TAF-41-11-00003-P New York State and City of Yonkers Withholding Tables and Other Methods

10/12/11 N.Y. St. Reg. TAF-41-11-00003-P

NEW YORK STATE REGISTER

VOLUME XXXIII, ISSUE 41

October 12, 2011

RULE MAKING ACTIVITIES

DEPARTMENT OF TAXATION AND FINANCE

PROPOSED RULE MAKING

NO HEARING(S) SCHEDULED

 

I.D No. TAF-41-11-00003-P

New York State and City of Yonkers Withholding Tables and Other Methods

PURSUANT TO THE PROVISIONS OF THE State Administrative Procedure Act, NOTICE is hereby given of the following proposed rule:

Proposed Action:

Repeal of Appendixes 10, 10-A; addition of new Appendixes 10, 10-A; and amendment of sections 171.4 and 251.1(b) of Title 20 NYCRR. This rule is proposed pursuant to [SAPA § 207(3)], 5-Year Review of Existing Rules.

Statutory authority:

Tax Law, sections 171, subdivision First, 671(a)(1), 697(a), 1321, 1329(a) and 1332(a); Code of the City of Yonkers, sections 15-105, 15-108(a) and 15-111; City of Yonkers Local Laws No. 3-2011 and No. 9-2011; L. 2009, ch. 57, part Z-1, section 5; and L. 2011, ch. 255

Subject:

New York State and City of Yonkers withholding tables and other methods.

Purpose:

To provide current New York State and City of Yonkers withholding tables and other methods.

Substance of proposed rule (Full text is posted at the following State website:www.tax.ny.gov):

Sections 671(a)(1) and section 1329(a) of the Tax Law, and section 15-105 of the Code of the City of Yonkers require that employers withhold from employee wages amounts that are substantially equivalent to the amount of New York State personal income tax and City of Yonkers income tax surcharge reasonably estimated to be due for the taxable year. The provisions authorize the Commissioner of Taxation and Finance to provide for withholding of these taxes through regulations promulgated by the Commissioner.

This rule repeals Appendixes 10 and 10-A of Title 20 NYCRR and adds new Appendixes 10 and 10-A to provide new New York State and City of Yonkers withholding tables and other methods. The new tables and other methods amendments implement changes necessitated by Chapter 57 of the Laws of 2009 for tax years beginning after 2011, reflecting the return to the highest personal income tax rate of 6.85 per cent in effect for tax years beginning before 2009. Specifically, the amendments reflect the expiration of the revised tax tables and the tax table benefits recapture provided for in Chapter 57 of the Laws of 2009. The new City of Yonkers withholding tax tables also reflect amendments to the Code of the City of Yonkers enacted by Local Law No. 3-2011 pursuant to Tax Law section 1321 that increased the City of Yonkers income tax surcharge rate from 10 to 15 percent of net state income tax, effective January 1, 2011. Specifically, the amendments to City of Yonkers withholding tax tables reflect the implementation of the 15 percent surcharge rate over a twelve-month period, rather than the shorter implementation period required for tax year 2011. Chapter 255 of the Laws of 2011 extended the authority contained in Section 1321 to taxable years beginning before 2014. City of Yonkers Local Law No. 9-2011 extended the City of Yonkers resident income tax surcharge and its non-resident earnings tax to taxable years ending on or before December 31, 2013.

The rule also amends the New York State and City of Yonkers provisions regarding withholding on supplemental wages to reflect the new rates of withholding.

This rule applies to wages and other compensation subject to withholding paid on or after January 1, 2012.

Text of proposed rule and any required statements and analyses may be obtained from:

John W. Bartlett, Tax Regulations Specialist 4, Department of Taxation and Finance, Taxpayer Guidance Division, Building 9, W. A. Harriman Campus, Albany, NY 12227, [phone], email: [e-mail]

Data, views or arguments may be submitted to:

Same as above.

Public comment will be received until:

45 days after publication of this notice.

Reasoned Justification for Modification of the Rule

The Department of Taxation and Finance submitted for publication in the Rule Review section of the January 6, 2010, issue of the State Register summaries of rules that were adopted by the Commissioner of Taxation and Finance in 2000 and 2005, as notice of the department's intent to review such rules pursuant to section 207 of the State Administrative Procedure Act. On December 31, 2009, this information was also posted on the department's website (http://www.tax.state.ny.us./rulemaker/regulations/fiveyearrev.htm). The public was invited to submit comments concerning the continuation or modification of these rules by February 22, 2010.

