Bill Text: NY S00702 | 2021-2022 | General Assembly | Amended


Bill Title: Relates to small business savings accounts; provides tax incentives for contributions and distributions.

Spectrum: Partisan Bill (Democrat 6-0)

Status: (Introduced - Dead) 2022-02-01 - REPORTED AND COMMITTED TO FINANCE [S00702 Detail]

Download: New_York-2021-S00702-Amended.html



                STATE OF NEW YORK
        ________________________________________________________________________

                                         702--A

                               2021-2022 Regular Sessions

                    IN SENATE

                                       (Prefiled)

                                     January 6, 2021
                                       ___________

        Introduced by Sens. KAPLAN, BROUK, GAUGHRAN, GOUNARDES, JACKSON, SKOUFIS
          -- read twice and ordered printed, and when printed to be committed to
          the Committee on Investigations and Government Operations -- recommit-
          ted  to  the  Committee on Investigations and Government Operations in
          accordance with Senate Rule 6, sec. 8 --  committee  discharged,  bill
          amended,  ordered reprinted as amended and recommitted to said commit-
          tee

        AN ACT to amend the tax law, in relation to establishing small  business
          savings accounts

          The  People of the State of New York, represented in Senate and Assem-
        bly, do enact as follows:

     1    Section 1. Short title. This act shall be known and may  be  cited  as
     2  the "savings accounts for a variable economy (SAVE) for small businesses
     3  act".
     4    §  2.  The  tax  law  is amended by adding a new section 45 to read as
     5  follows:
     6    § 45. Small business savings accounts. (a) General.  (1)  The  commis-
     7  sioner  shall establish   a program to administer small business savings
     8  accounts under this section.
     9    (2) The commissioner shall establish minimum standards for small busi-
    10  ness savings accounts and shall establish accounts, or enter into agree-
    11  ments that meet these standards to administer such accounts.  In  estab-
    12  lishing  such  standards  and  making  such  agreements the commissioner
    13  shall, to the extent practicable, seek to minimize fees,  minimize  risk
    14  of  loss  of  principal,  and  ensure a range of investment risk options
    15  available to account beneficiaries.  Any  eligible  small  business  may
    16  establish a small business savings account with respect to such business
    17  under terms which meet the requirements of this section.
    18    (b)  Definition.  For  the  purposes  of this section, the term "small
    19  business savings account" means a tax preferred savings account which is

         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.
                                                                   LBD00712-05-1

        S. 702--A                           2

     1  designated at the time of establishment of the plan as a small  business
     2  savings  account.  Such  designation shall be made in such manner as the
     3  commissioner may by regulation prescribe.
     4    (c) Contributions. (1) There shall be allowed as a deduction an amount
     5  equal  to  the contributions to a small business savings account for the
     6  taxable year.
     7    (2) The aggregate amount of contributions for any taxable year to  all
     8  small  business savings accounts maintained for the benefit of an eligi-
     9  ble small business shall not exceed an amount equal to  ten  percent  of
    10  the gross profits of the business for the preceding taxable year.
    11    (d)  Distributions.  (1) Any qualified distribution from a small busi-
    12  ness savings account shall not be includible in gross income.
    13    (2) Any amounts distributed out of a small  business  savings  account
    14  that  are  not qualified distributions shall be included in gross income
    15  for the taxable year of the distribution.
    16    (3) For purposes of this section:
    17    (A) The term "qualified distribution" means any amount:
    18    (i) distributed from a small business savings account during a  speci-
    19  fied period of economic hardship; and
    20    (ii) the distribution of which is certified by the taxpayer as part of
    21  a  plan which provides for the reinvestment of such distribution for the
    22  funding of worker hiring or financial stabilization for the purposes  of
    23  job retention or creation.
    24    (B) The term "specified period of economic hardship" means:
    25    (i) any one-year period beginning immediately after the end of any two
    26  consecutive quarters during which the annual rate of real gross domestic
    27  product (as determined by the Bureau of Economic Analysis of the Depart-
    28  ment of Commerce) decreases, or
    29    (ii)  any  period, in no event shorter than one year, specified by the
    30  commissioner for purposes of this section.
    31    (C) The commissioner may specify a period under clause (ii) of subpar-
    32  agraph (B) of this paragraph with respect to a  specified  area  in  the
    33  case  of  an  area determined by the governor to warrant assistance from
    34  the Federal Government under the Robert T. Stafford Disaster Relief  and
    35  Emergency Assistance Act.
    36    (D)  The  commissioner  shall,  for  each specified period of economic
    37  hardship establish a distribution limitation for qualified distributions
    38  from eligible small business accounts with respect to such  period.  The
    39  aggregate  qualified distributions for any such period from all accounts
    40  with respect to an eligible small business shall not exceed such limita-
    41  tion.
    42    (E) Any distribution not used in the manner certified  under  subpara-
    43  graph  (A)  of  this  paragraph shall be treated as a distribution other
    44  than a qualified distribution in the taxable year of such distribution.
    45    (F) Any amount contributed to a small business  savings  account  (and
    46  any  earnings  attributable  thereto),  once  distributed,  shall not be
    47  treated as a qualified distribution unless such distribution is made not
    48  later than eight years after the date of such contribution. For purposes
    49  of this subparagraph, amounts (and the  earnings  attributable  thereto)
    50  shall be treated as distributed on a first-in first-out basis.
    51    (e) Eligible small business. For purposes of this section:
    52    (1)  The  term  "eligible  small  business" means, with respect to any
    53  calendar year, any person if the  annual  average  number  of  full-time
    54  employees employed by such person during the preceding calendar year was
    55  twenty-five  or  fewer  and such person has an annual net income of less
    56  than two hundred fifty thousand dollars. For purposes of this paragraph,

