New York creates opt-in payroll tax, updates Code conformity

The New York Legislature has passed a budget bill that contains a variety of corporate franchise, personal income, property, sales and use, and other tax changes, including certain Code conformity amendments intended to address the effects of the federal Tax Cuts and Jobs Act.
The bill creates an optional employer compensation expense program (ECEP), under which employers would be subject to a tax on annual payroll expenses exceeding $40,000 per employee and a corresponding credit would be allowed. Employers that opt-in would be subject to a 5% tax on all annual payroll expenses in excess of $40,000 per employee, phased in over three years beginning on January 1, 2019. The progressive personal income tax system would remain in place, and a new tax credit corresponding in value to the ECEP would cut the personal income tax on wages and ensure that State filers subject to the ECEP would not experience a decline in take-home pay.
The bill also decouples the state tax code from the federal tax code, where necessary, to avoid more than $1.5 billion in State tax increases brought solely by increases in federal taxes. (S.B.7509, passed March 30, 2018.)

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