No public comments were received by the department concerning the 2005 amendments to 20 NYCRR Sections 171.4(b)(1) (Supplemental wages), 251.1(b) (Supplemental wages, City of Yonkers), and 291.1(b) (Supplemental wages, City of New York); and Appendixes 10, 10-A, and 10-C. The 2005 rule provided revised New York State, City of Yonkers, and City of New York withholding tables and other methods applicable to wages and other compensation paid on or after January 1, 2006. The 2005 rule also reflected a decrease in the New York State and City of New York supplemental withholding rates applied to supplemental payments and an increase in that rate for the City of Yonkers. The amendments were adopted by the commissioner on November 22, 2005 and published in the State Register on December 7, 2005, (TAF-40-05-00024-A).

Subsequent changes in the underlying provisions of the Tax Law, Code of the City of Yonkers, and Administrative Code of the City of New York have resulted in several changes to the withholding tables and other methods.

Section 5 of Part Z-1 of Chapter 57 of the Laws of 2009 required the Commissioner to adopt rules to implement changes in the withholding tax tables and other methods relating to the New York State income tax rate changes made by Part Z-1. The 2009 amendments to Appendixes 10 and 10-A relating to the exact calculation method (Method II) for New York State income tax withholding purposes and for City of Yonkers income tax surcharge purposes revised the withholding tables and methods as required by Chapter 57. Amendments to Sections 171.4(b)(1) and 251.1(b) regarding withholding on supplemental wages were also included in the adopted rules to reflect the new rate of withholding. Because Chapter 57 required that the withholding rates for the remainder of tax year 2009 reflect the full amount of tax liability for 2009 as accurately as possible, it was necessary to propose and adopt the amendments for tax year 2009 as an emergency rule on April 15, 2009, and adopt them as a permanent rule on June 23, 2009. On November 18, 2009, the commissioner adopted amendments to Appendixes 10 and 10-A providing the withholding tables and other methods applicable to wages and other compensation paid on or after January 1, 2010.

Appendix 10-A was subsequently repealed and new Appendix 10-A was added to provide new City of Yonkers withholding tables and other methods adopted by an emergency rule on March 28, 2011, and permanently adopted on June 1, 2011. The new tables and other methods reflected amendments to the Code of the City of Yonkers enacted by Local Law No. 3-2011 that increased the rate of the city income tax surcharge effective January 1, 2011. Section 251.1 was also amended to reflect the new City of Yonkers supplemental withholding tax rate. The Yonkers withholding tax tables and other methods apply to wages and other compensation subject to withholding paid on or after May 1, 2011 and reflect the full amount of liability for 2011 applied to an 8-month period.

The current rule repeals Appendixes 10 and 10-A and adds new Appendixes 10 and 10-A to provide New York State and City of Yonkers withholding tables and other methods, applicable to wages and other compensation paid on or after January 1, 2012. This rule sets forth amendments reflecting the revision of New York State personal income tax rates contained in Chapter 57 of the Laws of 2009, and the new City of Yonkers income tax surcharge rate pursuant to section 15-111 of the Code of the City of Yonkers as amended by City of Yonkers Local Law 3-2011. Part Z-1 of Chapter 57 directed the return to the highest New York State personal income tax rate of 6.85 per cent in effect for tax years beginning before 2009 for tax years beginning on or after January 1, 2012. The authority contained in Tax Law section 1321 allowing the City of Yonkers to impose its income tax surcharge set to expire December 31, 2011, was extended by Chapter 255 of the Laws of 2011. Subsequently, City of Yonkers Local Law No. 9-2011 amended the Code of the City of Yonkers to extend the City of Yonkers resident income tax surcharge and non-resident earnings tax to taxable years ending on or before December 31, 2013.

Section 4 of Part EE of Chapter 57 of the Laws of 2010 required the Commissioner to adopt rules to implement changes in the New York City withholding tax tables and other methods relating to the income tax rate changes made by Part EE, effective January 1, 2010. The amendments to Appendix 10-C related to the exact calculation method (Method II) for New York City personal income tax on residents for withholding purposes, revising the withholding tables and methods as required by Chapter 57 of the Laws of 2010. Amendments to Section 291.1(b) regarding withholding on New York City supplemental wages were also included in the adopted rules to reflect the new rate of withholding. Because Chapter 57 required that the withholding rates for the remainder of tax year 2010 reflect the full amount of tax liability for 2010 as accurately as possible, as it was necessary to propose and adopt the amendments for tax year 2010 as an emergency rule on August 17, 2010, and adopt them as a permanent rule on October 22, 2010. On November 18, 2010, the commissioner adopted amendments to Appendix 10-C providing the New York City withholding tables and methods applicable to wages and other compensation paid on or after January 1, 2011.

