Overview of FY 2010 Executive Budget Empire Zone Program Amendments 12/29/08
Staff Contact: Ken Pokalsky
The proposed NYS Executive Budget for Fiscal 2010 includes dramatic changes to the Empire Zone program that, if adopted, would significantly affect current program participants and limit new business certifications. Key provisions are summarized below.
We look forward to your input as we assess these proposals, and hope that you can remain involved in our advocacy efforts in response to these and other budget issues.
During 2009, all businesses certified prior to 4/1/05 will be required to show at least 20 to 1 ratio of wages and benefits paid and capital investments at their QEZE sites versus empire zone tax credits used at such sites. This one-time test will apply to all tax years for which the company has been certified since 2001. If a business exceeds this threshold, they will receive a benefit retention certificate. If not, they will be decertified, and will be ineligible for additional QEZE credits, and will be precluded from carrying forward any QEZE credits earned in prior tax years. Decertification will apply to tax years beginning on or after 1/1/08. The Commissioner has discretion to continue certification for businesses that fall below 20:1 based on “other economic, social and environmental factors.” A business can appeal a decertification to the Commissioner, showing either they meet the threshold, or that “extraordinary circumstances” have prevented it from meeting the threshold.
As of 4/1/09, new QEZE certification will be limited to manufacturing and financial service enterprises, and to “extraordinary projects,” with each category to be defined in regulation. Criteria for “extraordinary projects” will include substantial job creation/retention; substantial capital investment; degree of exports; and other factors. To be newly certified, a company will have show an estimated 20 to 1 ratio of wages/benefits/investments to zone tax credits for the first 3 years after certification, and document achievement of that ratio after three years in the program. Companies in these categories are eligible for benefits regardless of whether they are located within previously designated zone boundaries, and would be treated as if they were in an “investment zone,” for purposes of calculating the QEZE real property tax credit.
In addition to the new 20:1 cost/benefit threshold discussed above, existing criteria for decertifying QEZEs would be modified to:
- Eliminate the role of the Department of Labor in de-certifications;
- Consider material misrepresentations made in a QEZE's business annual reports;
- Consider failure to meet projected investment levels;
- Eliminate consideration of economic factors not anticipated by, or beyond control, of the business in evaluating its job creation and retention.
- No additional Empire Zone designations or amendments, designations of “regionally significant projects,” or designations of “clean energy enterprise” would be allowed after 3/31/09.
- The local zone administrative boards and local certification officers would have no role in approving certificate retentions or new certifications. State funding for local zone boards would be eliminated.
- Businesses certified before 4/1/09 are required to include in their annual reports data on tax benefits “used and refunded,” rather than credits claimed.
- Businesses certified on or after 4/1/09 will be subject to new annual reporting requirements on employment, wages and benefits, total capital investments and total empire zone tax benefits used and refunded.
- The current sales tax exemption for the purchase of tangible property and services and the construction and maintenance of buildings within zones is replaced with a sales tax credit/refund, applicable to state-imposed sales taxes and, as an option, to locally imposed sales tax.
- The Department of Tax and Finance would be required to issue an annual report identifying each taxpayer claiming an empire zone credits and/or receiving an empire zone sales tax credit/refund, and the amount of credits/refunds they earned or received,
- Adopts Executive Law definitions of “minority owned business enterprise,” “woman owned business enterprise,” and “minority group member.”
The Administration has said that between one quarter and one half of currently certified QEZEs could lose decertified under this proposal. The Administration is projecting $272 million in savings for Fiscal 2010