,

• sales tax and corporation tax delinquency notices,

• sales tax reclassification notices and

• audit notices asking the taxpayer for additional information. The additional information can be scanned and sent along with the response.

NYS Department of Taxation and Finance

Web Site Redesign:

Our redesigned Web site will have a user-friendly look and feel with easier to find information and services

The new design results from an in-depth study of how customers use the site (interviews, data analysis, etc.) and prototype testing with real users.

New York State Department of Taxation and Finance

E-file Hotline (518) 457-6387

Online Tax Center Hotline (518) 485-7884

Tax Practitioner Hotline(518) 457-5451

The material included in this slide show is intended only to highlight the changes andupdates as of the date presented. For more comprehensive information, please refer our TSB-M’s, forms, instructions, publications ,tax laws, and amendments.