New York’s Fiscal Budget Bill Adds a New Tax Credit, Amends the Cannabis Tax, and Makes Other Changes

by Jill C. McNally

After a number of Budget Extenders, New York’s 2024-2025 Budget Bill implementing the state’s fiscal plan has been enacted. Included in this law, is a new commercial security tax credit, and changes to the taxation of cannabis and little cigars. (L. 2024, S8309 (c. 59), effective 04/20/2024, or as otherwise stated.)

Personal income tax.

The itemized deduction limit on individuals with adjusted gross income over $10 million is extended through 2029. Taxpayers with New York adjusted gross income of more than $10 million are limited to 25% of the allowed Federal charitable contribution deduction.

Credits and incentives.  

Commercial security tax credit: For taxable years beginning on or after January 1, 2024 and before January 1, 2026, an eligible business entity may claim a security tax credit of $3,000 for each business retail location located in New York State. The total credits are capped at $5 million annually. to receive the credit, an eligible business must satisfy the following:

• be a qualified business required to file an income tax return (Article 9, 9-A, and 22 filers);
• have qualified retail theft prevention measure expenses exceeding $4,000 for qualified businesses with 25 or fewer employees or $6,000 for a qualified business that has more than 25 employees for each New York retail location during the taxable year;
• certify that the business entity participates in an established community anti-theft partnership; and
• cannot owe past due state or local property taxes unless making payments and complying with an approved binding payment agreement.

The total amount of tax credits available is $5 million per calendar year.

Sales and use taxes.

Exemption extensions: The exemption for tangible personal property and services sold to a related person (relating to the Dodd-Frank Protection Act) is extended to June 30, 2025, except certain property and services made pursuant to a binding contract is extended to June 30, 2028. The sales tax exemption for certain sales made through vending machines is extended until May 31, 2025.

Amended sales tax returns: Effective for quarterly periods commencing on and after December 1, 2024, sales and use tax returns may be amended if amending the return does not result in the reduction or elimination of a past-due tax liability. A person required to collect the tax, may amend a return within 180 days of the date the return was due if the past-due liability was self-assessed and reported by that person.

An amended return that would result in the reduction or elimination of tax due (cannot be past-due tax) is deemed be a claim for credit or refund and must be filed within the time required for filing a claim for credit or refund. The Department of Taxation and Finance is required notify affected persons of these changes no later than September 1, 2024.

Any person who willfully files or amends a return that contains false information to reduce or eliminate a liability is subject to a penalty up to $1,000 per return, in addition to any other penalty that may be imposed.

Cannabis tax.

For sales of adult-use cannabis products on or after June 1, 2024, the taxation of cannabis is 9% of the amount charged on the sale or transfer of adult-use cannabis products from the distributor to the retailer. However, distributors that are licensed as a micro business or a registered organization and who sells adult use cannabis at retail, the tax is 75% of the amount changed for the sale or transfer to the retail customer. The tax on cannabis is no longer based on the THC potency.

Medical cannabis: Effective June 1, 2024, the law reduces the excise tax on medical cannabis from 7% to 3.15%.

Tobacco products.

Effective August 1, 2024, the tax on little cigars is no longer taxed at the same rate as cigarettes. The new tax rate is 26^3/4¢ on each cigar.

Metropolitan commuter transportation mobility tax (MCTD).

Technical corrections are made to the MCTD by adding the counties (Dutchess, Nassau, Orange, Putnam, Rockland, Suffolk, and Westchester) where self-employed individuals are subject to the 0.34% MCTD tax rate that were inadvertently repealed.

Pari-mutuel taxes.

The law extends the pari-mutuel taxes and authorization for simulcasting of certain racing for another year to 2025. The law also adds a provision relating to the use of funds in the Catskill off-track betting corporation’s capital acquisition fund and the Capital region off-track betting corporation’s capital acquisition funds, amends the jockey injury fund, and adds other license requirements.

General.

The law extends the expiration date for the current tax shelter disclosure and penalty provisions in the Tax Law to July 1, 2029. These provisions had been scheduled to expire on July 1, 2024. Effective January 1, 2024, a taxpayer is permitted to file a petition for a refund claim if it relates to a refund or credit first claimed on an amended return for the taxable year. Also, the restriction on further deficiency notices is amended to restrict such notices being issued for the same tax return. Further, the mandatory electronic filing and payment provisions are extended to December 31, 2029.