Legislative Memo

Ken Pokalsky
Senior Director Government Affairs
T 518.465.7517 x205


S.750 (Krueger)



Economic Development Incentives Application, Reporting & Clawback Provisions



January 23, 2009


The Business Council strongly opposes this legislation that would impose numerous new application, reporting, performance and “clawback” provisions on employer receiving tax credits or other assistance under the Empire Zones program or through Industrial Development Agencies.

Economic development incentives are offered to employers considering new investments and/or new job growth in the state, as a way to help offset high cost-of-doing business factors in New York, including taxes – especially real property taxes, energy, labor and others.  In many cases, these incentives have a sufficient impact on an employer's projected return on investment to make the difference regarding investment decisions.

This legislation would diminish the value of these incentives by imposing significant new risks on their recipients.

It is difficult to precisely gauge the impact of this bill, as it imposes unclear compliance obligations, and includes drafting errors and inconsistent provisions regarding existing economic assistance application and compliance requirements. 

Even so, the direction of this legislation is clear, and we believe this proposal would severely impact the state's economic development efforts.

One of our most significant concerns with this bill is that it would super-impose unreasonable new compliance requirements on existing programs such as Empire Zones.  For example, under its provisions, this bill would require repayment of the full value of any “state tax exemption” (sic) received by a company under the Empire Zone program, if that company failed to create or retain a specified number of jobs.  However, under existing tax law, the value of an employer's annual QEZE real property tax credit and tax reduction credit – the two major credits offered under the Empire Zone program - are calculated based on the employer's increase in employment over their base year's employment level. 

In short, an employer's increase in jobs is already used to calculate its annual level of QEZE tax credits, and failure to produce an increase in employment could result in no tax credit for that given tax year.  It makes no sense to use the same criteria to disqualify that employer from the Empire Zone program, and impose an immediate “clawback” of prior years' tax credit, based on what may be a one-year “deficiency” in jobs.

We are also concerned that this legislation would impose harsh penalties in the form of recapture of tax credits and capital assistance on companies that have made significant capital investments in the state, but whose employment numbers may fall short for any number of reasons, including those wholly outside the control of the employer, such as a significant economic slowdown or other market disruptions.

Overall, we believe this legislation would impose unreasonable, unworkable and – in some cases - unnecessary requirements on employers participating in state economic development purposes.

We also question the timing of this legislation. The Executive Budget also would impose significant, retroactive requirements on Empire Zone participants – which we oppose – but also puts on the table a proposal to adopt a more focused forward strategy for the state's economic development programs.  We believe any consideration of new application and compliance requirements should take place in that broader context

For these reasons, The Business Council strongly opposes approval of S.750.