State & Local Tax Update 2017

COMMON ISSUES AND QUESTIONS

 What employers are covered by the new Paid Family Leave (“PFL”) Law?
 What employees are eligible to take PFL?
 What amount of PFL is available to eligible employees?
 For what reasons may employees take PFL?
 What are the paid benefits and how are they funded and paid?
 To what extent does an employer have to continue health insurance and hold the employee’s

position open during PFL?
 How does PFL interact with existing paid time off policies and can an employer require

employees to use paid time off concurrently with PFL?
 How does PFL interact with the FMLA and to what extent will FMLA and PFL run

concurrently?
 What procedure applies to PFL requests?

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INTERACTION WITH THE FMLA

 PFL is similar to FMLA, but different in several respects. For example:

• PFL is paid, while FMLA is unpaid
• FMLA is available for the employee’s own serious health condition, while PFL is not
• PFL is available for care of a greater scope of “family members”

 Given this, PFL and FMLA may run concurrently, but not in every situation.

 Under the PFL Law, an employer that wants to run PFL and FMLA concurrently
must notify the employee that it is concurrently designating the leave as both PFL
and FMLA leave, and provide the notices required under the FMLA.

• An employer who fails to do so “will be deemed to have permitted the eligible employee
to receive [PFL] benefits without concurrently using the benefits under FMLA.”

 When the total hours taken for FMLA in less than full-day increments (which are
not eligible for PFL) reaches the number of hours in an employee’s usual work day,
the employer may deduct one day of PFL from the employee’s annual available PFL
benefit.

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OTHER IMPORTANT DIFFERENCES
BETWEEN THE PFL LAW AND THE FMLA

FMLA NY PFL

 Allows employers to measure the 12-  Only allows employers to measure the
month period in several ways, 12-month period on a “rolling” basis.
including the rolling 12-month
method.  Only allows intermittent leave in
daily or weekly increments.
 Allows employees to use intermittent
leave in hourly or smaller increments.  Employees covered after 26
weeks/175 days (depending on
 Employees must have worked for 12 regular schedule).
months and at least 1,250 hours.
 Does not cover the employee’s
 Covers the employee’s “serious health “serious health condition.”
condition.”
 There is no requirement that
 Covers employees who work at a employees work at a location with 50
location with 50 or more employees or more employees within a 75-mile
within a 75-mile radius. radius in order to receive PFL.

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COMMON ISSUES AND QUESTIONS

 What employers are covered by the new Paid Family Leave (“PFL”) Law?
 What employees are eligible to take PFL?
 What amount of PFL is available to eligible employees?
 For what reasons may employees take PFL?
 What are the paid benefits and how are they funded and paid?
 To what extent does an employer have to continue health insurance and hold the employee’s

position open during PFL?
 How does PFL interact with existing paid time off policies and can an employer require

employees to use paid time off concurrently with PFL?
 How does PFL interact with the FMLA and to what extent will FMLA and PFL run

concurrently?
 What procedure applies to PFL requests?

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PROCEDURE

 Step 1: Employee provides notice of the need for leave.
 Step 2: Employer provides required forms.
 Step 3: Employee completes requisite forms and certification.
 Step 4: Designation of leave.

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STEP 1: EMPLOYEE REQUEST FOR LEAVE

 Requesting Leave. Employees need to provide their employer with sufficient information to notify
it of a qualifying event under the PFL Law and the anticipated timing and duration of the leave.

• When an employee seeks PFL for the first time, he or she need not expressly assert rights
under the PFL Law or even mention family leave.

• According to the regulations, in all cases, the employer should seek further information from
the employee to determine whether PFL is being sought by the employee.

 Foreseeable Leave. If the need for leave is foreseeable, the employee must give the employer 30
days advance notice.

 Unforeseeable Leave. If the need for leave is unforeseeable, the employee must give the employer
notice of the need for leave as soon as practicable.

• It generally should be practicable for the employee to provide notice of leave that is unforeseeable
within the time prescribed by the employer’s usual and customary notice requirements applicable to
such leave.

 Consequence. If an employee fails to provide proper notice, his or her PFL benefits may be partially
denied. For how long?

• For foreseeable leave, a period of up to 30 days from the date notice was actually provided.

• For unforeseeable leave, an amount of time equal to when notice should have been provided (when
practicable after learning of need for leave) and when notice was actually provided.

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STEP 2: PFL FORMS

 After receiving notice of an employee’s need for leave, the employer must provide the employee
with the appropriate PFL forms (with employer portion(s) completed) within 3 business days.

 The State recently released its PFL forms:

• PFL-1: Request for Paid Family Leave
• PFL-2: Bonding Certification
• PFL-3: Release of Personal Health Information under the Paid Family Leave Law
• PFL-4: Health Care Provider Certification for Care of Family Member with Serious Health

Condition
• PFL-5: Military Qualifying Event Certification
• PFL-Waiver: Waiver Form
• PFL-135: Employer’s Application for Voluntary Coverage (No Employee Contribution)
• PFL-136: Employer’s Application for Voluntary Coverage (Employee Contribution Required)

 If the request for leave is also potentially covered by FMLA, the employer must provide the
employee with the FMLA Eligibility Notice within 5 business days of the employee’s leave request.

• If a certification is required, the employer must also furnish the appropriate certification form with
the employer portion completed.

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STEP 3: EMPLOYEES’ CERTIFICATION OF
NEED FOR LEAVE

 After receiving the PFL forms, the employee must complete them and
submit them to the them to the carrier or self-insured employer in order to
file a claim.

• The carrier or self-insured employer may require the employee to provide
documentation and certification of the need for leave.