In light of the various statutory changes since 2005, the 2005 rule that revised New York State, City of Yonkers, and City of New York withholding tables and other methods applicable to wages and other compensation paid on or after January 1, 2006 has been revised several times. As a result of the current rule amending the State and City of Yonkers rules, all of these rules concerning the withholding tables and other methods will be current as applied to taxable years beginning on or after January 1, 2012. The 2005 amendments relating to the State and City of Yonkers withholding tables will be completely replaced by this rule so that these provisions of the 2005 rule will no longer be subject to review. The remaining provisions of the 2005 rule relating to New York City will be subject to review, along with the amendments made in 2010, in 2015.

Regulatory Impact Statement

1. Statutory authority: Tax Law, section 171, subdivision First, generally authorizes the Commissioner of Taxation and Finance to promulgate regulations; section 671(a)(1) provides that the method of determining the amounts of New York State personal income tax to be withheld will be prescribed by regulations promulgated by the Commissioner; section 697(a) provides the authority for the Commissioner to make such rules and regulations as are necessary to enforce the personal income tax; section 1329(a) of the Tax Law and section 15-105 of the Code of the City of Yonkers provide that the City of Yonkers income tax surcharge shall be withheld in the same manner and form as that required for State income tax; section 1332(a) of the Tax Law and section 15-108(a) of the Code of the City of Yonkers provide that the income tax surcharge shall be administered and collected by the Commissioner in the same manner as the tax imposed by Article 22 of the Tax Law. Section 1321 authorizes the City of Yonkers to adopt and amend local laws imposing a city income tax surcharge to be administered, collected and distributed by the Commissioner. Section 5 of Part Z-1 of Chapter 57 of the Laws of 2009 requires the Commissioner to adopt rules to implement changes in the withholding tax tables and methods relating to the income tax rate changes made by Part Z-1. City of Yonkers Local Law No. 3-1011 amended section 15-111 of the Code of the City of Yonkers to increase the city income tax surcharge from 10 to 15 percent of net state income tax. Chapter 255 of the Laws of 2011 extended the authority contained in Section 1321 to taxable years beginning before 2014. City of Yonkers Local Law No. 9-2011 extended the City of Yonkers resident income tax surcharge and its non-resident earnings tax to taxable years ending on or before December 31, 2013.

2. Legislative objective: New Appendixes 10 and 10-A of Title 20 NYCRR contain the revised New York State and City of Yonkers withholding tables and other methods applicable to wages and other compensation paid on or after January 1, 2012. The amendments implement changes necessitated by Chapter 57 of the Laws of 2009 for tax years beginning after 2011, reflecting the return to the highest personal income tax rate of 6.85 per cent in effect for tax years beginning before 2009. Specifically, the amendments reflect the expiration of the revised tax tables and the tax table benefits recapture provided for in Chapter 57 of the Laws of 2009. Because the income tax rate changes effected by Chapter 57 related to taxpayers with incomes over certain amounts, the wage bracket method (Method I) tables were not affected, and remain unchanged by the amendments. New Appendix 10-A also reflects the increase in the City of Yonkers income tax surcharge rate from 10 to 15 percent of net state income tax, pursuant to amendments to section 15-111 of the Code of the City of Yonkers made by Local Law No. 3-2011 of the City of Yonkers, which was enacted under the authority of Section 1321 of the Tax Law. Specifically, the amendments to City of Yonkers withholding tax tables reflect the implementation of the 15 percent surcharge rate over a twelve-month period, rather than the shorter implementation period required for tax year 2011. Amendments to provisions regarding withholding on supplemental wages are also made to reflect the new rates of withholding. The amendments also reflect minor technical corrections and cosmetic changes to Appendixes 10 and 10-A.

3. Needs and benefits: This rule sets forth amendments to the New York State and City of Yonkers withholding tables and other methods, applicable to wages and other compensation paid on or after January 1, 2012, reflecting the revision of New York State personal income tax rates contained in Chapter 57 of the Laws of 2009, and implementing the new City of Yonkers income tax surcharge rate pursuant to section 15-111 of the Code of the City of Yonkers as amended by City of Yonkers Local Law 3-2011 over a twelve-month period, rather than over the shorter period required for tax year 2011. This rule benefits taxpayers by providing New York State and City of Yonkers withholding rates that more accurately reflect the current income tax rates. If this rule is not promulgated, the use of the existing withholding tables would cause some over-withholding for some taxpayers.

