Authorizes the trading of existing but unused research and development credits and existing but unused net operating loss deductions to existing entities

BILL NUMBER:S1472A

Title of bill

An act to amend the tax law, in relation to providing for direct private assistance to emerging technology companies through the trading of their existing but unused research and development credits and their existing but unused net operating loss deductions to existing corporations and partnerships in return for private assistance

Purpose of the bill

To authorize the trading of existing unused research and development credits and existing but unused net operating loss deductions to existing entities. This bill establishes a corporation business tax benefit certificate transfer program to allow new or expanding small high technology companies in New York to surrender its unused amounts of research and development tax credits and unused net operating loss carryover to other corporations in exchange for private financial assistance.

Summary of specific provisions

§ 1- Creates the "Small New York Based High-Technology Business Investment Tax Credit Act."

§ 2- Creates-a new § 212 to the Tax Law, which authorizes the Tax Department to develop a corporation business tax benefit certificate transfer program. The Commissioner, in cooperation with the Commissioner of the Department of Economic Development would review and approve applications by new or expanding emerging technology and biotechnology companies in this state with unused but otherwise allowable carryover of research and development tax credits pursuant to § 210 subdivision 12(b)(1) of the Tax Law, and otherwise allowable net operating loss carryovers pursuant to § 208 subdivision 9(f) of the Tax Law, to surrender those tax benefits in exchange for private financial assistance to be made a corporation filing pursuant to Article 9A of the tax law, who has obtained a corporation business tax benefit certificate in an amount equal to at least 75% of the amount of the surrendered tax benefits.

§ 3- Adds a new § 606-a to the Tax Law to provide for a similar program but allows for surrender of research and development tax credits pursuant to § 606(a)(2)(A) of the Tax Law, and otherwise allowable net operating loss carryovers pursuant § 617(b), and 633(b) of the Tax Law.

§ 4- Effective date.

Justification

Emerging high-tech companies often find difficulty in accessing the capital they require to grow and create high-value jobs. Traditional bank financing does not meet their needs, and venture funds are not always available at certain stages of development and in various regions of the State.

These small firms often need numerous infusions of capital before they become profitable. They are not able to take advantage of the net operation loss, (NOL) , deduction in the Tax Law, as without profits, they have no tax liability. Allowing new, high-tech firms to sell their NOLs to profitable companies provides a market-based solution to their capital access problems, and benefits other firms in the economy as well.

Prior legislative history

2011-12; S.4228A/A.3132A - Referred to Investigations and Gov't Ops 2009-2010: A.2818 2007-2008: A.3022/S.2996 2005-2006: A.3525-A/S.1386-A 2003-2004: A.6147/S.2997 2001-2002: A.944/S.4210 1999-2000: A.7289-A/S.5680

Fiscal implications

None.

Effective date

This act shall take effect immediately and shall apply to taxable years which commence on or after January 1, 2015.