Relates to professional employer organization services

• Republican2

◆ The sponsor's argument

Why Jeremy Cooney says this is needed

The language in the current statute (Tax Law § 210-A.1) states that: "(t)he apportionment factor is a fraction, determined by including only those receipts, net income, net gains, and other items described in this section that are included in the computation of the taxpayer's business income (determined without regard to the modification provided in subparagraph nineteen of paragraph (a) of subdivision nine of section two hundred eight of this article) for the taxable year" reflects the intention of the Legislature that all revenue, net gain, etc. items used to compute business income also be included in the calculation of the apportionment factor. This obvious intention notwithstanding, the Department of Taxation and Finance has promulgated regulations requiring that certain client payments received by Professional Employer Organiza- tions ("PEOs") and included in the computation of business income be excluded from the calculation of the apportionment fraction on the basis that they are "reimbursements" of wages and other amounts paid by the PEOs for the employees performing services for the PEOs' clients. For federal income tax purposes, some reimbursements (like those of PEOs) are included in the calculation of federal taxable income, which is the foundation for determining the business income of corporations taxable under Article 9-A. In other instances (e.g., repayments of trav- el expenses, refunds of deposits) the reimbursements are excluded from the computation of business income. The proposed legislation will promote sound tax policy by clarifying the Legislature's original intent that the apportionment fraction includes representation of all items of revenue, net gain, etc. entering into the computation of a PEO's taxable business income. In those limited instances in which the proposal, if adopted, might lead to an apportionment factor that the Department considers distortive, existing Tax Law § 210-A.11 permits the Department to assert that a discretionary adjustment to the apportionment factor is necessary to cure the distortion.

This is the sponsor's own case for the bill, quoted from their memorandum. It is not Agora's description of what the bill does.