May 22 Tax Alert: A Drafted New York State Bill Could Alleviate Burden of SALT Deduction Cap Imposed by the Tax Cuts and Jobs Act
A discussion draft has been disseminated by the New York State Department of Taxation and Finance that establishes several state-level tax reforms to preserve state and local tax deductibility for individuals on certain non-wage income.
The draft language would establish an Unincorporated Business Tax (UBT), levied at a 5% rate on partnership income that is included as ordinary income reported for federal purposes and guaranteed payments to partners. The UBT would be deductible as a business expense on federal tax returns, and 93% of a partner’s proportionate share of the tax could be claimed as a credit against personal income tax on the state level. According to the draft language, the UBT would apply to partnerships doing business in New York while creating a corresponding credit for individual and corporate partners of those partnerships.
This could be good news as the UBT would not be subject to the $10,000 SALT deduction cap enacted as part of the Tax Cuts and Jobs Act effective this year. The New York State Department of Taxation and Finance is requesting submissions of comments and issues to the draft language by emailing [email protected] by July 16, 2018.
Sax LLP will keep you up to date on this tax reform development impacting New York State as additional details emerge. For any questions or issues, please reach out to a Sax advisor at (973) 472-6250.