A major decoupling provision relates to domestic research and experimental expenditures. Although pursuant to the One Big Beautiful Bill Act (OBBBA), federal law now permits a full deduction of these expenses in the year incurred, New York requires taxpayers to add back any such deduction in full. The state instead allows taxpayers to recover these costs through subtraction modifications over a 60-month amortization period for both domestic and foreign research expenditures.

For federal purposes, there are options to account for any remaining unamortized domestic R&E expenditure paid or incurred for taxable years beginning after Dec. 31, 2021 and before Jan 1, 2025. Taxpayers can continue to deduct these unamortized amounts over the remaining five-year period or elect to deduct any remaining unamortized costs either entirely in the first tax year (2025) or ratably over two taxable years (2025/2026). Based on the decoupling, New York requires pre-2025 unamortized amounts to continue to be deducted over the remaining five-year period.

Another key area of decoupling involves qualified production property. Qualified production property (QPP) is a tax incentive introduced under the OBBBA. It allows businesses to deduct 100% of the cost of qualifying production-related real property in the year it is placed in service, rather than depreciating the building over a traditional 39-year timeline. Under the decoupling provision, taxpayers must add back any full federal expense deduction attributed to the qualified production property. The taxpayer must then recompute depreciation for New York purposes as if the federal election had not been made and can take a corresponding subtraction modification for the recomputed depreciation. In addition, New York does not recognize the federal basis reduction associated with the federal deduction, which allows for a higher New York State basis to offset any potential gain upon disposition of the property. 

New York City Corporate Tax Decoupling

New York City does not conform to the federal treatment of domestic research and experimental expenditures, which permits a 100% deduction in the year the expenses are incurred. Instead, taxpayers are required to fully add back the federal deduction and amortize such expenditures over a five-year period. 

New York City also now requires a full addback of deductions taken for qualified production property and does not permit any corresponding reduction in adjusted basis.

Finally, the city does not adopt the federal expansion of the business interest limitation. As a result, taxpayers must add back any increase in the federal interest deduction attributable to adjustments for depreciation, amortization, or depletion in computing adjusted taxable income.

Corporate Tax Rate

The bill extends the 7.25% corporate tax rate on business income above $5 million through Jan. 1, 2030, thereby continuing an elevated rate structure for higher-income corporations.

Sales and Use Tax Reregistration Program

To strengthen compliance, the bill establishes a mandatory reregistration program for businesses that collect New York sales tax. Under this program, all vendors holding a certificate of authority will be required to periodically renew their registration.

The program will be implemented in phases through Dec. 31, 2030. The Department of Taxation and Finance will issue expiration notices at least 180 days in advance, and businesses must submit renewal applications at least 90 days before expiration. Approved applicants will receive a new certificate valid for a minimum of three years.

Sales Tax Penalty and Interest Discount Program

The budget bill also creates a temporary program that allows businesses to resolve outstanding sales and use tax liabilities on favorable terms. To qualify, taxpayers must have final (no longer subject to appeal) unpaid liabilities as of Sept. 1, 2026, and must hold a valid certificate of authority.

Participants in the program are required to pay the full amount of tax due but are eligible for a 50% reduction in accrued interest, along with the abatement of certain penalties, excluding those related to fraud or false filings. To take advantage of the program, taxpayers must pay the full reduced amount no later than Dec. 31, 2026. Taxpayers currently on installment agreements may participate only if they satisfy the full liability by the deadline. 

While the program seems similar to an “Amnesty” program, it is not as it only applies to already assessed liabilities and is not designed to bring non-filers forward.

Conclusion

Taxpayers, together with their tax advisors, are urged to carefully assess how the FY 2026–2027 budget changes, particularly the detailed surcharge rate structures, decoupling rules, and compliance requirements as they may affect their planning, reporting obligations and overall tax positions. 

About the author: Phillip Ross, CPA, CGMA, is an Accounting and Audit Partner and Chair of the Construction Industry Group at Anchin, Block & Anchin, LLP. For more construction industry thought leadership and content, log on to www.anchin.com.

Published: June 18, 2026.