In an attempt to foster entrepreneurialism and job creation, New York State has passed a tax incentive program called START-UP NY. The program alleviates tax liability for start-up companies that move to or start in one of the specified tax-free communities within the State. There are, however, limitations on the companies that qualify for participation. Among these limitations, restaurants, retail businesses and certain professional organizations are completely excluded from the program, and any business that can participate must not compete with a local business located outside the tax-free community. Nevertheless, the companies that are able to qualify are eligible for substantial benefits.
The program alleviates all tax liability for the participating company for a ten-year period, including corporate/business taxes, sales taxes and property taxes. Furthermore, employees of the qualifying company will not pay income taxes during the first five years and will only have to pay taxes on income over $200,000 for individuals, over $250,000 for a head of household and over $300,000 for taxpayers filing a joint return during the second five year period. In light of the potential for misconduct, participating companies will be subjected to significant oversight.
Participating companies are required to submit certification to Empire State Development (ESD), New York State’s chief economic development agency, and falsifying these documents will be a felony. Additionally, the State will be empowered to claw-back any benefits the business procured through fraud.
A participating company will be able to register until December 31, 2020, and ESD is required to prepare an evaluation of the program’s effectiveness by that date as well. The question is: Will New York State be able to entice new start-ups to locate within its boarders during the next seven years?
For more details on the requirements of the program, see START-UP NY. And for other Network posts on the federal government’s similar scheme, see the JOBS Act and coverage of the 2013 BBLJ Symposium.