Ryan: What Employers Should Know About New York's Response to the Tax Cuts and Jobs Act
DALLAS, July 20, 2018 /PRNewswire/ -- The State of New York is preparing its response to the Tax Cuts and Jobs Act (TCJA) that was signed into law in December 2017. Feeling pressure from many of the changes made by the TCJA, particularly due to the elimination of the state and local tax (SALT) deductions that impacted high state-tax states, Governor Andrew Cuomo's FY 2019 budget includes several tax reform proposals designed to alleviate the increased tax burden, including increasing charitable giving opportunities, decoupling the state from the federal tax code, and creating an unincorporated business tax to provide deductibility options for pass-through entities.
Employers of all sizes, however, should take note of the proposed Employer Compensation Expense Tax (ECET). This new tax, implemented under the Employer Compensation Expense Program (ECEP) (https://www.tax.ny.gov/bus/ecep/ecepdx.htm and https://www.tax.ny.gov/pdf/memos/ecep/m18-1ecep.pdf), is designed to directly offset the elimination of the SALT deduction for individuals, but recognizing that payroll taxes remain deductible under federal tax law, the ECET system would allow employers who opt-in to pay a 5% tax on "all annual payroll expenses in excess of $40,000 per employee." The system would be phased-in over three years beginning on January 1, 2019, and would be coupled with a tax credit for employees on their personal state income taxes, resulting in an offsetting shift in tax liabilities compared to New Yorkers' increased federal obligations.
If the ECEP is enacted into law as currently drafted, employers desiring to participate in the ECEP must affirmatively opt-in to the program no later than December 1, 2018 via a web-based registration system set up to facilitate the program. New York is encouraging employers who elect to participate to communicate to their employees: 1) that they are electing to participate; 2) that covered employees who make more than $40,000 may be eligible for a tax credit on their income tax return for 2019 and should review their IT-2104 withholding certificate to make any necessary adjustments; and 3) the amount of wages that will be subject to ECET. Although the ECET returns are due quarterly and at the same time as your withholding taxes, they must be paid and filed separately. In addition, payments and returns must be filed online.
Further information on the proposed ECET and other proposed tax reforms can be found in the Governor's budget linked above.
About Ryan
Ryan, an award-winning global tax services and software provider, is the largest Firm in the world dedicated exclusively to business taxes. With global headquarters in Dallas, Texas, the Firm provides an integrated suite of federal, state, local, and international tax services on a multi-jurisdictional basis, including tax recovery, consulting, advocacy, compliance, and technology services. Ryan is a six-time recipient of the International Service Excellence Award from the Customer Service Institute of America (CSIA) for its commitment to world-class client service. Empowered by the dynamic myRyan work environment, which is widely recognized as the most innovative in the tax services industry, Ryan's multi-disciplinary team of more than 2,200 professionals and associates serves over 14,000 clients in more than 50 countries, including many of the world's most prominent Global 5000 companies. More information about Ryan can be found at ryan.com. "Ryan" and "Firm" refer to the global organizational network and may refer to one or more of the member firms of Ryan International, each of which is a separate legal entity.
TECHNICAL INFORMATION CONTACTS:
Mindy Mayo
Principal
Ryan
408.850.4565
[email protected]
Aaron Babb
Manager
Ryan
216.685.9448
[email protected]
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