If you’re a business thinking about starting up or moving to NY, it could be true. START-UP NY is the new economic development legislation signed by Governor Cuomo on June 25th. If eligible companies set up near university campuses, the law will exempt them from state income, property, sales, and franchise taxes, as well as personal income taxes for employees. Of course there are pages upon pages of restrictions, qualifications, and requirements, but here are a few things to keep in mind if you’re thinking about taking advantage of the new tax breaks.
When does it start?
Technically, the law is effective immediately, which means for the 2014 tax year. However it remains unclear when Empire State Development (ESD) will get around to passing the corresponding regulations, and how fast the area’s major universities will move to draft the necessary plans for submission to ESD. You can find updates here as soon as we know more.
How does it work?
In brief, there are two steps: 1) Eligible universities will designate land on or near their campus as tax-free areas, draft a written plan for its development, and apply to ESD for approval. 2) Eligible businesses will apply to the university for a spot, and both the university and ESD will review the applications.
What is an “eligible business”?
There are extensive rules restricting who can participate in START-UP NY. Retail, wholesale, personal/professional service, and hospitality businesses, as well as any corporate structure other than corporations, LLC’s, partnerships, and sole proprietorships are expressly barred from the program. There are four major criteria business applications must satisfy:
1) The mission and activities of the business must align with the academic mission of the university.
2) The business must create new net jobs in New York. The jobs themselves must…
- be new to the state,
- not be transferred from employment with another business in New York through merger, acquisition, or reorganization,
- not be filled by someone employed in the last 60 months by a related person,
- be full-time, and
- be filled for at least 6 months.
3) The business must be new to the state, which means…
- it was not operating or located in New York at the time of application,
- it is not moving existing jobs into the area from another part of New York, and
- it is not substantially similar in ownership or operation to a taxable entity existing within New York in the last five years.
4) The business cannot compete with an existing business in the same community but outside of the tax-free area.
There is limited space for both universities and businesses in the plan, as well as monetary caps on the aggregate tax breaks. Even though there are some details that have yet to emerge, it will be important for businesses and schools interested in participating to get an early start formulating a plan that complies with the various rules.
If you’d like more information about how to get started, contact Budde & Roberson today.