Anyone who has seen the 1982 supernatural horror film Poltergeist certainly remembers four-year-old Carol Anne sitting up in bed and staring at the static filled TV screen acknowledging the arrival of her supernatural visitors by uttering the most well-known phrase from the movie, “They’re here!” While no one would ever accuse our lawmakers of being supernatural beings, Governor Cuomo’s 2019 Budget Proposals are certainly responsible for “physical disturbances such as loud noises and objects thrown around the room.”
While there are no proposals to raise tax rates (except the carried-interest proposal, below) the Tax Department has certainly been busy requesting supernatural acts from the Governor. One such request would extend the statute of limitations for amended returns so that the Department could assess additional tax. Currently, informed taxpayers and practitioners will often wait right before the deadline to file an amended return. The reason being the Department won’t have time to make any additional assessments of tax above and beyond the refund requested. Rather than recognize that the State already had three years to assess any additional tax they believe due, the proposal seeks to tack on additional time for the State to perform a full blown audit.
Furthering the problem of never-ending tax controversies, the proposal also requests the ability of the Department to appeal decisions of the Tax Appeals Tribunal. Under the current system, taxpayers can file a request for a hearing with an Administrative Law Judge. Either side has the right to appeal the ALJ decision to the Tax Appeals Tribunal. But only the taxpayer has the right to appeal the Tribunal’s decision.
Then there is the proposal to tax carried interests at a higher tax rate. The Governor is seeking to compensate for what he views as unfair federal tax provisions by seeking to penalize those reaping the benefits. This proposed provision (emphasis on the word proposed, as I have received numerous phone calls from those panicking about the change) is contingent upon neighboring states passing similar legislation. I’ve been wrong before, but for many reasons I don’t see this happening any time soon.
One taxpayer-friendly proposal seems to have snuck itself in. If enacted, prepared food can now be purchased for resale and sales tax need only be paid once. The law as it now stands penalizes those who resell taxable prepared food by doubling up on the tax. For example, a small boutique hotel may not have kitchen facilities, but would like to provide at least limited room service to its guests. It buys prepared sandwiches from a third party, which it will resell to guests. Under the current law, the hotel must pay sales tax on the purchase of the sandwich and charge the guest the tax again upon its purchase.
Hopefully the State Assembly and Senate won’t be so amenable to the taxpayer-adverse proposals. Speak up readers and make sure your lawmakers are aware. Hopefully I’ll be buying you a once-taxed sandwich sometime soon. Should you have questions about these proposals, contact me at firstname.lastname@example.org or your Berdon advisor.
Wayne Berkowitz, a tax partner and head of the State and Local Tax Group at Berdon LLP, New York Accountants, advises on the unique requirements of governments and municipalities across the nation.