New York State Economic Development Incentives, Take II: Excelsior Jobs Program

By Kurt K. Ohliger, Jr. CPA (Jul, 2010)

On June 22, 2010 Governor David Patterson signed legislation amending the Economic Development law by adding a new Article 17, creating the Excelsior Jobs Program. This new incentive program is designed to encourage businesses to expand in and relocate to New York while maintaining strict accountability standards that guarantee eligible businesses deliver on job and investment commitments. Sound familiar? This is essentially the same objective as the program's predecessor, the Empire Zone program.

The Excelsior Jobs Program is a targeted program focusing on growth and expansion, through job creation and investment, for companies in a variety of industries, including manufacturing, biotechnology, high-tech, clean-technology, green-technology, financial services, pharmaceutical and agriculture. Companies that create and maintain new jobs or make significant financial investment will be eligible for four new fully refundable tax credits:

  • Excelsior Jobs Tax Credit: A credit between $2,500 and $5,000 for each new job created to cover a portion of the associated payroll cost;
  • Excelsior Investment Tax Credit: A credit equal to 2 percent of qualified investments in real or tangible property that have a depreciable life of at least 4 years;
  • Excelsior Research and Development Tax Credit: A 10 percent credit for new investments based on the Federal Research and Development Credit;
  • Excelsior Real Property Tax Credit: available to companies locating in certain distressed areas and companies in targeted industries that meet higher employment and investment thresholds. The credit is available for five years with the maximum first year credit being 50 percent of eligible property taxes assessed. The credit percentage decreases 10 percent per year during the remaining four years of eligibility.

Every company is eligible to apply for first three credits. Only certain companies are eligible to claim the real property tax credit. However, companies that are currently certified in the New York State Empire Zone program must agree to be permanently decertified from that program beginning with the first taxable year the company is eligible to claim credits under the Excelsior Jobs Program.

Companies can participate in the program by satisfying one of 3 eligibility requirements. The first requirement is a "net new jobs" threshold. The number of net new jobs required for eligibility varies according to the industry in which the taxpayer operates. For example, a manufacturing company meets the eligibility requirements if it creates a minimum of 25 net new jobs within its designated investment zone. A software development company must create a minimum of 10 net new jobs to be eligible. Secondly, a company can participate in the program if it undertakes a "regionally significant project". Again, the definition of regionally significant project varies according to industry. Under this requirement, a company must obtain a higher job creation threshold in addition to a significant capital investment within the state. Finally, a company can participate in the program if it satisfies a benefit-cost ratio of 10:1. To satisfy the threshold, a company must spend at least $10 on investment and new wages for every $1 of tax credit it receives under the program.

"Net new jobs" means jobs that:

  1. Are new to the state,
  2. Have not been transferred from employment with another business located in the state, including from a related person in the state,
  3. Are either full-time wage-paying jobs or equivalent to a full-time wage-paying job requiring at least 35 hours per week, and
  4. Are filled for more than six months.

A company must submit a completed application with the Empire State Development (ESD) which includes its plan for expansion and growth. Upon review of the company's plan, ESD will determine the maximum potential credits the company would be eligible for over the 5 year program period. ESD's calculation will be based on the Company's:

  • Projected capital investment;
  • Projected salary and benefits expected to be paid to new employees;
  • Projected research and development expenditures; and
  • Property taxes paid on its facility (for companies eligible for the real property tax credit).

ESD will enter into a formal agreement with the company. The agreement will clearly state the tax credits available to the company as well as the job and investment requirements for each year. Once the ESD verifies that the company has met its annual requirements, a certificate will be issued allowing the company to claim the eligible tax credits for the next five years.

The Excelsior Jobs Program represents another attempt by New York State to spur job growth and expansion of existing companies, as well as attract new businesses to the state. Its focus on the "clean and green" energy jobs of tomorrow, while supporting the manufacturing sector (the traditional backbone of our economy), will be successful if it is managed properly unlike its controversial, oft-abused predecessor, the Empire Zone Program.

Hopefully the above overview of the Excelsior Jobs Program has created the necessary awareness within your company. To further discuss the program or assess your company's eligibility potential, please feel free to contact your Dermody, Burke & Brown advisor.

 

The information reflected in this article was current at the time of publication. This information will not be modified or updated for any subsequent tax law changes, if any.

Return To The Focus Front Page

I would like my DB&B tax advisor to
contact me regarding this topic.

Email: