April 16, 2014
Authored by: Stacie J. Rottenstreich and Karin Barkhorn
The New York Budget bill made changes not only in the estate tax arena, as previously reported on this blog, but also to the income taxation of certain trusts.
Under law prior to the passage of the Budget bill, a resident trust created by a New Yorker was entirely exempt from New York income tax if there was (i) no New York resident trustee, (ii) no assets located in New York and (iii) no New York source income. The new law, effective for calendar years beginning January 1, 2014, provides that a New York resident beneficiary receiving a distribution of income from a New York State resident trust which is exempt from New York State income tax, will be taxed on that “accumulated distribution”. The new accumulation distribution tax, will not apply if the accumulated income was earned before 2014 or if the trust itself is subject to New