Relates to the qualified emerging technology company capital tax credit; repealer

7 Co-sponsors

• Audrey Pheffer
• Ann-Margaret Carrozza
• Ronald Canestrari
• Peter Rivera
• Sam Hoyt
• Marc Alessi
• Donna Lupardo

11 Multi-sponsors

• Michael Benjamin
• William Boyland
• Barbara Clark
• RoAnn Destito
• Sandy Galef
• Micah Kellner
• David Koon
• William Magee
• William Scarborough
• Robin Schimminger
• Robert Sweeney

BILL NUMBER:A1892A

Purpose or general idea of bill

: This legislation Would increase the tax credit for equity investments in small companies engaged in high- technology fields and would extend the credit to investments in venture capital funds that invest in such companies.

Summary of specific provisions

: The existing credit for equity invest- ments in qualified emerging technology companies (subdivision 12-F of Section 210 and subsection (r) of section 606) is amended to:

* Increase the existing credit from ten percent for investments held for five years and twenty percent for investments held for ten years to twenty percent for investments held for three years, with half of the credit allowed during the taxable year the investment was made and one quarter of the credit allowed during each of the next two years;

* Allow a twenty percent credit over three years for investments in venture capital funds that make equity investments in qualified emerging technology companies;

* Allow a forty percent credit over three years for "seed" equity investments, with seed investments defined as investments "in a Start-up company or a company that may not yet have fully established commercial operations to enable such company to conduct research to prove a concept;

* Allow a twenty percent credit over three years for investments in seed capital funds that make seed capital investments, as determined by the empire.state development corporation.

* Increase the total amount of credits available to a taxpayer from $150,000 (for five-year investments) and $300,000 (for ten-year invest- ments) to $300,000 (regular and fund investments) and $600,000 (seed investments);

Justification

The accelerated growth of companies in emerging technol- ogy fields is critical to ensuring future economic prosperity in New York State. The State has recently invested millions of dollars in university/industry research and development with the intent that this R&D would lead to new products being commercialized in the State and, thus, be a significant source of quality jobs. However, entrepreneurs and start-up companies that are key players in translating R&D into commercial products require large amounts of outside equity and seed capital to prove a new concept and to fuel their growth. Testimony received over the past few years from venture firms, companies, and economic developers in emerging technology fields has identified a gap in seed funding for entrepreneurs and new companies. Seed funds account for less than two percent of all venture capital investments. The larg- est source of seed funds is from angel investors, wealthy individuals willing to invest in new companies and new ideas, yet there has been a recent decline in the percentage of angel investments going to seed and

start-up deals. The tax credit enhancement provided by this legislation would encourage such investments and lead to the commercialization of new products by entrepreneurs and small companies.

Prior legislative history

A.10460 of 2006. A2400 of 2007/2008 -Passed Assembly (2007)

Fiscal implications

Estimated tax expenditures for this program are $1.6 million in fiscal year 2006-2007 and $3.2 million when fully imple- mented.

Effective date

The act would take effect immediately and would apply to taxable years beginning on and after January 1, 2010. The act would sunset on December 31, 2015.