        S. 702--A                           3

     1  a preceding calendar year may be taken into account only if  the  person
     2  was in existence throughout the year.
     3    (2)(A)  The term "full-time employee" means, with respect to any year,
     4  an employee who is employed on average at least forty hours  of  service
     5  per week.
     6    (B)  The  commissioner  shall  prescribe  such regulations, rules, and
     7  guidance as may be necessary to determine the hours  of  service  of  an
     8  employee,  including  rules  for  the application of this subdivision to
     9  employees who are not compensated on an hourly basis.
    10    (f) Effect of pledging account as security.  If,  during  any  taxable
    11  year  of  the  eligible  small  business for whose benefit an account is
    12  established, the account or any portion thereof is pledged  as  security
    13  for  a loan, the portion so pledged shall be treated as distributed in a
    14  distribution other than a qualified distribution.
    15    (g) Annual report. The commissioner shall prepare and deliver an annu-
    16  al report on the efficacy of small  business  savings  accounts  to  the
    17  temporary  president of the senate and the speaker of the assembly. Such
    18  report shall include, but not be limited to, an evaluation as to whether
    19  small business savings accounts contribute to financial stabilization of
    20  the small business during times of economic hardship, job  retention  or
    21  creation.
    22    § 3. Section 209 of the tax law is amended by adding a new subdivision
    23  13 to read as follows:
    24    13.  For  any  taxable  year  beginning on or after January first, two
    25  thousand twenty-one, any  eligible  small  business,  as  such  term  is
    26  defined  pursuant to section forty-five of this chapter, shall be exempt
    27  from all taxes imposed pursuant to this article for any contribution  to
    28  and  qualified distribution from a small business savings account estab-
    29  lished pursuant to section forty-five of this chapter,  subject  to  the
    30  limits  set  forth in such section. If a taxpayer files for and receives
    31  an exemption from the tax imposed under this  section  pursuant  to  the
    32  provisions  of  this subdivision and the funds withdrawn, or any portion
    33  thereof, are not expended for a  qualifying  purpose  as  set  forth  in
    34  section  forty-five  of  this chapter, then the amount of such exemption
    35  claimed by the taxpayer shall be added back to tax in the next  succeed-
    36  ing taxable year or in the year in which the exemption is disallowed.
    37    § 4. Subsection (c) of section 612 of the tax law is amended by adding
    38  a new paragraph 46 to read as follows:
    39    (46) Any qualified contribution to and any qualified distribution from
    40  a  small business savings account established pursuant to section forty-
    41  five of this chapter.  If a taxpayer files for and receives an exemption
    42  from the tax imposed under this section pursuant to  the  provisions  of
    43  this  paragraph and are not a qualifying contribution or distribution as
    44  set forth in section forty-five of this chapter, then the amount of  any
    45  such exemption claimed by the taxpayer shall be added back to tax in the
    46  next succeeding taxable year.
    47    § 5. This act shall take effect immediately and shall apply to taxable
    48  years beginning after such date.
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