A variety of changes to New York State’s Personal Income Tax regulations were part of the 2009-2010 New York State Budget (Chapters 57 and Chapter 59 of the Laws of 2009) enacted April 7, 2009. These changes included certain definitions, rates and other rules, as well as changes to special tax programs.

Part I of this series covers changes to tax credits, rebates and deductions, as summarized below.

Tax Credits & Rebates

Low-income Housing Credit

The New York State Low-income Housing Credit, enacted in 2000 and administered by the New York State Division of Housing and Community Renewal, was designed to encourage the construction and rehabilitation of low-income housing in the state. The relevant Public Housing Law was amended increasing the total amount of credits available statewide for low-income housing projects to $14 million, up from $20 million.

This tax credit is similar to the Federal Low-income Housing Tax Credit and to conform with recent changes to the federal law, the New York State version has dropped the requirement for placement of a security bond in lieu of a recapture provision. Also, if a partial or full interest in a qualified project is being sold, the taxpayer will no longer have to post a bond if there is a “reasonable expectation” that the project will continue to qualify as low-income housing for the remaining time of its compliance period.

The time limit for issuance of “Deficiency Assessments” for tax credit recaptures has been extended to three years from the date of notification to the Commissioner of the New York State Division of Housing and Community Renewal that the project is no longer qualified for the credit. These deficiencies result from a decrease in the “qualified basis” of the credit resulting in a tax increase in the current or future tax years at the time the project is sold. Additional information is contained in the “Recapturing of Low-income Housing Credit” form and instructions (DTF-626).

Reference: Public Housing Law section 22(4) and Tax Law section 18

Fuel-cell Electric Generating Equipment Credit and Transportation Improvement Contribution Credit

Taxpayers in New York State purchasing and installing Fuel-cell Electric Generating Equipment can receive a tax credit and can carry forward unused credit for five years.

The Transportation Improvement Contribution Credit is provided for a “certified contribution” of at least $10 million to a qualified Transportation Improvement Project in New York State.

Claims for these tax credits cannot be made after the tax year beginning on or after January 1, 2009.

Reference: Tax Law sections 606(g-2), 606(z), and 606(i)

Empire Zone Program

Various changes were made to Empire Zone (EZ) credit claims, including Qualified Empire Zone Enterprise (QEZE) credits under Tax Law Articles 9, 9-A, 22, 32, and 33, for tax years beginning on or after January 1, 2008, as amended in the Tax Law and the General Municipal Law. Additional information on these changes is available in “Legislative Changes to the Empire Zones Program” (TSB-M-09(5)C, (4)I).

Reference: Tax Law sections 14(a)(2), 14(h), 14(m), 15(b)(3), 17, 210.12-B(d-1), 210.12-C(c-1),

210.19(e-1), 210.20(b-1), 606(j)(4-a), 606(j-1)(3-a), 606(k)(5-a), 606(l)(1-a), 685(p-2), 688(h),

689(c)(4), 1085(k-2), 1088(h), 1089(c)(4), 1456(d)(2-a), 1456(e)(5-a), 1511(g)(5-a), and

1511(h)(2-a)

Empire State Film Production Credit

Amendments to the Empire State Film Production Credit take effect for the tax year beginning on or after January 1, 2009, with the total statewide amount of the credit increased by $350 million. Note: Credits of less than $1 million will still be fully claimed in the tax year in which the production is completed.

The time period for claiming the credits of $1 million or more was changed, as follows:

a) $1 million up to $5 million: Credit is claimed in equal parts over a two year period starting the year in which the production is completed

b) Over $5 million: Credit is claimed in equal parts over a three year period starting the year in which the production is completed

Additional information on the Empire State Film Production Credit is available from the New York State Governor’s Office for Motion Picture and Television Development.

Reference: Tax Law section 24(a)(2)

New York City School Tax Credit

The New York City School Tax Credit amount has been decreased for tax years beginning in 2009, with specific changes summarized below:

a) Married Filing Jointly (and Surviving Spouses) with incomes of up to $250,000, the credit is $125.

b) Single, Heads of Households or Married Filing Separately with incomes up to $250,000, the credit is $62.50.

c) Taxpayers with incomes over $250,000 are not eligible for the New York City School Tax Credit, but the income limit will be adjusted for inflation in subsequent tax years, starting on or after January 1, 2010.

Reference: Tax Law section 1310(e) and section 11-1706(c) of the Administrative Code of the City of New York

Middle Class STAR Rebate Program

Specific sections of the Middle Class STAR rebate program has been repealed, but the Basic and Enhanced STAR Rebate Programs are not affected. Property owners filing claims under these programs will still obtain their exemption directly on their School Tax bills.

Reference: Tax Law sections 171-q and 178

Deductions

Limit on Itemized Deductions

For taxpayer’s with Adjusted Gross Incomes over $1 million, the New York State limit for Itemized Deductions is now equal to 50% of the taxpayer’s Charitable Contributions claimed on their Federal tax return. Note: No other federally-allowed deductions are permitted under New York State tax law.

This change is effective for tax years beginning on or after January 1, 2009.

Reference: Tax Law sections 615(f)(3)

Deduction for Student Loan Interest

The “New York Higher Education Loan Program” Part V, Section 694-a(3), within Article 14 of the Education Law, was amended to allow interest paid on certain educational loans (on or after July 1, 2009) to be deducted in calculating a taxpayer’s Adjusted Gross Income for New York State tax purposes.

Reference: Education Law Article 14, Part V

Additional information is available from the New York State Department of Taxation and Finance, as well as from CPAs, professional tax preparers and other tax practitioners.

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