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February 11th, 2014
START-UP NY Program Offers Tax Incentives for Eligible Businesses
Described by New York Governor Andrew Cuomo as "one of the most ambitious economic development programs our state has seen in decades," the recently adopted START-UP NY program, which took effect January 1, 2014, offers eligible businesses and their employees an opportunity to enjoy substantial tax benefits.
The program is intended to attract to New York eligible businesses willing to relocate, start up or significantly expand their operations in vacant space or land of approved New York State public and private colleges and universities, strategic state assets or incubators affiliated with private universities or colleges that are designated as tax-free NY areas. Thus, in addition to substantial tax benefits, approved businesses may enjoy access to the significant talent and resources available at New York State public and private colleges and universities.
The tax benefits available to approved businesses and their employees under the START-UP NY program can be substantial. Approved businesses qualify for the following tax benefits for up to 10 years:
- a credit that eliminates corporate entity-level New York State franchise taxes related to income earned in a tax-free New York area;
- an exemption from New York's organization tax and license and maintenance fees for businesses located exclusively in a tax-free New York area;
- an exemption from the Metropolitan Commuter Transportation Mobility Tax ("MCTMT")for the payroll expense of covered employeesand for the net earnings from self-employment of anindividual attributable to a tax-free New York area located within the Metropolitan Commuter Transportation District ("MCTD");
- a credit or refund of New York state and local sales and use taxes(including the .375%tax imposed by New York in the MCTD) imposed on the sale of tangible personalproperty, utility services and certain other services;
- an exemption from New York state or local real estate transfer taxon a lease of real property located in a tax-free New York area; and
- certain exemptions from New York real estatetaxes.
Employees of approved businesses in a "net new job" pay no state or local income taxes for the first five years and, for the second five years, pay no state or local income taxes on income up to $200,000 for individuals, $250,000 for a head of household and $300,000 for taxpayers filing a joint return (Note: There is an annual per business cap on the number of employees qualifying for this exemption and an annual statewide cap of 10,000 net new jobs i.e., a maximum of 10,000 tax-free jobs after year 1, 20,000 tax-free jobs after year 2, etc.) Generally, a "net new job" means a full-time wage-paying job created in a tax-free New York area that is new to New York and is filled for more than six months.
An eligible business can be organized as a corporation, partnership, limited liability company or sole proprietorship, but must be either a "new business" in New York or an expanding business that will create and maintain "net new jobs" (as defined above). Generally, a "new business" is one that (1) is not in New York at the time it applies to participate in the START-UP NY program, (2) is not moving existing jobs into a tax-free New York area from another area in New York, (3) is not substantially similar in operation and ownership to a business taxable in New York within the last five years, and (4) has not caused its employees to transfer from similar employment with a related person in New York. In New York City and Nassau, Suffolk and Westchester counties, an eligible business also must be a "high-tech company" or a company in the formative stages of its development. A "high-tech company" is one engaged in the design, development and introduction of new biotechnology, information technology, remanufacturing, advanced materials, processing, engineering or electronic technology products or innovative manufacturing processes. In addition, an eligible business must comply with all worker protection and environmental laws and regulations, and must not owe past due federal or state taxes or local property taxes.
The following businesses are not eligible to participate in the START-UP NY program:
- retail and wholesale businesses;
- real estate brokers;
- law firms;
- medical or dental practices;
- real estate management companies;
- finance and financial services;
- businesses providing personal services;
- businesses providing business administrative or support services, unless the business has received permission from the Commissioner of Economic Development to apply to participate in the START-UP NY program upon demonstration that the business would create no fewer than one hundred net new jobs in the tax-free NY area;
- accounting firms;
- businesses providing utilities; and
- businesses engaged in the generation or distribution of electricity, the distribution of natural gas or the production of steam associated with the generation of electricity.
In order to participate in the START-UP NY program, an eligible business must occupy property or land affiliated with a public or private college or university. Such property or land must be on or near an academic campus, although New York State has indicated that even if a piece of property is not currently part of an academic institution's campus, that property may, under special circumstances, become affiliated with a sponsoring academic institution.
To learn more about the eligibility requirements, tax benefits and other aspects of the START-UP NY program, please contact Jeffrey Marks at (212) 826 5536 or firstname.lastname@example.org or Bernard Topper at (212) 826 5547 or email@example.com.
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