Key Income Tax Changes: Administrative

Administrative Updates

Electronic Signatures for Powers of Attorney

Effective July 1, 2027, New York authorizes taxpayer representatives acting under a valid power of attorney to electronically sign covered tax documents. The electronic signature may be used in place of a handwritten signature and has the same legal validity and effect, including being treated as acknowledged when required by law.

Key Income Tax Changes: Individual

New Credits and Deductions for Individual Taxpayers

New York State Child and Dependent Care Credit

Effective for tax years beginning on or after Jan. 1, 2026, New York replaces its existing child and dependent care credit, which was calculated as a percentage of the federal credit for child and dependent care expenses, with a standalone refundable state credit that no longer relies on the federal credit calculation. The credit will now be computed under new state-specific eligibility, expense, and income-based limitation rules.

Qualified Tips Deduction (IRC § 224)

For taxable years beginning on or after Jan. 1, 2026, New York allows taxpayers to subtract up to $25,000 of qualified tips from New York adjusted gross income, to the extent the amount is allowed as a federal deduction.

Key Income Tax Changes: Corporate

Business Income Tax Rate Extensions

Extension of Corporate Tax Rates

New York delays the sunset of the temporary 7.25% business income tax rate for Article 9-A taxpayers with a business income base over $5 million, extending the rate through tax years beginning before Jan. 1, 2030. The bill also delays the scheduled phaseout of the capital base tax by extending the temporary 0.1875% capital base tax rate through tax years beginning before Jan. 1, 2030, for taxpayers not otherwise eligible for a 0% capital base tax rate.

Amended or Extended New York State Income Tax Returns

Limited Penalty and Interest Relief

Because these conformity provisions apply retroactively, taxpayers that have already filed a New York return reflecting New York’s assumed conformity to the federal OBBB provisions may need to revisit 2025 reporting. The bill provides limited penalty and interest relief for certain returns filed under a valid extension and certain amended returns for tax years beginning on or after Jan. 1, 2025, and before Jan. 1, 2026, but only where the changes to income and tax are a result of the updated conformity.

Amended or Extended New York City Income Tax Returns

Limited Penalty and Interest Relief

Because these conformity provisions apply retroactively, taxpayers that have already filed New York City returns reflecting OBBB conformity may need to revisit 2025 reporting. The bill provides limited penalty and interest relief for certain returns filed under a valid extension and certain amended returns for tax years beginning on or after Jan. 1, 2025, and before Jan. 1, 2026, but only where the change to income or tax is a result of the conformity provisions.

New York City GILTI Receipts Factor

GILTI Receipts Factor Treatment (IRC §§ 951A & 250)

Effective immediately and retroactive to tax years beginning on or after Jan. 1, 2025, New York City updates its receipts factor rules for GILTI-related income. The amendment continues denominator-only factor representation by excluding the net GILTI amount from the numerator of the receipts factor while including it in the denominator.

New York State OBBB Conformity Changes

Retroactive New York State IRC Conformity Updates

New York is a rolling IRC conformity state. As a result, federal income tax changes generally flow into the New York State tax base unless the state affirmatively decouples. Effective immediately and retroactive to tax years beginning on or after Jan. 1, 2025, New York decouples from certain One Big Beautiful Bill (OBBB) federal income tax changes for purposes of the personal income tax, corporate franchise tax, and insurance company tax.

Qualified Production Property (IRC § 168(n))

Effective immediately and retroactive to tax years beginning on or after Jan. 1, 2025, New York decouples from the OBBB’s accelerated depreciation rules for qualified production property. Taxpayers that make the federal IRC § 168(n) election will need to recompute depreciation for New York purposes as if the federal election had not been made and report a New York modification for the difference between the federal depreciation claimed and the depreciation allowed under New York rules.

Research and Experimental Expenses (IRC §§ 174 & 174A)

New York decouples from the OBBB’s immediate deduction for domestic research and experimental expenses. For tax years beginning on or after Jan. 1, 2025, taxpayers must amortize foreign and domestic research and experimental expenses over a 60-month period for New York purposes. Taxpayers with remaining unamortized pre-2025 research and experimental expense balances must continue determining those amounts under prior IRC § 174 rules.

Immediate Expensing (IRC § 179)

New York State generally conforms to the OBBB’s expanded IRC § 179 expensing rules. As a result, taxpayers generally are not required to make a New York State-specific modification for the federal changes to the IRC § 179 deduction.

Business Interest Expense Limitation (IRC § 163(j))

New York State generally conforms to the OBBB’s changes to the federal business interest expense limitation under IRC § 163(j). As a result, taxpayers generally are not required to make a New York State-specific modification for the federal changes to this limitation.

