Tax-Free NY Legislation
Contact: Ken Pokalsky
The Governor's draft tax-free NY legislation is now available here. The following provides our overview of this draft proposal.
Note that many key terms and concepts are undefined in the draft legislation, and some key administrative procedures relate to business eligibility lack specifics.
We appreciate members' input on the specifics of this legislation, the overall design and focus of this legislation, and its potential application to your business' investment plans in New York State.
- Outside of NYC and Westchester, Nassau and Suffolk counties, vacant land and vacant building space on a SUNY or community college campus, and up to 200,000 square feet of vacant land/space leased by college located within one mile of a SUNY campus or community college (or elsewhere if approved by ESDC);
- Outside of NYC and Westchester, Nassau and Suffolk county, up to 3 million square foot in aggregate of vacant land and vacant building space on a private university campus, or owned or leased by such university; notwithstanding other provisions, of this 3 million square feet allocation, 30,000 square feet shall be designated in each of Nassau, Suffolk and Westchester counties and each NYC borough except Manhattan, with SUNY, CUNY, private and community colleges eligible.
- Within New York City, one CUNY campus per borough can be designated, but they must be in a high poverty area.
- Twenty strategic state owned assets, which must be “affiliated with” a SUNY, CUNY, community college or private college campus, to be designated by the “TFNY approval board.”
- Must be either a new business to the state, or an expanding NYS business that creates new jobs without any related in-state job reductions, or a business that has “successfully completed residency in an NYS business incubator. “New business” precludes an entity that was engaged in the same line of business in NYS within the previous five years, unless the business had moved its operations out of NYS prior to 6/1/13.
- Be align with or advance the academic mission of the school
- Produce “positive community and economic benefits”
- Create net new jobs in first year of designation, and maintain net new jobs during its ten year eligibility period.
- Maintain higher in-zone and state-wide employment than existed in the year prior to its tax-free designation.
- Be in compliance with “all worker protection and environmental law,” and owe no past state taxes or local property taxes (applicants must also certify to “substantial compliance” with all environmental, worker protection and local, state and federal tax laws.)
Ineligible business categories:
- Retail, wholesale, restaurants, “hospitality.”
- Real estate brokers, law firms, real estate management companies, finance and financial services, accounting firms.
- Medical and dental practices.
- Personal service business.
- Business administration and support services (unless they demonstrate creation of at least 100 net new jobs).
- Utilities and energy generation and distribution companies.
- All tax benefits apply for a ten year period from the date of the business' designation.
- Employees of tax-free zones business will be exempt from state, NYC and Yonkers personal income taxes for all income for the first five years of the business' designation, and for income up to $200,000 (single filer), $250,000 (head of household) or $300,000 (joint filer) in the business' second five years of designation. Employees must work “exclusively” at the TFNY location, and be employed by the business for at least one-half of the taxable year.
- The business is exempt from taxation under the corporate franchise tax and personal income tax, with exempt income determined using a factor based on the business' share of total NYS property and payroll located in the tax-free area. Tax can be reduced to the AMT level, and any unusable credit is treated as a refundable overpayment.
- TFNY employers within the MCTD are exempt from the MTA “mobility” tax.
- Businesses operating exclusively within a tax-free area are exempt from Tax Law section 180 taxes on changes of capital and section 181 license and maintenance fees on foreign corporations.
- Businesses are eligible for sales/use tax credits or refunds for tangible property and services.
- Property leases are exempt from any state or local real estate or real property transfer taxes.
- A participating business may not claim any other tax credit with respect to activities or employees in a tax-free area.
- Businesses may be required to proportional reductions in tax benefits for failure to achieve net new job benchmarks. (This provision is to be set forth in the business' initial application, and are agreed to by the business and sponsoring campus.)
- Universities/colleges must develop and submit plans to the ESDC commissioner that specify areas to be designated, describe business types that “align with” its academic mission and their potential positive economic and community impacts, and the school's process for selecting participating business. The school must consult with municipalities in which off-campus sites exist. ESDC approves SUNY, CUNY and community college plans with consultation of the applicable chancellor; lands proposed by private universities are approved by three-person approval board (Governor, Senate and Assembly each designate one member.) Preference is given to private schools affiliated with a NYS incubator.
- Sponsoring campuses will solicit, accept and review applications from business, share all applications with the ESDC commissioner, require certification from the business as to its program eligibility
- Applicants must have a plan for recruiting employees from the “local workforce.”
- Proposals not rejected by ESDC within 60 days are deemed accepted
- If a SUNY campus proposes a lease of greater than 40 years or more than 1 million square feet, the proposal must be approved by the program approval board.
- SUNY, CUNY or community college campuses must meet state MWBE and prevailing wage requirements pursuant to Education Law section 361; projects on strategic state asset sites are subject to prevailing wage, such business are treated as a state agency for contract purposes, and may enter into project labor agreements.
- If participation is terminated by ESDC, the business immediately loses eligibility for all tax benefits, and the business' lease is rescinded effective 30 days after termination. A business' employees remain eligible for PIT benefits for the remainder of the tax year in which termination is effective. An administrative appeals process will be put in place.
- ESDC will prepare annual program report, showing the number of business applicants and approvals, total benefits provided and net new jobs, and participant specific information including the name and addresses of all accepted business, benefits received per business, net new jobs per business, and new investment per business.
- Each business must submit an annual report to ESDC with information required by the commissioner, including wages paid in net new jobs within TFNY areas.
- ESDC commission may disclose business specific information on tax benefits received, net new jobs created, and total tax benefits provided to the business' employees.
- Business must agree to sharing of data by Departments of Tax and Finance and Labor, and allow ESDC and college access to books and records necessary to monitor compliance.
- Business must propose performance benchmarks for job creation, job titles and expected salaries, and be subject to program suspension or termination, and/or proportional benefit recovery for failure to achieve benchmarks.
- TFNY applicants must describe whether the business would “compete with other businesses in the same community but outside the tax-free NY area.”
- In evaluating whether a business designation would have positive effects, ESDC may reject proposals from business that “competes with other businesses in the same community but outside the tax-free NY area.”