4. Costs: (a) Costs to regulated parties for the implementation and continuing compliance with this rule: Since (i) the Tax Law and the Code of the City of Yonkers already mandate withholding in amounts that are substantially equivalent to the amounts of New York State and City of Yonkers personal income tax on residents reasonably estimated to be due for the taxable year, and (ii) this rule merely conforms Appendixes 10 and 10-A of Title 20 NYCRR to the rates of the New York State income tax and the City of Yonkers income tax surcharge on residents, any compliance costs to employers associated with implementing the revised withholding tables and other methods are due to such statutes, and not to this rule.

(b) Costs to this agency, the State and local governments for the implementation and continuation of this rule: Since the need to make amendments to the New York State Personal Income Tax Regulations under Article 22 of the Tax Law, the City of Yonkers Income Tax Surcharge on Residents Regulations, and to Appendixes 10 and 10-A, arises due to the statutory change in the rates of the New York State personal income tax for wages and other compensation paid on or after January 1, 2012, and due to the statutory change in the City of Yonkers income tax surcharge rate applied over a twelve-month period, there are no costs to this agency or the State and local governments that are due to the promulgation of this rule.

(c) Information and methodology: This analysis is based on a review of the statutory requirements and on discussions among personnel from the Department's Taxpayer Guidance Division, Office of Counsel, Office of Tax Policy Analysis Bureau of Tax and Fiscal Studies, Office of Budget and Management Analysis, and Management Analysis and Project Services Bureau.

5. Local government mandates: Local governments, as employers, would be required to implement the new withholding tables and other methods in the same manner and at the same time as any other employer.

6. Paperwork: This rule will not require any new forms or information. The reporting requirements for employers are not changed by this rule. Employers will be notified of the changed tables and other methods and directed to the Department's Web site for the new tables and other methods.

7. Duplication: This rule does not duplicate any other requirements.

8. Alternatives: Since sections 671(a) and 1329(a) of the Tax Law, section 15-105 of the Code of the City of Yonkers and Chapter 57 of the Laws of 2009 require that withholding tables and other methods be promulgated, there are no viable alternatives to providing such tables and other methods.

9. Federal standards: This rule does not exceed any minimum standards of the federal government for the same or similar subject area.

10. Compliance schedule: The required information will be made available to affected employers in sufficient time to implement the revised New York and City of Yonkers withholding tables and other methods for wages and other compensation paid on or after January 1, 2012.

Regulatory Flexibility Analysis

1. Effect of rule: Small businesses, within the meaning of the State Administrative Procedure Act, that are currently subject to the New York State and City of Yonkers withholding requirements will continue to be subject to these requirements. This rule should, therefore, have little or no effect on small businesses other than the requirement of conforming to the new withholding tables and other methods. All small businesses that are employers or are otherwise subject to the withholding requirements must comply with the provisions of this rule.

2. Compliance requirements: This rule requires small businesses and local governments that are already subject to the New York State and City of Yonkers withholding requirements to continue to deduct and withhold amounts from employees using the revised New York State and City of Yonkers withholding tables and other methods. The promulgation of this rule will not require small businesses or local governments to submit any new information, forms, or paperwork.

3. Professional services: Many small businesses currently utilize bookkeepers, accountants and professional payroll services in order to comply with existing withholding requirements. This rule will not encourage or discourage the use of such services.

4. Compliance costs: Small businesses and local governments are already subject to the New York State and City of Yonkers withholding requirements. Therefore, small businesses and local governments are accustomed to withholding revisions, including minor programming changes for federal, state, City of New York, and City of Yonkers purposes. As such, these changes should place no additional burdens on small businesses and local governments. See, also section 4(a) of the Regulatory Impact Statement for this rule.

5. Economic and technological feasibility: This rule does not impose any economic or technological compliance burdens on small businesses or local governments.

6. Minimizing adverse impact: Section 671(a)(1) of the Tax Law requires that New York State withholding tables and other methods be promulgated. Section 1329(a) of the Tax Law requires that the City of Yonkers withholding of tax on wages shall be administered and collected by the Commissioner of Taxation and Finance in the same manner as the tax imposed by Article 22 of the Tax Law. There are no provisions in the Tax Law that exclude small businesses and local governments from the withholding requirements. The regulation provides some relief to small businesses and local governments with respect to the methods allowed to comply with the withholding requirements by continuing to provide employers with more than one method of computing the amount to withhold from their employees. Look-up tables are provided for employers who prepare their payrolls manually, and an exact calculation method is provided for employers with computer-based systems.

