Authorizes a digital media production credit

Title of bill

An act to amend the tax law, in relation to authorizing an empire state digital media production credit

Purpose or general idea of bill

To provide tax credits to digital media companies located in New York State.

Summary of specific provisions

Section 1 adds a new section 31 to the tax law to provide for $7 million in tax credits for digital media companies located in New York. Four million dollars would be allocated annually two and one-half million upstate on one and one-half million dollars in the Metropolitan commuter District. A qualified digital media company would be eligible for a 20% credit of its eligible production costs in excess of $50,000 for upstate companies and $100,000 in the Metropolitan commuter District. Sections 2 and 3 would make conforming amendments by adding a new section 41 to the tax law and a new subsection (b) of paragraph I of subsection (i) of section 606 of the tax law, respectively. Section 4 is the effective date.

Justification

Several states, including New York, have recognized that tax credits for certain industries have resulted in economic benefits for the state both in terms of jobs and increased tax revenues from businesses. To ensure that New York remains competitive, it is important that it keep pace with other states in attracting and maintaining industries like the digital media industry. This industry is a fast growing industry that New York should continue to maintain. To do so, the state needs to make sure such industries are cultivated and encouraged to create their products here. New York has enacted and enhanced (in 2008) its film tax credit which has had a positive economic benefit to the state.

Digital media tax credits will attract businesses to New York to develop software and games for national distribution. Given the strength of New York's system of higher education, companies will be looking to New York's colleges and universities for the research and development of their products. The "licensing rights" for projects in software development were started back in the 1980's under the Bayh-Dohl Act which allows tax exempt colleges and universities to retain ownership of intellectual property developed with federal research dollars. In doing this, a college or university can license, on a tax exempt basis, any Intellectual property ("IP") resulting from federally sponsored projects to a commercial entity through a license tied to future royalties from a successful product venture, which allows that business to commercially utilize the resulting IP on attractive financial terms.

Since enacting Bayh-Dohl, many states, including New Jersey and Connecticut, have provided business tax credits to companies that create such intellectual property. This has resulted in higher paying jobs in many areas of these states, centered around their universities and colleges. New York should follow this trend to ensure it remains competitive.

Prior legislative history

2008: A.11188 Referred to Ways and Means

Fiscal implications

To be determined

Effective date

Immediately and shall apply to taxable years beginning on or after January 1, 2010.