Bill S4990A-2011

Relates to an investment advisory services tax credit

Expands the state investment tax credits to include tangible property used for providing investment advisory services or management of investment portfolios with investment objectives of over one million dollars.

Details

Actions

  • Jun 21, 2012: COMMITTED TO RULES
  • May 30, 2012: ADVANCED TO THIRD READING
  • May 23, 2012: 2ND REPORT CAL.
  • May 22, 2012: 1ST REPORT CAL.888
  • May 2, 2012: REPORTED AND COMMITTED TO FINANCE
  • Jan 4, 2012: REFERRED TO INVESTIGATIONS AND GOVERNMENT OPERATIONS
  • May 24, 2011: PRINT NUMBER 4990A
  • May 24, 2011: AMEND (T) AND RECOMMIT TO INVESTIGATIONS AND GOVERNMENT OPERATIONS
  • May 2, 2011: REFERRED TO INVESTIGATIONS AND GOVERNMENT OPERATIONS

Votes

VOTE: COMMITTEE VOTE: - Investigations and Government Operations - May 2, 2012
Ayes (4): Marcellino, Alesi, Golden, Nozzolio
Ayes W/R (2): Zeldin, Peralta
Nays (2): Squadron, Diaz

Memo

BILL NUMBER:S4990A

TITLE OF BILL: An act to amend the tax law, in relation to an investment tax credit

PURPOSE OR GENERAL IDEA OF BILL: To provide technical corrections to Part YY-1 of the 2008-2009 Education, Labor and Family Assistance Article VII Budget Bill, in order for the Investment Tax Credit to continue to retain and grow the financial services industry in New York and to make it competitive with other states.

SUMMARY OF SPECIFIC PROVISIONS: Sections 1-3: Expands the investment tax credit (ITC) definition of investment advisory activity so that investment advisory services beyond those provided to Regulated Investment Companies (i.e., mutual funds) will qualify for the ITC. The expanded definition reflects changes in the business model that have occurred since the ITC was originally enacted in 1998.

Section 4: Effective Date

JUSTIFICATION: In 2008 the Legislature extended the ITC and made two technical changes to the law. The first allowed a financial services taxpayer to aggregate its broker/dealer and investment advisory activities in determining whether property qualifies for the ITC (in order to achieve more than 50% of use requirement). The second revised eligibility requirements pertaining to the location of employees.

However, in order for the ITC to have its intended economic impact, the definition of "investment advisory activity" must be updated to reflect current business activities. In 1998 when the ITC was first enacted, investment advisory services were primarily provided to Regulated Investment Companies (i,e, mutual funds). The business has grown since then to advising pension funds and endowments among others.

By enacting this legislation into law, the financial services industry will be prepared to expand and grow in New York. Facilities planning that are currently taking place can consider New York State as competitive with other states that have more favorable tax treatment.

PRIOR LEGISLATIVE HISTORY: New Bill.

FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:

This bill will ultimately result in increased revenue to the state and city of New York as high paying jobs are created and maintained in New York.

EFFECTIVE DATE: This act shall take effect immediately.