7. Small business and local government participation: The following organizations are being given an opportunity to participate in the rule's development: the Association of Towns of New York State; the Office of Coastal, Local Government, and Community Sustainability of New York State Department of State; the Division of Small Business of Empire State Development; the National Federation of Independent Businesses; the New York State Association of Counties; the New York Conference of Mayors and Municipal Officials; the Small Business Council of the New York State Business Council; the Retail Council of New York State; and the New York Association of Convenience Stores; the Tax section of the New York State Bar Association; the Association of the Bar of the City of New York; the National Tax Committee for the National Conference of CPA Practitioners; the New York State Society of CPAs; and the Business Council of New York State. In addition, the City of Yonkers was consulted.

Rural Area Flexibility Analysis

1. Types and estimated numbers of rural areas: Every employer, including any public or private employer located in a rural area as defined in section 102(10) of the State Administrative Procedure Act, that is currently subject to the New York State and City of Yonkers withholding requirements will continue to be subject to such requirements and will be required to comply with the provisions of this rule. There are 44 counties throughout this State that are rural areas (having a population of less than 200,000) and 9 more counties having towns that are rural areas (with population densities of 150 or fewer people per square mile).

2. Reporting, recordkeeping and other compliance requirements; and professional services: This rule requires employers that are already subject to the New York and City of Yonkers withholding requirements to continue to deduct and withhold amounts from employees using the revised withholding tables and other methods. The promulgation of this rule will not require employers to submit any new information forms or other paperwork.

Further, many employers currently utilize bookkeepers, accountants, and professional payroll services in order to comply with existing withholding requirements. This rule will not encourage or discourage the use of any such services.

3. Costs: Employers are already subject to the New York State and City of Yonkers withholding requirements. Therefore, employers are accustomed to withholding revisions, including minor programming changes for federal, state, City of New York, and City of Yonkers purposes. As such, these New York State and City of Yonkers changes should place no additional burdens on employers located in rural areas. See, also, section 4(a) of the Regulatory Impact Statement for this rule.

4. Minimizing adverse impact: Section 671(a)(1) of the Tax Law requires that the New York State withholding tables and other methods be promulgated. Section 1329(a) of the Tax Law requires that the City of Yonkers withholding of tax on wages shall be administered and collected by the Commissioner of Taxation and Finance in the same manner as the tax imposed by Article 22 of the Tax Law. There are no provisions in the Tax Law that exclude employers located in rural areas from the withholding requirements.

5. Rural area participation: The following organizations are being given an opportunity to participate in the rule's development: the Association of Towns of New York State; the Division of Local Government Services of New York State Department of State; the Division of Small Business of Empire State Development; the National Federation of Independent Businesses; the New York State Association of Counties; the New York Conference of Mayors and Municipal Officials; the Small Business Council of the New York State Business Council; the Retail Council of New York State; the New York Association of Convenience Stores; the Tax section of the New York State Bar Association; the Association of the Bar of the City of New York; the National Tax Committee for the National Conference of CPA Practitioners; the New York State Society of CPAs; and the Business Council of New York State.

Job Impact Statement

A Job Impact Statement is not being submitted with this rule because it is evident from the subject matter of the rule that it could have no impact on jobs and employment opportunities. The purpose of the rule is to provide New York State and City of Yonkers withholding tables and other methods, applicable to wages and other compensation paid on or after January 1, 2012. This rule sets forth amendments reflecting the revision of New York State personal income tax rates contained in Chapter 57 of the Laws of 2009, and the new City of Yonkers income tax surcharge rate pursuant to section 15-111 of the Code of the City of Yonkers as amended by City of Yonkers Local Law 3-2011. Chapter 255 of the Laws of 2011 extended the authority contained in Section 1321 to taxable years ending before 2014. City of Yonkers Local Law No. 9-2011 extended the City of Yonkers resident income tax surcharge and its non-resident earnings tax to taxable years ending on or before December 31, 2013.

The amendments necessitated by the Chapter 57 of the Laws of 2009 for tax years beginning after 2011 reflect the return to the highest personal income tax rate of 6.85 per cent in effect for tax years beginning before 2009. Specifically, the amendments reflect the revision of the tax tables and the tax table benefits recapture contained in Chapter 57. Because the income changes made by Chapter 57 relate to taxpayers with incomes over certain amounts, the wage bracket method (Method I) tables are not affected. The new Appendix 10-A also reflects the increase in the City of Yonkers income tax surcharge rate from 10 to 15 percent of net state income tax pursuant to section 15-111 of the Code of the City of Yonkers. Specifically, the amendments to the Yonkers withholding tax tables reflect the implementation of the 15 percent surcharge rate over a twelve-month period, rather than the shorter implementation period required for tax year 2011.

The amendments to the New York State and Yonkers provisions regarding withholding on supplemental wages are also made to reflect the new rates of withholding.