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New York State Fiscal Year 2021 Budget
New York State Fiscal Year 2021 Budget
By: Melissa L. Green
On April 3, 2020, Governor Cuomo signed New York’s Fiscal Year 2021 Budget into law. The budget contains provisions that will impact businesses, including mandated paid sick leave. The law also provides the Governor and State Budget Director with the authority to revise the state’s fiscal plan throughout the coming fiscal year, as much remains uncertain in this volatile economic time. Notable tax provisions contained in the budget include: a new category for the Excelsior Tax Credit Program, prolonging the Hire-A-Vet Tax Credit Program, and a departure from recently enacted federal tax benefits. The budget also includes provisions which impact individual tax payers.
Paid Sick Leave
New York employers will soon be required to provide sick leave to employees. The temporary sick leave policies enacted in response to the COVID-19 pandemic were modified and made permanent. Employees begin accruing sick leave (at a rate of one hour per thirty hours worked) on September 30, 2020, but employers are not required to begin paying leave until January 1, 2021. Employer requirements are based on size and net income as follows:
| Employer | Yearly Requirements | |
| Less than 4 employees with net income less than $1 million | 40 hours of unpaid sick leave | |
| Less than 4 employees with net income greater than $1 million; or greater than 4 but less than 100 Employees | 40 hours of paid sick leave | |
| 100 or more employees | 56 hours of paid sick leave |
Employers should refresh their policies and procedures to determine how they will comply with the law. Where an employer is already providing paid sick leave that meets the requirements, such policies may and should continue. Under the new law, employers are not required to pay unused sick leave upon termination of employment. However, employers should remember that New York State common law requires payment of sick leave upon termination, if it is the company’s existing policy to do so. Employers should notify employees of changes to sick leave policies, including how and when employees will accrue leave (annually or an on hourly basis) and pay upon termination. Employee policies regarding notice of sick leave and the minimum hours used should also be reviewed to ensure compliance with the new law.
Business Tax Credits
The Excelsior Tax Credit and Hire-A-Vet Programs were extended in the budget. Under the new category provided for in the Excelsior Tax Credit Program, employers with qualified “Green Projects” may be entitled to: a refundable Jobs Credit of 7.5% for new jobs, 5% for new capital investments, and 8% for qualifying research and development expenses. The Hire-A-Vet Tax Credit, which provides credit to employers equal to 10% of wages paid to a qualified veteran (up to $5,000) and 15% of wages paid to a disabled veteran (up to $15,000), was extended to include both the 2020 and 2021 hiring periods.
Recent federal legislation contained in the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, included provisions for business interest deductions (increase to 50%) and net operating loss (allowing net operating losses to be carried back from 2018, 2019, and 2020 for a period of five years, and eliminating the 80% utilization limit prior to 2021). The New York State Budget decouples from the CARES Act relief, preventing full realization of these benefits for New York State taxpayers.
Individual Income Taxes
In 2016, New York State began a phased rollout of decreasing middle class income taxes, which the Governor’s office projects will result in a “$4.2 billion in annual savings for six million filers by 2025.” Under the 2020 provisions individual income tax rates will be 6.09% for taxpayers in the $43,000-$161,550 income bracket, and 6.41% percent in the $161,550-$323,200 income bracket.
Several other provisions impact individual tax payers. First, the Long-Term Care Insurance credit was decreased to $1,500 (available for those with an adjusted gross income of less than $250,000). New York State also automated the process of electing the higher deduction allowing for the use of the standard deduction automatically where it is greater than allowable itemized deductions. Similarly, where the State has the information to calculate eligibility, entitled taxpayers will automatically receive the Earned Income Tax Credit.
Conclusion
New York State’s Fiscal Year 2021 Budget reflects the uncertainty of economic impact as New Yorkers continue to deal with the effects of COVID-19. The budget provides room to pivot as economic impacts continue to be realized and areas of continuing need are assessed. The mandated sick leave policies will benefit employees, but should be reviewed closely by employers to ensure compliance.
Unfortunately, proposed benefits for small businesses were not included in the final budget. Likewise decision to decouple from the CARES Act tax benefits will negatively impact New York taxpayers. However, some tax benefits continued or expanded including the availability of state tax credits for qualified “Green Projects” and certain jobs, and the multi-year rollout for middle income tax cuts. The new law also continued the phased rollout of decreasing income taxes for middle class New Yorkers.
This article is intended to be for informational and discussion purposes only and is not to be construed as legal advice or as a legal opinion on which certain actions should or should not be taken. For additional legal assistance specific to your tax, business, or employment situation reach out to your usual contact at the firm, or contact Melissa Green, Esq. ([email protected]).
