New York Temporary Deferral Refundable Payout Credit

Temporary Deferral Refundable Payout Credit
TSB-M-10(5)C, (11)I:(9/10):Temporary Deferral of Certain Tax Credits:tsbm105c11i
New York State Department of Taxation and Finance

Office of Tax Policy Analysis
Taxpayer Guidance Division

TSB-M-10(5)C
Corporation Tax
TSB-M-10(11)I
Income Tax
September 13, 2010

Temporary Deferral of Certain Tax Credits
Chapter 57 of the Laws of 2010 amended the Tax Law to add new sections 33 and 34
establishing the temporary deferral of certain tax credits. In addition, new sections were added
under Article 9 (Corporation Tax), 9-A (Business Corporations), 22 (Personal Income Tax),
32 (Franchise Tax on Banking Corporations), and 33 (Insurance Franchise Tax) relating to the
application of deferred tax credit amounts.
Effective for tax years beginning on or after January 1, 2010, and before January 1, 2013,
certain tax credits will be subject to a temporary deferral in any tax year that the total amount of
these credits that would otherwise be used to reduce a taxpayer’s tax liability or be refunded or
credited as an overpayment to estimated tax is in excess of $2 million.
Taxpayers will be allowed to claim the deferred tax credit amounts starting with tax years
beginning on or after January 1, 2013. No interest will be paid on the deferred tax credit
amounts.
The following credits allowable under Articles 9, 9-A, 22, 32, or 33 of the Tax Law1 are
subject to the temporary deferral:
• Investment tax credit
• Investment tax credit for the financial services industry
• Retail enterprise tax credit
• Historic barn rehabilitation credit
• Empire Zone (EZ) investment tax credit
• EZ investment tax credit for the financial services industry
• EZ employment incentive credit
• EZ employment incentive credit for the financial services industry
• EZ wage tax credit
• EZ capital tax credit
• Zone Equivalent Area wage tax credit
• Employment incentive credit
• Employment incentive credit for the financial services industry
• Qualified emerging technology company (QETC) employment credit
• QETC capital tax credit
• QETC facilities, operations, and training credit
• Special additional mortgage recording tax credit
• Credit for servicing certain mortgages
• Credit for employment of persons with disabilities
• Alternative fuels credit
• Credit for purchase of an automated external defibrillator
1

Note: Not all of the credits are allowed under each article.

W A Harriman Campus, Albany NY 12227

www.nystax.gov

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• Qualified empire zone enterprise (QEZE) credit for real property taxes
• QEZE tax reduction credit
• Low-income housing credit
• Green building credit
• Brownfield redevelopment tax credit
• Remediated brownfield credit for real property taxes for qualified sites
• Environmental remediation insurance credit
• Security training tax credit
• Credit for fuel cell electric generating equipment expenditures
• Conservation easement tax credit
• Empire State commercial production credit
• Biofuel production credit
• Clean heating fuel credit
• Credit for rehabilitation of historic properties
• Credit for companies who provide transportation to individuals with disabilities
• Power for jobs credit
• Solar energy system equipment credit
• Historic homeownership rehabilitation credit
• Credit for certain investments in certain capital companies
Determining if a taxpayer is subject to the temporary deferral and computing the amounts
deferred
To determine if a taxpayer is subject to the temporary deferral of any of the above listed
tax credits for the tax year and to compute the amounts deferred, the taxpayer must complete the
following steps:
1. Compute the taxpayer’s tax liability for the tax year without regard to any tax credits
or payments of tax.
2. Determine the amount of each tax credit (include any carryover of the tax credit from
the preceding tax years) that the taxpayer would have used to reduce the tax liability
or have refunded or credited as an overpayment to estimated tax as if the temporary
deferral of tax credits was not in effect. (If the amount of any nonrefundable credit
exceeds the tax liability, do not include the excess credit.)
3. Add the amounts of each nonrefundable tax credit subject to the temporary
deferral (from step 2) that would have been used to reduce the tax liability.
4. Add the amounts of each refundable tax credit subject to the temporary deferral
(from step 2) that would have been used to reduce the tax liability or would have been
refunded or credited as an overpayment to estimated tax.