Text

STATE OF NEW YORK ________________________________________________________________________ 4990--A 2011-2012 Regular Sessions IN SENATE May 2, 2011 ___________
Introduced by Sen. HANNON -- read twice and ordered printed, and when printed to be committed to the Committee on Investigations and Govern- ment Operations -- committee discharged, bill amended, ordered reprinted as amended and recommitted to said committee AN ACT to amend the tax law, in relation to an investment tax credit THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. Subparagraph (i) of paragraph (b) of subdivision 12 of section 210 of the tax law, as amended by chapter 637 of the laws of 2008, is amended to read as follows: (i) A credit shall be allowed under this subdivision with respect to tangible personal property and other tangible property, including build- ings and structural components of buildings, which are: depreciable pursuant to section one hundred sixty-seven of the [internal revenue code] INTERNAL REVENUE CODE, have a useful life of four years or more, are acquired by purchase as defined in section one hundred seventy-nine (d) of the [internal revenue code] INTERNAL REVENUE CODE, have a situs in this state and are (A) principally used by the taxpayer in the production of goods by manufacturing, processing, assembling, refining, mining, extracting, farming, agriculture, horticulture, floriculture, viticulture or commercial fishing, (B) industrial waste treatment facil- ities or air pollution control facilities, used in the taxpayer's trade or business, (C) research and development property, (D) principally used in the ordinary course of the taxpayer's trade or business as a broker or dealer in connection with the purchase or sale (which shall include but not be limited to the issuance, entering into, assumption, offset, assignment, termination, or transfer) of stocks, bonds or other securi- ties as defined in section four hundred seventy-five (c)(2) of the Internal Revenue Code, or of commodities as defined in section four hundred seventy-five (e) of the Internal Revenue Code, (E) principally used in the ordinary course of the taxpayer's trade or business of
providing investment advisory services for a regulated investment compa- ny as defined in section eight hundred fifty-one of the Internal Revenue Code, or lending, loan arrangement or loan origination services to customers in connection with the purchase or sale (which shall include but not be limited to the issuance, entering into, assumption, offset, assignment, termination, or transfer) of securities as defined in section four hundred seventy-five (c)(2) of the Internal Revenue Code, (E-1) PRINCIPALLY USED IN THE ORDINARY COURSE OF THE TAXPAYER'S TRADE OR BUSINESS OF PROVIDING INVESTMENT ADVISORY SERVICES, OR THE SERVICE OF MANAGING INVESTMENT PORTFOLIOS TO ACHIEVE SPECIFIC INVESTMENT OBJECTIVES FOR ACCOUNTS OVER ONE MILLION DOLLARS OF ACCREDITED INVESTORS (AS THAT TERM IS DEFINED IN RULE FIVE HUNDRED ONE OF REGULATION D OF THE SECURI- TIES ACT OF 1933), IF THE TAXPAYER SATISFIES THE FOLLOWING CRITERIA: (I) THE TAXPAYER IS A REGULATED BROKER OR DEALER OR AN AFFILIATE OF A REGU- LATED BROKER OR DEALER, (II) THE TAXPAYER IS REGISTERED AS AN INVESTMENT ADVISER UNDER SECTION TWO HUNDRED THREE OF THE INVESTMENT ADVISER ACT OF 1940, AS AMENDED, AND (III) AT LEAST ONE CLIENT OF THE TAXPAYER IS A REGULATED INVESTMENT COMPANY AS DEFINED IN SECTION EIGHT HUNDRED FIFTY- ONE OF THE INTERNAL REVENUE CODE THAT HAS ASSETS IN EXCESS OF ONE HUNDRED MILLION DOLLARS, (F) principally used in the ordinary course of the taxpayer's business as an exchange registered as a national securi- ties exchange within the meaning of sections 3(a)(1) and 6(a) of the Securities Exchange Act of 1934 or a board of trade as defined in section 1410(a)(1) of the New York Not-for-Profit Corporation Law or as an entity that is wholly owned by one or more such national securities exchanges or boards of trade and that provides automation or technical services thereto, or (G) principally used as a qualified film production facility including qualified film production facilities having a situs in an empire zone designated as such pursuant to article eighteen-B of the general municipal law, where the taxpayer is providing three or more services to any qualified film production company using the facility, including such services as a studio lighting grid, lighting and grip equipment, multi-line phone service, broadband information technology access, industrial scale electrical capacity, food services, security services, and heating, ventilation and air conditioning. For purposes of clauses (D), (E), (E-1) and (F) of this subparagraph, property purchased by a taxpayer affiliated with a regulated broker, dealer, registered investment adviser, national securities exchange or board of trade, is allowed a credit under this subdivision if the property is used by its affiliated regulated broker, dealer, registered investment adviser, national securities exchange or board of trade in accordance with this subdivision. For purposes of determining if the property is principally used in qualifying uses, the uses by the taxpayer described in clauses (D) [and], (E), AND (E-1) of this subparagraph may be aggregated. In addition, the uses by the taxpayer, its affiliated regulated broker, dealer, and registered investment adviser under [either or both] ANY of those clauses may be aggregated. Provided, however, a taxpayer shall not be allowed the credit provided by clauses (D), (E), (E-1) and (F) of this subparagraph unless (I) eighty percent or more of the employees performing the administrative and support functions resulting from or related to the qualifying uses of such equipment are located in this state or (II) the average number of employees that perform the adminis- trative and support functions resulting from or related to the qualify- ing uses of such equipment and are located in this state during the taxable year for which the credit is claimed is equal to or greater than ninety-five percent of the average number of employees that perform
