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NY and NJ financial transaction, individual, corporate proposals

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September 2020


Bills proposed in New York and New Jersey would affect certain financial transactions of asset managers. Currently, New York is projecting a $30 billion budget shortfall over the next two years; New Jersey is projecting a $10.1 billion shortfall for FY20 and FY21. Given the challenging fiscal situations in both states, additional sources of revenue are likely to be explored.  

Initially proposed in January 2020, New York bill A9041/S7231 (collectively A9041), would impose a transaction tax on mezzanine debt financing. On August 17, A9041 was amended to broaden the scope of the tax to include preferred equity investments. Taken together, the imposition of a tax could have a significant effect on the costs of transactions relating to mezzanine debt and preferred equity investments. 

On August 26, New Jersey Governor Phil Murphy (D) released a revised FY21 budget proposal that asks “the wealthiest among us  - millionaires and large corporations - to pay their fair share in taxes” by increasing tax rates on certain taxpayers and establishing a new Qualified Business Income surcharge on individuals with income of more than $1 million. Additionally, on July 16, A4402 was introduced in the New Jersey legislature; that bill would impose a tax on persons or entities that process 10,000 or more financial transactions through electronic infrastructure located in New Jersey during the year. The tax is $0.0025 (a quarter of a cent) per financial transaction processed in New Jersey. The bill would take effect 90 days after enactment.

The takeaway

While these proposals are in the very early stages of the legislative process, their enactment could significantly affect the asset and wealth management industry. As states continue to refine their revenue outlooks, new sources of revenue may be considered to close the fiscal gaps. Taxpayers should continue to monitor the state proposals to assess the impact if passed.

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Brian Rebhun

Asset Management Tax Leader, PwC US

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