New York State’s long-awaited budget was signed into law by Governor Kathy Hochul on May 28, 2026.
The enacted budget retains most, but not all, of the tax reforms from the Governor’s January budget proposal discussed in our prior post.
Notably, New York State and New York City have decoupled from certain Internal Revenue Code provisions enacted by H.R. 1 (OB3) including immediate expensing for qualified production property and domestic research and experimental (R&E) expenditures.
The final budget preserves taxpayer-favorable provisions from the proposal including the elimination of state income taxes on tipped wages consistent with OB3 and the continued deductibility of charitable contributions to certain tax-exempt entities at risk of losing their IRC § 501(c)(3) tax-exempt status.
However, the budget did not contain several previously proposed tax changes, including the proposed sales tax exemption on the retail sale of electricity by commercial EV charging stations, extension of the filing deadline for the pass through entity tax, and provisions addressing the taxation of vapor products.
A notable addition to the budget imposes an annual property tax surcharge on certain non-primary residences in New York City beginning on July 1, 2026. This “pied-à-terre” tax generally will apply to covered property with a market value of $5 million or more at rates ranging from 0.8% to 1.3%, depending on property value when measured by sales of comparable properties. During a transitional period until July 1, 2028, however, property value will be based on current assessed value methodology and residential condominium and cooperative units will be subject to higher surcharge rates ranging from 4.0% to 6.5% that are applicable where property value exceeds a lowered threshold value of $1 million or more. The state enabling statute expressly delegates authority to promulgate administrative rules for implementing the surcharge to the New York City Department of Finance.