Establishes the economic resurgence initiative credit

Summary of provisions

The legislation would create an elective provision permitting a taxpayer to convert a portion of the taxpayer's previously earned -- but not used -- Investment Tax Credit into a new credit called the Economic Resurgence Initiative Credit. The amount of Investment Tax Credit authorized for conversion would be limited on a sliding scale basis; no conversion at all would be authorized for Investment Tax credits that have been carried forward for nine or fewer taxable years. Notwithstanding the amount of Investment Tax Credit eligible for conversion under the sliding scale, that eligible amount would be limited yet further to no more than the taxpayer's new expenditures in the current taxable year which are eligible for newly earned Investment Tax Credit status. In addition, the taxpayer would have to waive (forego) the Investment Tax Credit on those new, eligible expenditures. The legislation would also extend the carry forward period for the Investment Tax Credit from fifteen to twenty years.

Justification

There was 1.5 billion dollars in unused tax credits in New York as of 2003 (Analysis of Article 9-A General Business corporation Franchise Tax Credit for 2002) that would be better of being reinvested in New York Business to help stimulate the economy and job growth.

The proposed ERIC legislation is an incentive to encourage investment in New York State, that will help increase both the retention and creation of new jobs and career opportunities. Making New York State a stronger and more viable place to do business.

The structure of the Investment Tax Credit -- New York's main economic incentive -- severely limits its use. On the one hand, taxpayers who make substantial investment expenditures earn their Investment Tax Credits; on the other hand, taxpayers are denied use of the credits through their non-applicability against the Minimum Taxable Income base alternative. The earned Investment Tax Credit whose use is disallowed is carried forward for potential use in the subsequent tax year{s). If the taxpayer makes another significant investment expenditure in the following year, the situation compounds itself, and, in future years, the cycle continues. The problem is exacerbated should the taxpayer suffer a downswing in income in a recessionary

time, for example, as use of the taxpayer's earned Investment Tax Credit is further curtailed under the Tax Law.

The legislation's proposed Economic Resurgence Initiative Credit is designed to put incentive back into New York's tax credit provisions for taxpayers who take the initiative of both waiving their carry-forward Investment Tax Credit that they bring into a taxable year and foregoing Investment Tax Credit newly earned in the current taxable year. Taxpayers can elect to convert a limited amount of their carry-forward Investment Tax Credit into the new Economic Resurgence Initiative Credit, but only up to the amount of the taxpayers' new investment expenditures -- and then only if the taxpayers waive the Investment Tax Credit that the new investment expenditures would have earned in the current taxable year.

Taxpayers who take the initiative to invest anew in an economic resurgence in New York and who relinquish their rights to both previously earned and newly earned Investment Tax Credit would become eligible for the economic resurgence initiative credit. The economic resurgence initiative credit would provide taxpayers with an effective incentive to encourage investment in our State -- that collectively done would assist in an economic resurgence in New York, upstate and downstate alike.

Legislative history

2007 Passes Senate 2008 REFERRED TO INVESTIGATIONS AND GOVERNMENT OPERATIONS

Fiscal implications

To be determined.

Effective date

This act shall take effect immediately and shall apply to taxable years beginning on or after January 1, 2011.