The $212 billion state budget includes a mechanism meant to aid small businesses in New York who could face a form of double taxation due to the $10,000 cap on state and local tax deductions.
The measure, backed by state Senator John Brooks, creates a pass through entity tax that would restore federal deductibility to income taxes paid in New York for corporations and partnerships.
For small businesses that are eligible, an "election to be taxed" under the provisions fo new law must be made by October 15.
The measure comes as many small businesses — especially in the leisure and hospitality industries — have struggled during the last 12 months of the COVID-19 pandemic.
“The pandemic has pushed small businesses to the brink of closure,” Brooks said. “Immediate relief is needed in order to thrive amidst these tremendously difficult economic conditions. I am proud that we were able to structure this relief in the state budget."
Governor Andrew Cuomo, meanwhile, has called for a full repeal of the cap on deductions, which was put in place under a tax overhaul by Congress in 2017.
The $10,000 cap is seen as especially harmful to states with high taxes, including New York. So far, there has been little movement in Congress to repeal the cap.