these functions and are located in this state during the thirty-six months immediately preceding the year for which the credit is claimed, or (III) the number of employees located in this state during the taxa- ble year for which the credit is claimed is equal to or greater than ninety percent of the number of employees located in this state on December thirty-first, nineteen hundred ninety-eight or, if the taxpayer was not a calendar year taxpayer in nineteen hundred ninety-eight, the last day of its first taxable year ending after December thirty-first, nineteen hundred ninety-eight. If the taxpayer becomes subject to tax in this state after the taxable year beginning in nineteen hundred ninety- eight, then the taxpayer is not required to satisfy the employment test provided in the preceding sentence of this subparagraph for its first taxable year. For purposes of clause (III) of this subparagraph the employment test will be based on the number of employees located in this state on the last day of the first taxable year the taxpayer is subject to tax in this state. If the uses of the property must be aggregated to determine whether the property is principally used in qualifying uses, then either each affiliate using the property must satisfy this employ- ment test or this employment test must be satisfied through the aggre- gation of the employees of the taxpayer, its affiliated regulated broker, dealer, and registered investment adviser using the property. For purposes of this subdivision, the term "goods" shall not include electricity. S 2. Subparagraph (A) of paragraph 2 of subsection (a) of section 606 of the tax law, as amended by chapter 637 of the laws of 2008, is amended to read as follows: (A) A credit shall be allowed under this subsection with respect to tangible personal property and other tangible property, including build- ings and structural components of buildings, which are: depreciable pursuant to section one hundred sixty-seven of the [internal revenue code] INTERNAL REVENUE CODE, have a useful life of four years or more, are acquired by purchase as defined in section one hundred seventy-nine (d) of the [internal revenue code] INTERNAL REVENUE CODE, have a situs in this state and are (i) principally used by the taxpayer in the production of goods by manufacturing, processing, assembling, refining, mining, extracting, farming, agriculture, horticulture, floriculture, viticulture or commercial fishing, (ii) industrial waste treatment facilities or air pollution control facilities, used in the taxpayer's trade or business, (iii) research and development property, (iv) princi- pally used in the ordinary course of the taxpayer's trade or business as a broker or dealer in connection with the purchase or sale (which shall include but not be limited to the issuance, entering into, assumption, offset, assignment, termination, or transfer) of stocks, bonds or other securities as defined in section four hundred seventy-five (c)(2) of the Internal Revenue Code, or of commodities as defined in section 475(e) of the Internal Revenue Code, (v) principally used in the ordinary course of the taxpayer's trade or business of providing investment advisory services for a regulated investment company as defined in section eight hundred fifty-one of the Internal Revenue Code, or lending, loan arrangement or loan origination services to customers in connection with the purchase or sale (which shall include but not be limited to the issuance, entering into, assumption, offset, assignment, termination, or transfer) of securities as defined in section four hundred seventy-five (c)(2) of the Internal Revenue Code, [or] (vi) PRINCIPALLY USED IN THE ORDINARY COURSE OF THE TAXPAYER'S TRADE OR BUSINESS OF PROVIDING INVEST- MENT ADVISORY SERVICES, OR THE SERVICE OF MANAGING INVESTMENT PORTFOLIOS
TO ACHIEVE SPECIFIC INVESTMENT OBJECTIVES FOR ACCOUNTS OVER ONE MILLION DOLLARS OF ACCREDITED INVESTORS (AS THAT TERM IS DEFINED IN RULE FIVE HUNDRED ONE OF REGULATION D OF THE SECURITIES ACT OF 1933), IF THE TAXPAYER SATISFIES THE FOLLOWING CRITERIA: (I) THE TAXPAYER IS A REGU- LATED BROKER OR DEALER OR AN AFFILIATE OF A REGULATED BROKER OR DEALER, (II) THE TAXPAYER IS REGISTERED AS AN INVESTMENT ADVISOR UNDER SECTION TWO HUNDRED THREE OF THE INVESTMENT ADVISER ACT OF 1940, AS AMENDED, AND (III) AT LEAST ONE CLIENT OF THE TAXPAYER IS A REGULATED INVESTMENT COMPANY AS DEFINED IN SECTION EIGHT HUNDRED FIFTY-ONE OF THE INTERNAL REVENUE CODE THAT HAS ASSETS IN EXCESS OF ONE HUNDRED MILLION DOLLARS, OR (VII) principally used as a qualified film production facility including qualified film production facilities having a situs in an empire zone designated as such pursuant to article eighteen-B of the general municipal law, where the taxpayer is providing three or more services to any qualified film production company using the facility, including such services as a studio lighting grid, lighting and grip equipment, multi-line phone service, broadband information technology access, industrial scale electrical capacity, food services, security services, and heating, ventilation and air conditioning. For purposes of clauses (iv) [and], (v) AND (VI) of this subparagraph, property purchased by a taxpayer affiliated with a regulated broker, dealer, or registered investment adviser is allowed a credit under this subsection if the property is used by its affiliated regulated broker, dealer or registered investment adviser in accordance with this subsection. For purposes of determining if the property is principally used in qualify- ing uses, the uses by the taxpayer