The Business Council strongly supports this legislation that will make crucial technical amendments to recent changes in the Empire Zone program. These amendments are necessary to avoid significant economic damage to New York State businesses, and long term damage to the state's future economic development efforts.
Importantly, this bill will clarify recently adopted language regarding the recertification of Empire Zone companies, to assure that businesses that have met their obligations under law, that have made significant investments in the state, and that have grown and retained jobs in New York are not subject to unintended de-certifications.
It will also assure that New York State keeps its commitments to businesses that made business decisions based on the availability of Empire Zone benefits, and that have participated in the program in good faith.
The Empire Zone changes adopted with the final FY 2010 budget mandated a review of all current zone companies based on two newly adopted criteria, including a so–called “shirt-changer” test that required decertification of any company certified prior to August 1, 2002, to which employees or real estate was transferred from another company with similar ownership. Under the budget language, this broad decertification test applies to all such companies regardless of their job creation or investments in the state. As result, companies that have made significant investments in the state face decertification under this new criteria. While the budget gives ESDC discretion to extend zone benefits to these businesses, these companies should not be subject to potential decertification in the first place. This bill exempts businesses from the “shirt-changer” test based on post-certification job growth and capital investments, and protects them from potential decertification based on this retroactive criteria and new evaluation process.
The recent Empire Zone changes also allow decertification of any company that had a “change of ownership.” Described as a technical change that simply allows for decertification of a business to which Empire Zone eligibility could not be transferred, the budget language is excessively broad. For example, it could be read as authorizing decertification of a business partnership that had any change in its partners. This bill addresses this problem by stating that change of ownership means change in a federal tax ID number.
This legislation also addresses the potential retroactive repeal of Empire Zone credits already earned by a business enterprise. The budget language mandates a review of all zone businesses during 2009 based on newly imposed criteria. However, the new budget language is unclear on the effective date of any decertifications based on this retroactive criteria. The Department of Taxation and Finance has argued that such decertifications would be effective for tax years beginning on or after January 1, 2008, meaning that businesses being decertified based on criteria that didn't exist in 2008 would loose tax credits already earned for 2008. It is bad enough for New York's reputation that it has adopted retroactive tests for tax credits; it is especially damaging that the state would apply these to prior tax years. This bill clarifies that any decertifications based on the new “economic return” or “shirtchanger” tests would apply to tax years beginning on or after January 1, 2009.
It is essential that New York keep its economic development commitments to businesses that have participated in the Empire Zone program in good faith, and that have expanded employment and made significant investments in the state. We believe the technical amendments in S.5988-A/A.8803 support this important goal, and avoid unintended, adverse consequences of language adopted with the FY 2010 budget.
For these reasons, The Business Council strongly supports approval of S.5988-A/A.8803.