Introduction
The 2026-2027 (“FY27”) New York budget introduces significant tax changes that vary by taxpayer type and jurisdiction (New York State vs. New York City), with potential impacts on timing, calculations, and effective tax rates.
The Bottom Line
The FY27 New York budget bill, S.9009‑C / A.10009‑C was signed by Governor Hochul on May 28, 2026. The budget bill decouples New York and New York City from federal tax treatment of certain provisions enacted under the One Big Beautiful Bill Act (“OB3”). These changes introduce meaningful divergences from federal tax law that may affect cash tax liabilities, deferred tax positions, and compliance obligations beginning in 2025. Below is a list of the most notable changes to the New York Tax Law found in the bill.
- The corporate business tax rate of 7.25% is extended through 2029 for taxpayers with over five million dollars in business income. In addition, the capital base tax of 0.1875% is extended through 2029.
- For New York corporate franchise tax, personal income tax, insurance tax and New York City’s corporation tax, business corporation tax, and unincorporated business tax, the bill decouples from the special deprecation treatment for qualified production property under Internal Revenue Code (“IRC”) § 168(n). Instead, the applicable depreciation will be the provisions in effect before the enactment of OB3, such as IRC § 167. For New York City purposes, the bill states that the property will not be treated as IRC § 1245 property.
- New York and New York City decouple from the immediate expensing for research and experimental (“R&E”) provided in IRC § 174A. Specifically, New York decouples from the federal accelerated deductions for pre-2025 domestic R&E, as well as the immediate expensing for R&E in the year incurred. New York also decouples from the separate amortization of foreign R&E. Instead, for tax years beginning January 1, 2025, New York requires foreign and domestic R&E to be capitalized and amortized over a period of five years. Any remaining R&E cost that were incurred prior to January 1, 2025, is amortized under IRC § 174 as it was in effect on January 1, 2022. These provisions apply to New York State business income taxes under Articles 9-A and 33 of the Tax Law, in addition to the New York State and New York City personal income taxes and pass-through entity taxes.
- The bill does not decouple from the transition deduction for R&E cost incurred prior to January 1, 2025, or the federal foreign R&E treatment for New York City business income taxes. New York City has decoupled from IRC § 174A while differing from New York State on the method to amortize the relevant expenditures.
- For New York City business income tax purposes, the bill decouples from IRC § 179 full federal expensing and limits the IRC § 179 deduction to pre-2025 amounts, creating divergence from both federal and New York State treatment.
- For New York City tax purposes only, the bill provides an addback modification for the increase in interest deduction allowable under IRC § 163(j) starting in 2026, attributable to depreciation, amortization, and depletion in the calculation of adjusted taxable income, essentially keeping the “EBIT” basis for the calculation as it existed for federal income tax purposes immediately before OB3’s enactment
- For New York City tax purposes only, the bill replaces global intangible low-taxed income (“GILTI”) with net controlled foreign corporations tested income (“NCTI”), including NCTI in the tax base while excluding it from the apportionment numerator—potentially increasing effective tax rates for multinational taxpayers.
Who Is Impacted
- Multistate and multinational businesses.
- Taxpayers with R&E expenditures.
- NYC taxpayers with capital investment or financing structures.
Key Considerations
- Evaluate impact on effective tax rate and provisions.
- Model NY vs NYC differences.
- Reassess R&E capitalization and interest limitations.
- Analyze foreign income inclusion exposure.
How Forvis Mazars Can Help
Forvis Mazars can assist with modeling the impact of New York State and New York City decoupling, identifying planning opportunities, and supporting compliance and provision requirements for 2025 and beyond.