We often get questions from clients and potential clients about Start-Up NY ranging from detailed inquiries about the program to general questions about eligibility. This primer serves an overview of the most common questions that we are asked about the Start-Up NY program.
Start-Up NY is Governor Cuomo’s flagship growth plan for businesses across New York State, which he announced back in May of 2013. The program provides broad-based tax incentives for businesses that locate on or near an approved college campus, with the goal of spurring growth in new and existing businesses that reside in or relocate to New York.
Eligibility requirements for new businesses, businesses doing business outside of New York, and businesses already doing business in New York are not the same.
The easiest category to qualify under is a brand new company that will be located in New York. This category needs no further explanation.
Next are businesses that recently relocated to New York. For eligibility under this category, the company must not be located or operated within New York at the time its application is submitted to become a part of the program.
The third main category involves companies already established in New York. In order to be considered as “from” New York State, the business must be an expansion of a company that already has New York employees. These businesses must show that they are creating jobs and not merely moving already existing jobs within the state.
Regardless of what type of company you have, there are three additional requirements. First, the mission and activities of your business must align with or further the academic mission of the campus, college, or university sponsoring the tax-free zone, where the company would like to re-locate. Second, the business must also demonstrate that it will facilitate positive community and economic benefits. Finally, the business must show that it has created jobs during the participation period. In other words, the average number of employees in New York State during the year must equal or exceed the average number from the preceding year of your application.
So long as your business meets all of the above requirements and is not classified as one of the specifically excluded industries, your business may qualify for Start-Up NY. That said,
the State specifically wants to attract the following industries:
- Advanced Materials & Manufacturing
- Biotechnology & Life Sciences,
- Technology & Electronics,
- Optics & Imaging,
- Cleantech & Renewable energy,
- Transportation Equipment, and
- Food & Beverage.
Even if your business type is classified as ineligible, your company’s data centers and back offices could still be accepted into the program.
Ineligible industries are as follows: retail and wholesale businesses, restaurants, law and accounting firms, medical or dental practices, real estate management companies/brokers, hospitality, retail banking, utilities, and energy production.
One of the main incentives for participation in the program is the numerous tax benefits offered to its participants. These are the most significant tax benefits of the program:
- Companies that have 100% of their operations in tax-free zones will have their tax liability completely eliminated. For those that have only a portion of their operations located in a tax-free zone, their liability will be pro-rated based on the percentage of their operations located in the tax-free zone;
- If businesses are completely located within the tax-free area, then they would be exempt from organization, license, and maintenance taxes and fees, which are imposed on companies based on the value of their stock;
- The Metropolitan Commuter Transportation District (MCTD) mobility tax is a tax that is based on the businesses payroll expenses located within the MCTD. If a business is completely located within the tax-free area, they would be exempt from all liability once certified;
- Once a company is certified, a subsequent application to the Tax Department would result in a credit or refund for any sales and use taxes paid on goods or services within the tax-free zone;
- Any real property leased in the tax-free zone to an approved business is exempt from the real estate transfer tax; and
- Employees that are hired under the program, and whose jobs are certified as new jobs in a tax-free area, will pay no local or state income taxes for the first five years. After the first five years, the income tax liability is based on the employee’s income. However, there is an annual cap per business on the number of employees who are eligible for the income tax benefits.
These incentives can add up to substantial savings for qualifying businesses.
How to Apply?
The first step is to complete the application form available online which allows the state to gain key information about your business. The state will then look to match your business with a campus, college, or university based on geographic location and academic missions. Businesses can also request certain schools that they would specifically like to work with on their application. Start-Up NY will then send your application to that institution. The last step is for that institution to approve the application, which then goes to the state for final review and approval.
The process can be time consuming, but the benefits can be very valuable to those that qualify. We have followed this initiative and helped clients navigate the application and approval process. If you have any questions, please contact Matthew Wagoner via email or telephone for a free consultation.