The Empire Zone Program

Tax Incentives and Benefits

The following is a summary of the incentives and benefits available in the Empire Zone program.

Investment Tax Credit

An investment tax credit is available for the purchase of production property and equipment used to produce goods. This credit is also available for property and equipment purchased for the financial securities industry, industrial waste treatment facilities, air pollution control facilities, and research and development.

The credit is equal to 10% for business corporations and 8% for personal income tax filers.

The investment tax credit cannot reduce the franchise tax for any tax year to less than the alternative minimum tax or the fixed dollar minimum. Any amount of the credit that cannot be used in a given tax year, may be carried over to following years. A taxpayer that qualifies as a new business may elect to treat 50% of the credit amount available for carryover as an overpayment of tax.

Employment Incentive Credit

An employment incentive credit is available to businesses that have utilized the investment tax credit and creates new employment in the 3 years immediately following the tax year the credit was allowed. The credit each year is equal to 30% of the allowable investment tax credit.

To be eligible, the average number of employees must be at least 101% of the average number of employees employed in the Zone in the year proceeding the taxable year the investment tax credit was allowed.

The employment incentive credit cannot reduce the corporate tax liability to less than the alternative minimum tax or the fixed dollar minimum. Any incentive credit not used in a current tax year may be carried over to the following year or years.

This credit is allowed in conjunction with claiming the wage tax credit.

Wage Tax Credit

The wage tax credit is available for every newly created full time job in the Zone for up to five consecutive years.

The credit is $1,500 per new full time employee, or $3,000 for a new "targeted" full time employee. Effective for tax years 1/1/05 and after, a certified business entity in an Investment Zone may increase the wage tax credit by $500 for each qualifying employee who received wages in excess of $40,000.

"Targeted" employees are persons whose income are below the poverty level, recipients of public assistance, an honorably discharged member of any branch of the armed forces of the United States or may be eligible for benefits under the Job Training Partnership Act.

To qualify for the credit, the average number of employees in and outside the Empire Zone must exceed the average number of employees in the four years proceeding the first year the Zone wages are paid.

Individuals employed by a related company for the previous sixty months may not be included as new employees, unless a wage tax credit was never claimed on that individual prior.

QEZE Credit For Real Property Taxes

Available for a 10-year period, a Qualified Empire Zone Enterprise (QEZE) is allowed a refundable credit against their business tax equal to the percentage of real property taxes paid in the Zone and the percentage of employment increase.

The tax credit is based on a formula that is the product of two factors:

1. Percent increase of employment in the Empire Zone
2. The amount of real property taxes

To be eligible, the QEZE must own property and pay the real property taxes (or make payments in lieu of taxes)

• The taxes are paid under a written lease agreement executed or amended on or after June 1, 2005;
• The taxes become a lien on the property during a tax year in which the lessee is both certified and a QEZE; and
• The lessee made direct payment to the taxing authority and has received a receipt for the payment from the authority.

Property taxes are paid to the taxing jurisdiction when due, then claimed as a credit on NYS income taxes. A limitation on the amount of the real property tax credit claimed may be limited to the greater of: A) 25% of wages, health benefits & retirement benefits paid to NET NEW EMPLOYEES during the taxable year. The credit may not exceed $10,000 per employee or B) the capital investment limitation calculated at 10% of the cost or other basis is, owned by the QEZE, multiplied by the greater of: A) the percentage of physical occupancy by the QEZE or related person or B) the percentage of the cost to the construction, expansion or rehabilitation of the real property.

QEZE Tax Reduction Credit

The tax reduction credit is applied to business related income, based upon the business' structure. The credit is available for a ten year period. The tax reduction credit may reduce the company's tax liability to zero, eliminating the alternative minimum tax and the fixed dollar minimum.

The tax reduction credit is based on a formula that is a product of the following factors:

1. Percent of employment increase
2. Zone allocation factor
3. The tax factor

A new business exclusively in an Empire Zone is able to eliminate its entire NY income tax burden with this credit.

Sales Tax Exemption

An exemption from the 4% NYS sales and use taxes for tangible personal property for use in an Empire Zone is available.

The sales and use tax exemptions are available for 10 taxable years for an eligible certified business.

All tangible personal property must be predominately used or consumed by the qualified business in the Empire Zone including motor vehicles and tangible personal property sold to a contractor, sub-contractor or repairs to real property owned by a qualified business.

Excluded from this exemption are: food, drink, hotel occupancy and amusement charges.

To be eligible for the sales and use tax exemption, the business must equal or exceed its base period employment both in the Zone and outside the Zone in New York State for the taxable year immediately prior to the tax year you are in.