Enacts a tax exemption for capital gains on the sales of new businesses

BILL NUMBER:A10613

Title of bill

An act to amend the tax law, in relation to establishing the capital gains modification

Purpose or general idea of bill

Enacts a tax exemption for capital gains for early-investors on the sales of new businesses.

Summary of specific provisions

The bill enacts a tax exemption for capital gains on the sale of new businesses. Section 612 of the tax law is amended by adding a new subsection (t). Subsection (t) defines "capi- tal gain" as the gain or profits realized from the sale of any new company or the gain from the initial public offering of stock by early- stage investors or company founders of any new company. The subsection defines "liquidity event" as the sale of a new company or the initial public offering of stock of any new company. The subsection defines "new company" as any corporation or partnership organized or formed under the laws of New York state alter January 1, 2011 and located therein. Any corporation or partnership shall cease to qualify for the exemption provided for in this subsection if, before the liquidity event, the principal place of business of such corporation or partnership moves out of New York state.

Justification

Enactment of a new tax exemption for capital gains on the sale of new businesses will provide capital to emerging companies at the most critical stage of development, when investment from venture capi- talists and banks is typically not available. The growth of such compa- nies will generate significant revenue for New York State in this time of fiscal crisis.

Prior legislative history

None.

Fiscal implications

To be determined.

Effective date

This act shall take effect January 1, 2011; provided however that effective immediately, the department may prescribe such rules and regulations as may be necessary to carry out the purposes of this act.