Thursday, October 31, 2013

New York Offers Tax Exemptions to New Businesses in Designated Tax-Free Areas

In June 2013, New York State enacted the START-UP NY program to encourage new businesses to move to New York, especially upstate New York, by offering a full tax exemption from New York state taxes for businesses locating in tax-free areas on or near certain institutions of higher education. The START-UP NY program may provide significant benefits and should be considered by out-of-state businesses operating in high tax states or foreign businesses seeking to establish or expand their U.S. presence.

The tax benefits from the program are scheduled to commence on January 1, 2014 and the last date for businesses to be accepted into the program is December 31, 2020.

Benefits: The program offers a host of tax benefits for a 10-year period including:

  • The business being exempt from:
    • New York state income taxes1;
    • State and local sales taxes;
    • State and local real estate transfer taxes on leases of property to the business; and
    • The organization tax, and the Metropolitan Commuter Transportation District mobility tax.
  • Employees being exempt from:
    • All New York state and New York City incomes taxes on wages from the business during the first 5 years that the business participates in the program; and
    • New York state and New York City income taxes on the first $200,000 ($300,000 if married) of wages in years 6 through 10.
Eligibility and Restrictions: The eligibility requirements will likely be subject to discussions with New York State and the participating institutions. To take part in the program, businesses must (i) apply directly to a participating college or university, (ii) be located on property affiliated with a participating school, (iii) support the school’s academic mission and (iv) create net new jobs. Each participating school will determine how the business supports its academic mission as part of the application process. Net new jobs mean full-time wage paying jobs.

The following types of business will not be eligible for the program:
  • Retail and wholesale businesses;
  • Restaurants;
  • Real estate brokers;
  • Law firms;
  • Medical practices;
  • Real estate management companies;
  • Hospitality;
  • Finance and financial services;
  • Businesses providing personal services;
  • Businesses providing business administration or support services;
  • Accounting firms;
  • Businesses providing utilities; and
  • Energy production and distribution companies.
Geographic Regions: The program primarily benefits SUNY campuses and private universities located north of Westchester County. Businesses located in New York City or Nassau, Suffolk or Westchester Counties may only participate if they are “high-tech businesses” or in the formative stages of development.

1. It does not appear as though businesses locating in New York City under the program would be exempt from New York City income taxes.