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Corporation Tax
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September 13, 2010
5. Add the amounts determined in step 3 and step 4.
• If the result is $2 million or less, the taxpayer is not subject to the temporary
deferral of tax credits and does not need to continue to steps 6 or 7.
• If the result is more than $2 million, the taxpayer is subject to the temporary deferral
of tax credits. Continue with steps 6 and 7 to compute the amount of each tax credit
subject to the temporary deferral that may be used, refunded, or credited as an
overpayment to estimated tax for the tax year and the amount of each tax credit that
must be deferred.
6. For each nonrefundable tax credit subject to the temporary deferral:
a. Multiply the amount of the tax credit that would have been used to reduce the tax
liability (as determined in step 2) by a fraction. The numerator of the fraction is
$2 million and the denominator of the fraction is the amount determined in step 5.
The result is the amount of the tax credit that is not deferred and that can be used
to reduce the tax liability.
b. Subtract the amount of tax credit as determined in step 6a from the amount of that
tax credit as determined in step 2.
The result is the amount of the nonrefundable tax credit that must be deferred.
Deferred nonrefundable tax credit amounts will accumulate as a taxpayer’s
temporary deferral nonrefundable payout credit and can be claimed in tax years
beginning on or after January 1, 2013 (see Application of deferred credits on
page 4).
7. For each refundable tax credit subject to the temporary deferral:
a. Multiply the amount of the tax credit that would have been used to reduce the tax
liability or would have been refunded or credited as an overpayment to estimated
tax (as determined in step 2) by a fraction. The numerator of the fraction is
$2 million and the denominator of the fraction is the amount determined in step 5.
The result is the amount of the tax credit that is not deferred and that can be used
to reduce the taxpayer’s tax liability or that can be refunded or credited as an
overpayment to estimated tax.
b. Subtract the amount of credit as determined in step 7a from the amount of that
credit as determined in step 2.

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The result is the amount of the refundable tax credit that must be deferred.
Deferred refundable tax credit amounts will accumulate as a taxpayer’s temporary
deferral refundable payout credit and can be claimed in tax years beginning on or
after January 1, 2013, (see Application of deferred credits on page 4).
Combined filers under Article 9-A, 32, or 33
Corporations that are required or permitted to file combined returns under Article 9-A,
32, or 33 must use the total tax credits and the tax liability of the combined group to determine
whether the combined group is subject to the temporary deferral of tax credits.
Application of deferred tax credits
Nonrefundable tax credits. The accumulated amounts of nonrefundable tax credits that
are deferred in tax years beginning on or after January 1, 2010, and before January 1, 2013, are
combined and will constitute a taxpayer’s temporary deferral nonrefundable payout credit.
Taxpayers are allowed to first claim the temporary deferral nonrefundable payout credit
for the tax year beginning on or after January 1, 2013, and before January 1, 2014.
• Taxpayers subject to tax under Article 22. Any amount of the temporary deferral
nonrefundable payout credit that is not deductible in the tax year beginning on or after
January 1, 2013, and before January 1, 2014, may be carried over to the following year
or years to be deducted from the taxpayer’s tax until the accumulated credit amount is
exhausted.
• Taxpayers subject to tax under Article 9, 9-A, 32, or 33. The amount of the
temporary deferral nonrefundable payout credit deducted for the tax year cannot reduce
the tax to an amount less than the applicable minimum tax. Any excess may be carried
over to the following year or years to be deducted from the taxpayer’s tax until the
accumulated credit amount is exhausted.
Refundable tax credits. The accumulated amounts of refundable tax credits that are
temporarily deferred in tax years beginning on or after January 1, 2010, and before
January 1, 2013, are combined and will constitute a taxpayer’s temporary deferral refundable
payout credit.

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Taxpayers are allowed to claim the temporary deferral refundable payout credit over a
period of three tax years as follows:
Tax year
Beginning on or after January 1, 2013,
and before January 1, 2014
Beginning on or after January 1, 2014,
and before January 1, 2015
Beginning on or after January 1, 2015,
and before January 1, 2016

Claim amount allowed
50% of the total
accumulated credit
75% of the balance of the
accumulated credit
The remaining balance of the
accumulated credit

• Taxpayers subject to tax under Article 22. If the amount of the temporary deferral
refundable payout credit allowed for each year exceeds the taxpayer’s tax for the year,
the excess will be refunded.
• Taxpayers subject to tax under Article 9, 9-A, 32, or 33. The amount of the
temporary deferral refundable payout credit allowed for each tax year cannot reduce
the tax to an amount less than the applicable minimum tax. Any amount of credit not
deductible in the current tax year may be credited or refunded.
Estimated tax for individuals, estates, and trusts
Taxpayers must consider the temporary deferral of credits when calculating and making
estimated tax payments for tax years 2010, 2011, and 2012.
Special rule for tax year 2010. As a result of the temporary deferral of certain tax
credits, a taxpayer’s 2010 estimated income tax may be underpaid.
To avoid the penalty for underpayment of estimated tax for individuals, estates, and trusts
for the 2010 tax year, the total amount of estimated tax paid and withholding tax (if applicable)
must be:
• at least 90% (66 2/3% for farmers and fishermen) of the amount of income tax due as
shown on the taxpayer’s return for tax year 2010; or
• 100% of the tax shown on the taxpayer’s return for tax year 2009 (110% of that amount
if he or she is not a farmer or a fisherman and his or her New York adjusted gross
income shown on that return is more than $150,000 or, if married filing separately for
2010, more than $75,000). To qualify for this provision, the taxpayer must have filed a
return for tax year 2009, and it must have been for a full 12-month year.

