On January 8, 2025, a group of New York State Senators introduced S953, which proposes to increase the gross amount of GILTI under IRC § 951A included in the New York State business income base from 5% to 50%. This increase to corporations’ tax base is done by reducing the amount of GILTI excluded as “exempt CFC income” from 95% to 50%. A change to a 50% GILTI inclusion will put New York State on equal footing with New York City with respect to the amount of GILTI subject to tax. Presumably, New York State would continue to provide a sales factor denominator inclusion equal to the amount of GILTI included in business income – the inclusion going from 5% of GILTI to 50% of GILTI. The legislation does not change New York State’s nonconformity to the IRC § 250 deductions for GILTI and FDII. Those deductions are not included in calculating a corporation’s New York State business income bases.
Further, S953 proposes a graduated tax rate imposed on corporations starting in tax years beginning on or after January 1, 2026. This proposal raises the top rate from 7.25% to 14% for taxpayers with a business income base of more than $20 million. The rate is 8% for taxpayers with business income bases higher than $2.5 million and 12% for taxpayers with business income bases higher than $10 million.
As with most New York State tax legislation, the likelihood of either of S953’s proposals being enacted is generally dependent on whether they make it into the New York State budget legislation. The Eversheds Sutherland SALT team is monitoring S953, as well as all other New York State tax legislative proposals, and will continue to provide updates.