described in clauses (iv) and (v) of this subparagraph may be aggregated. In addition, the uses by the taxpayer, its affiliated regulated broker, dealer and registered invest- ment adviser under either or both of those clauses may be aggregated. Provided, however, a taxpayer shall not be allowed the credit provided by clauses (iv) [and], (v) AND (VI) of this subparagraph unless (I) eighty percent or more of the employees performing the administrative and support functions resulting from or related to the qualifying uses of such equipment are located in this state, or (II) the average number of employees that perform the administrative and support functions resulting from or related to the qualifying uses of such equipment and are located in this state during the taxable year for which the credit is claimed is equal to or greater than ninety-five percent of the aver- age number of employees that perform these functions and are located in this state during the thirty-six months immediately preceding the year for which the credit is claimed, or (III) the number of employees located in this state during the taxable year for which the credit is claimed is equal to or greater than ninety percent of the number of employees located in this state on December thirty-first, nineteen hundred ninety-eight or, if the taxpayer was not a calendar year taxpay- er in nineteen hundred ninety-eight, the last day of its first taxable year ending after December thirty-first, nineteen hundred ninety-eight. If the taxpayer becomes subject to tax in this state after the taxable year beginning in nineteen hundred ninety-eight, then the taxpayer is not required to satisfy the employment test provided in the preceding sentence of this subparagraph for its first taxable year. For the purposes of clause (III) of this subparagraph the employment test will be based on the number of employees located in this state on the last day of the first taxable year the taxpayer is subject to tax in this state. If the uses of the property must be aggregated to determine whether the property is principally used in qualifying uses, then either
each affiliate using the property must satisfy this employment test or this employment test must be satisfied through the aggregation of the employees of the taxpayer, its affiliated regulated broker, dealer, and registered investment adviser using the property. For purposes of this subsection, the term "goods" shall not include electricity. S 3. Paragraph 2 of subsection (i) of section 1456 of the tax law, as amended by chapter 637 of the laws of 2008, is amended to read as follows: (2) A credit shall be allowed under this subsection with respect to tangible personal property and other tangible property, including build- ings and structural components of buildings, which are: depreciable pursuant to section one hundred sixty-seven of the Internal Revenue Code, have a useful life of four years or more, are acquired by purchase as defined in section one hundred seventy-nine (d) of the Internal Revenue Code, have a situs in this state and are (A) principally used in the ordinary course of the taxpayer's trade or business as a broker or dealer in connection with the purchase or sale (which shall include but not be limited to the issuance, entering into, assumption, offset, assignment, termination, or transfer) of stocks, bonds or other securi- ties as defined in section four hundred seventy-five (c) (2) of the Internal Revenue Code, or of commodities as defined in section four hundred seventy-five (e) of the Internal Revenue Code, [or] (B) princi- pally used in the ordinary course of the taxpayer's trade or business of providing investment advisory services for a regulated investment compa- ny as defined in section eight hundred fifty-one of the Internal Revenue Code, or lending, loan arrangement or loan origination services to customers in connection with the purchase or sale (which shall include but not be limited to the issuance, entering into, assumption, offset, assignment, termination, or transfer) of securities as defined in section four hundred seventy-five (c) (2) of the Internal Revenue Code OR (C) PRINCIPALLY USED IN THE ORDINARY COURSE OF THE TAXPAYER'S TRADE OR BUSINESS OF PROVIDING INVESTMENT ADVISORY SERVICES, OR THE SERVICE OF MANAGING INVESTMENT PORTFOLIOS TO ACHIEVE SPECIFIC INVESTMENT OBJECTIVES FOR ACCOUNTS OVER ONE MILLION DOLLARS OF ACCREDITED INVESTORS (AS THAT TERM IS DEFINED IN RULE FIVE HUNDRED ONE OF REGULATION D OF THE SECURI- TIES ACT OF OF 1933), IF THE TAXPAYER SATISFIES THE FOLLOWING CRITERIA: (I) THE TAXPAYER IS A REGULATED BROKER OR DEALER OR AN AFFILIATE OF A REGULATED BROKER OR DEALER, (II) THE TAXPAYER IS REGISTERED AS AN INVESTMENT ADVISER UNDER SECTION TWO HUNDRED THREE OF THE INVESTMENT ADVISER ACT OF 1940, AS AMENDED, AND (III) AT LEAST ONE CLIENT OF THE TAXPAYER IS A REGULATED INVESTMENT COMPANY AS DEFINED IN SECTION EIGHT HUNDRED FIFTY-ONE OF THE INTERNAL REVENUE CODE THAT HAS ASSETS IN EXCESS OF ONE HUNDRED MILLION DOLLARS. For purposes of subparagraphs (A) [and], (B) AND (C) of this paragraph, property purchased by a taxpayer affil- iated with a regulated broker, dealer, or registered investment adviser is allowed a credit under this subsection if the property is used by its affiliated regulated broker, dealer, or registered investment adviser in accordance with this subsection. For purposes of determining if the property is principally used in qualifying uses, the uses by the taxpay- er described in subparagraphs (A) [and], (B) AND (C) of this paragraph may be aggregated. In addition, the uses by the taxpayer, its affiliated regulated broker, dealer and registered investment adviser under either or both of such subparagraphs may be aggregated. S 4. This act shall take effect immediately.

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