Provides for an additional franchise tax on life insurance policies obtained by companies on its employees and/or retirees.
BILL NUMBER: S6236
TITLE OF BILL : An act to amend the tax law, in relation to providing an additional franchise tax on certain life insurance policies
PURPOSE : Provides for an additional franchise tax on certain life insurance policies.
SUMMARY OF PROVISIONS : Section 1. Imposes a fifty-percent (50%) tax on every company that has a corporate franchise, or does business, or has employees or owns or leases property, or maintains an office in this state and that receives benefits from life insurance policies obtained on its employees and/or retirees. Requires records to be kept in a form as the Commissioner of Taxation and Finance may require. Provides that the Commissioner of Taxation and Finance may consent to the destruction of such records within three years or require that such records be kept longer than three years.
Section 2.Effective Date
JUSTIFICATION : New York State currently faces a budget deficit of approximately $3 billion. The Governor has called for drastic mid-year spending cuts totaling several billion dollars including $5.4 million in programs to serve senior citizens, $43 million to the State Department of Health, $10 million in the Office of Family and Children's Services, and $44 million to the State Department of Education and $24 million to SUNY. Unfortunately, little or nothing has been done to find sources of revenue to mitigate New York State's dire fiscal circumstances.
As New York State faces its worse fiscal crisis since the Great Depression, corporations are reaping huge financial benefits from life insurance policies they take out on their employees and or retirees. Corporate owned life insurance, better known as "dead peasants" or "janitors" insurance, is a life insurance policy that is taken out on low-level employees, often without the knowledge or consent of the employee, and whose families are not named as beneficiaries when the employee or retiree dies. When the employee or retiree dies, these tax free benefits are collected by the employer. Furthermore, companies frequently use these policies to pay for retirement benefits and other perks for their top executives. Companies that supposedly engage in the practice of purchasing these policies include Wal-Mart, Dow Chemical, Proctor & Gamble and Walt Disney.
One tragic example of this practice is that of a 48 year old assistant manager at Wal-Mart who died of a massive heart attack. The man's widow became the lead plaintiff in a class action suit after she learned that Wal-Mart collected $300,000 from a life insurance policy it owned on him.
This bill would impose a 50% tax on all benefits received by companies in New York State who take out life insurance policies on their employees or retirees.
LEGISLATIVE HISTORY : New bill.
FISCAL IMPLICATIONS : None.
EFFECTIVE DATE : On or after January 1, 2010.