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

9 Co-sponsors

• John J. Bonacic
• Patrick M. Gallivan
• Joseph A. Griffo
• Mark Grisanti
• George D. Maziarz
• Michael H. Ranzenhofer
• James L. Seward
• David J. Valesky
• Lee M. Zeldin

BILL NUMBER:S4890

Title of bill

An act to amend the tax law, in relation to the qualified emerging technology company facilities, operations and training credit

Purpose

To reinstate the QETC tax credit, which expired in 2011.

Summary of provisions

Amends Paragraphs (a), (b) and (h) of subdivision 12-G of section 210 of the tax law, and Paragraphs 1, 2 and 8 of subsection (nn) of section 606, to reinstate the QETC tax credit for taxable years beginning January 1, 2013. It makes clear that the language applies prospectively, and eliminates a clause that the Tax Department considered ambiguous. Adds provisions to eliminate the cap on total employment after the qualifying year, so long as 75% of total employees are locates in New York, and allows a partner in a company to be considered an employee only if he or she is full time and meets material participation requirements. Also, the sunset for the program is eliminated. If enacted, the program would be permanent.

EXISTING LAW:. The QETC expired in 2011.

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enhances and makes permanent the Qualified Emerging Technology Company Facilities, Operations and Training Credit originally enacted in the 2005-6 budget. The credit was 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 are now duplicating it in some cases at substantially greater levels than was offered in New York State. The secret to its effectiveness is refundability, which few other states offer at this time. Refundability is maintained in this reenactment.

The main body of the program remains intact The credit is the sum of credits available under the capital (18%), R&D (9%), and training ($4,000 per employee) components of the bill. The credits are claimable for four years, and cannot total more than $250,000 in any year. An eligible taxpayer must have 100 or fewer employees, although in subsequent years this number may increase, so long as 75% of full time employees are in New York State, have a 6% ration of R&D to net sales, have gross revenues of $20 million or less, and meet the QETC activities and product definition. Enactment of this legislation will reinstate New York's most important and effective program for nascent high-technology firms.

Fiscal implications

To be determined

Effective date

Immediate.