• The carrier will generally determine the documentation it will require and accept in
support of a PFL claim.

 If the leave is also potentially covered by FMLA, the employee must
timely return a complete, sufficient FMLA certification to the employer

• If the employee returns an incomplete or insufficient certification, the employer
follows the procedures outlined in the FMLA regulations.

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STEP 4: DESIGNATION OF LEAVE

 For PFL, the carrier – not the employer – will determine whether the leave
is approved or denied.

 For FMLA, the normal designation rules apply. Specifically, the employer
must provide a designation notice within 5 business days of “having
enough information to determine whether the leave is FMLA-qualifying”
(often based on receipt of a complete and sufficient FMLA medical
certification).

 Where FMLA and PFL both apply, the employer’s designation notice
should specify that the leave is designated as both FMLA and PFL.

• As noted above, an employer who fails to provide timely FMLA notices and
designate the leave as both FMLA and PFL “will be deemed to have
permitted the eligible employee to receive [PFL] benefits without
concurrently using the benefits under FMLA.”

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PERSONAL INCOME TAX TAKE-AWAYS

 Move out of NYC before the closing.
 Avoid permanent place of abode (PPA) rules with

brokerage agreement.
 Does statutory residence trump domicile?
 Keep an eye on Wynne

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NY PERSONAL INCOME TAX – CASES

 Chamberlain v. NYS, New York State Supreme Court (March 3,
2017)

• Based on US Supreme Court’s constitutional analysis in Wynne v. Maryland,
where the Court struck down a portion of MD’s resident credit scheme,
Taxpayers alleged NY’s statutory residency scheme improperly subjected
them to double taxation in violation of the Federal Commerce Clause

• Court here held NY’s scheme was constitutional despite the Supreme Court
ruling – Court held Wynne didn’t alter the constitutional analysis NY courts
had used pre-Wynne, and that the tax passed the “internal consistency test”
used in Wynne

• Case is on appeal

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RESIDENCY – FACTS AND FIGURES

 2016 NYC Comptroller Report: The Increasing 
Concentration of High Income Taxpayers in the New York 
Economy

• 43% of US Taxpayers with income > $10MM reported some NY source
income

• In 2014, half of NY taxpayers with > $720K income were (or claimed to
be) nonresidents!

• Nonresidents earned more than $90B in NY income in 2014 ($68B in
NYC alone)!

 What could this mean?

• More audits? Are these folks really nonresidents?
• Even more taxpayers? How may other non-filing nonresidents are there?
• Re-birth of NYC nonresident tax?

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RESIDENCY

 Why do we care?

• Income tax
• 17 states still impose an estate or inheritance tax

 Domicile or by statute
 “Leave and Land”
 When did you “move” or “change” your domicile?
 Explain the “change”
 Who proves what?

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RESIDENCY (CON’T.)

 Statutory Residence

• 183 days and a permanent place of abode (PPA)
• What is a “day”?
• Proof
• Exceptions

 Travel
 In-Patient

 Gaied/Barker/Sobotka
 Patrick – love conquers all
 Blatt – loving your dog works, too
 Campaniello – failure to check the box is negligence

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DOMICILE – PRIMARY FACTORS

 Home

• Bigger, better, more valuable
• Watch out for “STAR” and IRC § 121 issues

 Business

• Limited to active involvement
• Location of business headquarters, your office, assistant, etc.

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DOMICILE – PRIMARY FACTORS (CON’T.)

 Time

• Not 183-day rule!
• Domicile day count

 Near and Dear

• Where is your teddy bear,
• Safe deposit box,
• And insured and other “valuables”?
• Moving vans v. storage

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DOMICILE

 Family Factor

• Most spouses share their domicile
• Minor children can be critical

 Other Factors

• Checklist items – nice but not determinative
• Parking tax exemption

 548- and 30-day Rules

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TOP TEN RESIDENCY ERRORS

1. Nobody moves on January 1
2. Statutory residence trumps domicile
3. The “Living Quarters” box
4. Consistency!
5. Husbands and wives usually share a domicile
6. Don’t start an audit with an offer to settle
7. Don’t let client “chat” with auditors
8. Credits for taxes paid elsewhere
9. Never amend a return under audit
10. Many states have an accrual rule (a cruel rule!)

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TAXATION OF NONRESIDENTS

 Wages (including “convenience” rule)
 Business and flow-through income
 Post retirement remuneration
 Sales of property (see, e.g. Ittleson). Is location temporary?
 Accrual rule (a cruel rule)
 Withholding audits

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TAXATION OF NONRESIDENTS (CON’T.)

 Flow-through entity issues:

• Increased audit activity
• Scrutiny of claimed apportionment; difficult flow-through issues
• Sales of partnership/LLC issues and real estate
• Tiered-partnership issues

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ADMINISTRATIVE UPDATE

 BCMS

• 7,000 cases
• 75% agreement
• 67% resolved within six months
• 88% consent rate

 ALJ

• 11-month backlog

 TAT
 Article 78

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THANK YOU

Mark S. Klein, Esq. Peter C. Godfrey, Esq.
Hodgson Russ LLP Hodgson Russ LLP
605 Third Avenue, Suite 2300 605 Third Avenue, Suite 2300
New York, NY 10158 New York, NY 10158
Phone: (646) 218-7514 Phone: (716) 848-1246
[email protected] [email protected]

@MarkKleinNY

Joseph N. Endres, Esq.
Hodgson Russ LLP
140 Pearl Street, Suite 100
Buffalo, NY 14202
Phone: (716) 848-1504
[email protected]

@NYTaxGuy

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