The Business Council generally supports the proposed amendments to the Excelsior Jobs program included in the Executive Budget. When the program was adopted in 2010, we had significant concerns that because of design flaws, its tax credits would provide ineffective incentives for new investment and the creation of new, well paying jobs.
Many of our concerns are being addressed in the Executive Budget proposal.
For example, the proposal would base the Excelsior real property tax credit on the post-improvement value of property, rather than its pre-investment value as is the case under current law. We believe that using the post-investment property value makes sense, as it more clearly rewards new investment in new capital plant. The bill also increases the credit for years 2 through 5 of the program (to 45, 40, 35 and 30%, respectively), and extending the credit for an additional five years (at 25, 20, 15, 10 and 5%, respectively). As a result of these changes, we believe Excelsior will have a much more effective real property tax component.
The budget would also limit the elimination of concurrent Empire Zone and Excelsior credits to a specific location, rather than a specific taxpayer. We believe this amendment is an improvement over current law, but does not provide a complete fix. If a business makes a wholly new investment in New York State, it should be able to qualify for full Excelsior benefits for that project, in addition to continuing to receive previously earned Empire Zone benefits. The fact that the business had made a previous investment at the same location that qualified for Empire Zone benefits should have no impact on its eligibility for incentives under Excelsior.
The budget proposes a restructuring of the research and development credit to assure that R&D investments receive the full intended value of the Excelsior program’s R&D incentive. While we support this change, eventually, New York needs to adopt a more aggressive, stand-alone, as of right research and development investment tax credit that would not be limited to Excelsior program participants.
The budget also proposes changing the calculation of the jobs tax credit to the product of the gross wages of new employees and 6.85% (rather than the current sliding scale of 1.33 to 5%); and eliminating the $5,000 per job cap on credits. Again, this amendment will make the Excelsior program more effective in promoting the location of new, well paying jobs in New York State.
Given that Excelsior has become the state’s flagship economic development program, we believe it is appropriate that the Executive Budget propose a five year extension of the program. The bill would increase the cap on total Excelsior credits to $250 milli0n for years 2016 through 2019, and extends the program through 2024 (with the cap reduced to $200 million for 2021 and falling by $50 million increments the next 3 years.) It also extends the eligibility for all Excelsior tax credits from 5 to 10 years.
Finally, we support the proposal to allow businesses to claim tax credits upon achievement of interim job, investment and/or R&D targets. This change maintains the program’s commitment to reward actual investment and job growth, while allowing tax benefits to flow based on achievement of specific interim goals.
Overall, we believe these amendments will result in a better, more effective, while assuring significant economic benefits to New York State. The Business Council supports their adoption.