The Empire Zone Program

Direct Equity Investments

A Zone certified business may offer a potential investor an immediate 25% NYS tax credit for the amount of his/her investment into the business. This is in addition to any return-on-investment offerings the business and investor may otherwise negotiate.

Basic Requirements

• An Empire Zone certified business must request from the local Zone Administrative Board an allocation of credits prior to making an offering to an investor. This request must be in the form of a written summary including the number of jobs to be created in ratio to the amount of investment; a description of any equipment to be purchased and the economic impact the equipment will have on the operations of the business.
• An Empire Zone certified business must employ 250 or fewer workers during the 12 month period preceding the month in which the investment is made.
• The investor may not be an owner, existing stockholder or partner of the business.
• The investment must contribute significantly to an activity, which has tangible economic benefits, such as a start-up, expansion or modernization.
• The investment must have the potential to create new jobs.
• The investment must increase the capital available to the business, not merely replace existing debt or equity.

The Process

• An Empire Zone certified business discusses its project with the local Zone Administrative Board in order to determine the amount of credits the business will be allowed to offer potential investors.
• Once a commitment is made by the Board (by resolution), the business owners may begin negotiations with potential investors.

Credit Approval

• The investor must complete Form Z5 Application for Eligibility to Claim a Zone Capital Credit Direct Equity Investment and forward to the certified business owner for further processing.
• The Zone certified business owner must complete Form Z5a-List of Direct Equity Investors in EZ-Certified Business. A package, which includes (1) Form Z5a (2) Form Z5 from each investor, and (3), all necessary exhibits must be sent to the local Zone Administrative Board for approval.
• The Board forwards the approved application to Empire State Development for final approval.
• Once approved by the State, a credit certificate (Form Z10) will be issued for each investor. Each taxpayer is limited to a $100,000 tax credit in this category.
• The Z10s will be sent to the Zone Coordinator who must obtain the signature of the Zone Board Chairperson on each form. The Coordinator then forwards the Z10 to each investor.
• The investor attaches Form Z10 to the NYS Taxation & Finance DTF-602 form at the time of the investor's annual tax filing period.