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September 13, 2010
Note: In determining whether a taxpayer paid 100% (or 110%, if applicable) of the tax
shown on the taxpayer’s 2009 tax return, the taxpayer must recompute his or her 2009
tax as if the temporary deferral of credits had been in effect for tax year 2009.
No penalty will apply to any shortfall in a taxpayer’s April 15, 2010, or June 15, 2010,
estimated tax payment that is attributable to this amendment, provided:
• the taxpayer has timely made the April 15, 2010, and June 15, 2010, estimated
payments, if applicable, and
• the shortfall was attributable to the deferral of credits.
However, to avoid a penalty for the estimated tax due on September 15, 2010, the
taxpayer must include in the September 15, 2010 estimated tax payment any shortfall of
estimated tax due.
Estimated tax for corporations
Taxpayers must take into account the temporary deferral of tax credits when calculating
and making estimated tax payments for tax years 2010, 2011, and 2012.
Taxpayers must calculate any mandatory first installment payments made on or after
August 11, 2010, as if the deferral of tax credits was in effect for the tax year upon which the
first installment is based.
No penalty for underpayment of estimated taxes will apply to any shortfall in an
installment payment(s) for a tax year beginning in 2010 if:
• the payment(s) was timely made,
• the shortfall was attributable to the temporary deferral of tax credits, and
• the payment due date was prior to August 11, 2010.
However, to avoid a penalty for any installment payment due on or after
August 11, 2010, any shortfall in a payment due prior to August 11, 2010, must be included with
the next installment payment due on or after August 11, 2010.
When calculating the underpayment of estimated tax penalty for a tax year beginning in
2010, the exceptions described in Tax Law sections 1085(d)(1) and 1085(d)(2), based on the
preceding year’s return, shall be calculated as if the deferral of tax credits had been in effect for
that preceding year. Note: These exceptions do not apply to large corporations.

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A large corporation is one that had, or whose predecessor had, allocated entire net
income (ENI) of at least $1 million for any of the three tax years preceding the tax year involved.
A large corporation, in the case of a non-life insurance corporation subject to tax under Tax Law
Article 33, section 1502-a, is one that had direct premiums subject to the premiums tax under
Tax Law Article 33, section 1502-a, exceeding $3,750,000 for any of the three immediately
preceding tax years beginning on or after January 1, 2003. However, health maintenance
organizations (HMOs) subject to Article 33 meet the definition of a large corporation satisfying
the $1 million ENI requirement.
For payment due dates for corporate filers, see the instructions for Form CT-400,
Estimated Tax for Corporations.
Additional information for corporate fiscal-year filers whose tax years began on or after
June 1, 2009, but before January 1, 2010
2009 corporate extension request forms. When computing the mandatory first
installment (MFI) of estimated tax for the next tax year, the franchise tax and the Metropolitan
Transit Authority (MTA) surcharge, as computed using the worksheet in the instructions, must
be recomputed as if the temporary deferral of tax credits had been in place for whichever tax
year on which the MFI is being based.
2009 corporate tax returns. When computing the MFI for both franchise and MTA
taxes for the next tax year beginning in 2010, taxpayers must recompute their tax for the tax year
beginning in 2009, which is the year upon which the 2010 MFI is based, as if the deferral of
credits had been in place for that 2009 year.
Forms and instructions
Beginning with tax year 2010, new Form IT-500, Income Tax Deferral Credit, and new
Form CT-500, Corporation Tax Deferral Credit, will provide taxpayers with detailed
instructions and schedules regarding the temporary deferral of tax credits. These new forms and
instructions will be available on the department Web site in late December 2010.

NOTE: A TSB-M is an informational statement of existing department policies or of
changes to the law, regulations, or department policies. It is accurate on the date
issued. Subsequent changes in the law or regulations, judicial decisions, Tax
Appeals Tribunal decisions, or changes in department policies could affect the
validity of the information presented in a TSB-M.