New York State tax implications of the federal CARES Act
The federal Coronavirus Aid, Relief and Economic Security Act (CARES ACT) and the Consolidated Appropriations Act, 2021, contained a number of tax provisions that impact the computation of taxable income, modify eligibility for certain tax credits, and provide assistance to taxpayers and businesses affected by COVID-19.
New York State follows the federal tax treatment resulting from some of these federal provisions and they will automatically be reflected in the New York State income tax computation. However, others require state-specific adjustments on the New York State income tax return.
Below are questions and answers regarding New York State’s treatment of some of the most high-profile items. These and other provisions that require state adjustments are explicitly addressed in tax form instructions, such as Form IT-558-I, New York State Adjustments due to Decoupling from the IRC. See Current year forms by form number to view the 2020 forms and instructions.
Generally, if a federal provision is not specifically addressed in the New York State form instructions, it means no separate adjustments are necessary at the state level.
Frequently Asked Questions
These payments are not included in federal adjusted gross income. You are not required to include the payments when determining your New York adjusted gross income.
New York State follows the federal treatment of RMDs. This includes the waiver of RMDs for tax year 2020 and the extended rollover period.
New York State follows the federal treatment. The income will be included in New York adjusted gross income in the same year it is included in federal adjusted gross income.
New York State follows the federal treatment. If the forgiven loan is excluded from federal adjusted gross income it is also excluded from New York adjusted gross income.
New York State follows the federal treatment. If the expenses related to the forgiven loan are deducted in computing federal adjusted gross income, these deductions are automatically excluded from New York adjusted gross income.
New York State does not follow the CARES Act changes to NOLs. Taxpayers must recompute their federal NOL deduction using the rules in place prior to any CARES Act or subsequent federal changes. For example:
- a federal NOL deduction for losses incurred in tax year 2018 or later is limited to 80% of the current year federal taxable income (computed as if the changes to the IRC after March 1, 2020, did not occur);
- there is no carryback of losses incurred in tax year 2018 or later (except for certain farming losses); and
- excess business losses disallowed will be treated as a net operating loss carryforward to the following tax year.
For New York State income tax purposes, an NOL deduction is limited to the lesser of:
- the federal NOL deduction computed using the rules in place prior to any CARES Act or subsequent federal changes, or
- the federal taxable income computed:
- using the rules in place prior to any CARES Act or subsequent federal changes, and
- without the federal NOL deduction.
New York State personal income tax does not conform to the federal changes to QIP depreciation.
For tax year 2019 and earlier, New York State personal income tax returns must be prepared using information from the federal income tax returns the IRS made available prior to March 1, 2020. Software developers have been advised not to update the federal income tax computation for New York State income tax purposes to account for CARES Act changes. To find copies of the 2019 federal forms issued prior to March 1, 2020, see 2019 federal income tax returns—supplement to N-20-7.
For tax year 2020, the differences in New York State and federal treatment should be reported using Form IT-558, New York State Adjustments due to Decoupling from the IRC.