S.2609-B / A.3009-B, Part J (Budget)


Vice President of Government Affairs


S.2609-B / A.3009-B, Part J (Budget)


Restrictions on State Sales Tax Abatement by IDAs



The Business Council opposes this component of the Executive Budget that would place new restrictions on the ability of industrial development agencies to include state sales tax abatement in their project assistance packages. It would also categorically preclude state sales tax abatements for project categories not specifically listed in the Excelsior program statute.

Since Excelsior only applies to a limited number of business categories, this legislation would have the result of reducing IDA support for a wide range of community and development, site rehabilitation, and other projects – including projects identified as priorities in Regional Economic Development Council strategic plans. With the demise of the Empire Zone program, and the fact that these types projects are already categorically precluded from Excelsior, it will become increasingly difficult for local developers to put together competitive incentive packages for new investment.

This bill will also add new layers of approval, and new delays, to local economic development efforts by requiring that any IDA proposal to include state sales tax abatement be reviewed and approved by Empire State Development, with "consultation" by the applicable regional economic development council. Moreover, the proposed legislation adds another element of uncertainty by allowing ESDC to modify the IDA's proposal to a developer by reducing the amount of abatement to be allowed or restricting the project components to which the abatement can be applied.

Finally, the proposed legislation diminishes the immediate value of this sales tax abatement by converting it from an up-front exemption to an after-the-fact refund or credit, adding time delays to the realization of this tax benefit, imposing an additional paperwork requirement on the project sponsor, and apparently leaving it up to the Tax Commissioner as to whether the benefit will be in the form of a refund or a credit.

While we appreciate the Administration's concerns regarding effective use of state tax credits and abatements, we believe this legislation represents the wrong approach. An alternative would be to reinstate the exclusion of IDA assistance for most categories of market-driven retail projects, with limited exclusions for projects such as Tourism destination projects, projects in highly distressed areas, and projects that would provide a product(s) not otherwise available to people in the region served by the IDA.

However, we find that this proposal eliminates a valuable tax incentive for projects that result in significant local economic benefit. Its passage would diminish one of the few remaining local economic development mechanisms. For these reasons, The Business Council opposes legislative approval of Part J.