Relates to New York state incubators and hotspots

Summary of provisions

Section 1. Amends incubator law (16-v of the urban development corpo- ration act), to allow incubators and hotspots to certify companies for the new tax credits and other items under the new 38-A of tax law.

Section 2. New tax law section 38-A, NYS Incubator program tax benefits. Key provisions:

For incubator clients:

*Angel investment credit (non-refundable): 30% credit on a qualified investment of $250,000 or less in a qualified entity that is an incuba- tor or hotspot client. Investment must 1) include at least $25,000 in cash, 2) be in the form of an equity security, and 3) cannot constitute acquisition of the eligible entity. The investor may take the credit for three years at 1/3 per year with carry over allowed for unused credits. A qualified entity is small company with assets less than $10 million and 75% of operations and FTE personnel in NYS A qualified entity may receive up to $1 million in qualified investments by qualified investors in any calendar year. The credit is capped at $5 million in 2015, and $7 million in 2018, and is effective January 1, 2015.

*R&D credit (refundable): Two credits for qualified emerging technology companies (QETCs) that are Franchise or PIT taxpayers and incubator or hotspot clients. Credits can be claimed for up to four years, or while company is an incubator or hotspot client, whichever period is shorter the R&D Property Credit-18% of qualified R&D property (must also qualify under IRC section 41), and the R&D technology expenditures credit-9% of qualified expenditures for emerging technologies that qualify under IRC section 41. Also includes costs associated with the preparation of patent applications, patent application filing fees, patent research fees, patent examinations fees, patent post allowance fees, patent main- tenance fees, etc. Credit is limited to $250,000 per year The credit is capped at $5 million starting in January 1, 2015, increasing to $7 million in 2018.

*Accelerated depreciation. Provides a 100% depreciation in first year of property acquired by a company that is a client of an incubator or hotspot, or which is within two years after graduation, or bonus federal depreciation.

*Procurement: allows the state to purchase goods and services from incu- bator and hotspot client companies under the small business provisions of State procurement law.

For incubators:

*RPT Exemption provides that incubators are to be considered as not for profit tax exempt entities.

*Energy rate Create an incubator energy rate equal to the incremental cost of providing energy to incubators or hotspots.

Existing law

16-v of the urban development corporation act crated the incubator and hotspot law. This bill adds new provisions and strengths.

Justification

This bill will if enacted into law increase the ability of incubators and hotspots to continue to create jobs and companies and wealth in New York State, by opening up new avenues of financing, using the state's powers of procurement to aid in company expansion, and by reducing costs to incubators, thus reducing fiscal pressure and allowing lower rents:

*Adding incentives for outside financing of companies through the angel investor credit.

*Providing refundable R&D credits to qualified emerging technology companies in incubators and hotspots during their startup periods.

*Allowing 100% depreciation, or any of the federal schedules for depre- ciation (NYS currently only allows level depreciation) for companies in an incubator or hotspot, and for two years after graduation. this should help companies graduating from incubators into the community at a time when they will be buying equipment.

*Reducing fiscal pressures on incubators by assuring that they are treated as not for profit educational entities, and establishing an energy rate for them.

Incubators and hotspots are and have been doing the work of creating jobs in New York State since they were first created in this state in 1957. This bill will enhance that effort.

Fiscal implications

To be determined.

Effective date

January 1, 2016