By Mark H. Levin

Here is a list of tax relief efforts allowed in New York state for businesses, families and individuals.

Relief for the Families of Sept. 11, 2001, Victims

The 2002–2003 New York state budget provides that the families of victims who perished as a result of the Sept. 11, 2001, terrorist attacks are not subject to any income tax for 2000 and 2001 (or 2002 for victims who died during 2002) on the income of any family member who perished. The New York State Department of Taxation and Finance is directed to refund an amount equal to the tax on such income for the year 2000.

Additionally, the estate tax will be conformed to the relief provided by the Victims of Terrorism Act of 2001, which provides for in increased exemption (from $675,000 to approximately $2.9 million) and tax reductions for estates in excess of this amount.

Relief for Businesses That Make New Investments After Sept. 11, 2001

The 2002–2003 state budget provides relief for those businesses that lost equipment on which they claimed an investment tax credit (ITC). Under the general rules, a taxpayer is required to recapture any ITC taken on any property that was destroyed or ceased to be in qualified use. The budget provides that where a taxpayer’s property was destroyed or ceased to be in qualified (recapture event year) use as a result of the Sept. 11, 2001, attacks, a taxpayer may elect to defer the recapture until the next taxable year following the recapture event year.

However, no recapture will be required if the affected taxpayer retains, in the recapture event year, a significant percentage (not defined in the Budget Act) of the taxpayer’s average total employment number in the state in the recapture event year and the two taxable years immediately preceding the recapture event year. Also, in cases where 50 percent or more of a taxpayer’s employees perished as a direct result of the Sept. 11 tragedy, the taxpayer may make the above election and will not be required to recapture any ITC even if the above-described employment test is not met.

The 2002–2003 state budget also provides for an alternative election to the one described above. Under this alternative, a taxpayer who does not make the above-described election may elect to pay any recapture required in the year in which the destruction or cessation of qualified use occurred. If the taxpayer makes this alternative election, the ITC basis of any replacement property will be computed without any basis reductions that otherwise would be required under the involuntary conversion rules IRC § 1033.

Resurgence Zone

In addition to the federally created Liberty Zone, New York state, during earlier legislation, created the Resurgence Zone, which also covers Lower Manhattan.

Sales Tax Free Periods

Three “sales tax free” periods have been authorized in the Liberty and Resurgence zones of Lower Manhattan. Two already have passed; however, there still remains one for Aug. 20–22, 2002.

During the sales tax free periods, the following items are exempt from the 4 percent New York state sales tax, the 0.25 percent Metropolitan Commuter Transportation District sales tax, and the 4 percent New York City sales tax:

• Retail products
• Prepaid calling services
• Rents
• Restaurant sales of food and beverages The sales tax free exemption does not apply to the following items:
• Motor vehicles
• Motor fuel
• Diesel motor fuel
• Cigarettes
• Tobacco products
• Alcohol products
• Building materials