Relates to requirements under the qualified emerging technology company facilities, operations and training credit

Summary of provisions

In general, this bill maintains the provisions of the underlying but now expired law, enhancing the credit and amending subdivision 12-G of section 210 of the Tax Law, and section 606 of the Tax Law in order to make the following changes:

* Eligibility: Increases company gross revenue permitted for eligibility from $20 million to $40 million. Also excludes non-U.S. based employees from the employee counting requirements and establishes criteria for counting partners.

* Credits:

- R&D PROPERTY: Increases the credit from 18% to 30% for purchase of R&D property (defined by IRS code) used for testing, inspection, or quality control, also for fees paid for use of facilities and processes, and fees for production or commercial distribution of qualified products.

- RESEARCH & PATENT: Increases the credit for research, dissemination, and patent-related and grant application fees and expenses from 9% to 15% and maintains prohibition against counting advertising or promotion or litigation or consultant expenses as eligible expenses.

- TRAINING: Continues the 100% credit with a $4,000 annual cap per employee for training expenses, and maintains requirements that training occur only at NYS colleges and universities, that it relate to the company product, that the employee pass the course, etc.

* TERM & AMOUNT: Maintains the maximum term as five years (four years within an incubator), but increases the credit from $250,000 to $500,000 total per year for property and processes, and $100,000 for training. Changes the application of the credit to make it site based as well as at an entity level, to insure that the credit is available based on activity not entity.

* SUNSET: Strikes the current sunset, which made the credit inapplicable for tax years beginning on or after January 1, 2012.

Justification

To continue incentivizing growth of the emerging technology sector of New York's economy, this legislation enhances and makes permanent the Qualified Emerging Technology Company Facilities, Operations and Training Credit originally enacted in the 2005-06 budget. Since the credit's enactment, it has been shown to be an effective tool to encourage the creation, expansion and retention of these cutting edge firms. In the last year for which the credit was applicable, the Tax Expenditure report estimated its value at $22

million. Thus number suggests an investment of qualified expenses of over $80 million by these firms in New York, with a much greater return when the companies begin full-fledged commercial production of their products.

Imitation, it is said, is the sincerest form of flattery. Other states have seen the success of the credit and it is now being duplicated in other states and nations at substantially greater levels than currently offered in New York State. Therefore, this bill enhances the credit to make it comparable to programs in Canada, England, Singapore and states such as Pennsylvania, Washington, Maryland, North Carolina, New Jersey, Wisconsin and Illinois. The size of the eligible firms is doubled to encourage retention, the credit amounts are increased by two-thirds, alien employees that relocate to New York will not count against the employee limitation, and the new training credit is made easier to access. These enhancements include an increase of up to an annual benefit of $500,000 per eligible high-technology or biotechnology or other high-technology company, including $100,000 for high-technology training, an increase in the R&D credit from 18% to 30% and in the qualified research expense credit from 9% to 15%. In addition, this bill expands the existing eligibility requirements to include companies with gross revenues of $40 million or less. The bill also makes it clear that all partners in the aggregate are bound by the statutory caps per eligible site. Most importantly, the expired sunset for the program is eliminated. Enactment of this legislation will reinstate New York's most important and effective program for nascent high-technology firms.

Legislative history

S6838 of 2012 remained in the Tax Committee.

Fiscal implications

$15 million annually.

Effective date

This act shall take effect immediately.