New York City OBBB Conformity Updates

Retroactive New York City IRC Conformity Updates

Effective immediately and retroactive to tax years beginning on or after Jan. 1, 2025, New York City decouples from certain OBBB federal income tax changes for purposes of the Unincorporated Business Tax, General Corporation Tax, Banking Corporation Tax, and Business Corporation Tax. The amendments generally require taxpayers to add back certain federal deductions or exclusions and then recompute the allowable New York City deduction under pre-OBBB or city-specific rules.

Qualified Production Property (IRC § 168(n))

Effective immediately and retroactive to tax years beginning on or after Jan. 1, 2025, New York City decouples from the OBBB’s accelerated depreciation rules for qualified production property. Taxpayers that make the federal IRC § 168(n) election will need to recompute depreciation for New York City purposes as if the federal election had not been made and report a New York City modification for the difference between the federal depreciation claimed and the depreciation allowed under New York City rules.

Research and Experimental Expenses (IRC §§ 174 and 174A)

Effective immediately and retroactive to tax years beginning on or after Jan. 1, 2025, New York City decouples from the OBBB’s immediate deduction for domestic research and experimental expenses. Instead, domestic research and experimental expenses must be deducted for New York City purposes using a five-year amortization period beginning with the midpoint of the tax year in which the expenses are paid or incurred. Because the New York City amendments do not address foreign research and experimental expenses, those expenses continue to follow the federal 15-year amortization period beginning with the midpoint of the tax year in which the expenses are paid or incurred.

Immediate Expensing (IRC § 179)

Effective immediately and retroactive to tax years beginning on or after Jan. 1, 2025, New York City decouples from the OBBB’s expanded IRC § 179 expensing rules. Taxpayers must add back the federal deduction attributable to the increased OBBB expensing limits and recompute the allowable New York City deduction using the pre-OBBB IRC § 179 limitations.

Business Interest Expense Limitation (IRC § 163(j))

Effective immediately and retroactive to tax years beginning on or after Jan. 1, 2025, New York City decouples from the OBBB’s changes to the federal business interest expense limitation. Taxpayers must add back the additional federal business interest deduction attributable to the OBBB’s changes to the adjusted taxable income calculation for depreciation, amortization, and depletion.

Key Sales Tax Changes

Periodic Re-Registration Required for Sales Tax Vendors

Sales Tax Certificate of Authority Re-Registration Program

New York is implementing a statewide sales tax Certificate of Authority re-registration program to be completed by Dec. 31, 2030. Under the program, the Department of Taxation and Finance will require existing sales tax vendors to periodically renew their registration to verify continued eligibility to collect sales tax.

The commissioner will issue expiration notices by certified mail at least 180 days before a certificate expires. Businesses wishing to maintain their authority to collect sales tax must submit a completed application for a new Certificate of Authority at least 90 days before the expiration date. Within 30 days of receiving the application, the Department must either issue a new certificate – at no cost and with a term of at least three years – or issue a proposed refusal if the vendor meets one of the existing statutory disqualifying conditions.

Vendors that receive a proposed refusal have the right to appeal through the Division of Tax Appeals, which is required to schedule an expedited hearing within 30 days of receiving the petition.

Temporary Relief for Outstanding Sales Tax Liabilities

Sales and Use Tax Penalty and Interest Discount Program

New York has established a temporary Sales and Use Tax Penalty and Interest Discount Program for current holders of a sales tax Certificate of Authority with final sales and use tax liabilities outstanding on or before Sept. 1, 2026. Eligible taxpayers may resolve qualifying liabilities by paying the full amount of tax due plus 50% of the accrued interest by Dec. 31, 2026. The remaining eligible interest and penalties will be waived. Note that certain penalties and liabilities, including those previously compromised or reduced, are excluded from the program.

Key Property Tax Changes

New York City Pied-à-Terre Surcharge

New York City Non-Primary Residential Property Tax Surcharge

Beginning with the 2026-2027 property tax year, New York City imposes a new annual non-primary residential property tax surcharge, commonly referred to as the pied-à-terre surcharge, on certain high-value residential properties that are not used as a primary residence.

For 2026-2027 and 2027-2028, the surcharge generally applies to non-primary, Class 1, one-, two-, and three-family homes valued at $5 million or more, at rates ranging from 0.8% to 1.3%, and Class 2 condominium and cooperative units valued at $1 million or more, at rates ranging from 4% to 6.5%. The higher condominium and cooperative rates reflect the Department of Finance’s (DOF) current valuation methodology, which generally produces values below actual sales prices. Beginning with 2028-2029, these units are expected to be valued using a comparable-sales methodology, with thresholds and rates aligning with those for one-, two-, and three-family homes.

Property owners who receive a DOF notice and believe the property qualifies for an exemption as a primary residential property were originally instructed to submit an exemption application by Sept. 18, 2026. However, a temporary restraining order currently prohibits the city from enforcing that deadline against homeowners who received a mailed notice, pending further proceedings: