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New York State Empire Development Zone Program open to all of Essex County


The Economic Development Zones Program saw changes with the 2000-2001 State Budget to provide one of the State's best economic development tools for businesses.

As described by the Moriah Port Henry Essex County Empire Zone, they highlighted the original credits (see proceeding paragraph, "Original Plan") and made updated changes in '04 (see table below, "Updated Plan").  We include both plans, so the viewer can see the progress of the program.  We suggest you call the agents at the Economic Development Zone Program and schedule an appointment to go over your business plan.

 

ORIGINAL PLAN _____________________________________________________________________________

The three new Empire Zone credits are:

(1) a tax reduction tax credit (eff 1/1/01)
(2) a real property tax credit (eff 1/1/01)
(3) a sales tax exemption for tangible personal property and services (eff 3/1/02)

The existing EDZ credits are:

(1) a five-year wage tax credit (as of 1/1/01 @ $3,000 for target and $1,500 for non-targeted workers)
(2) a 10% investment tax credit with a three year 3% employment incentive credit
(3) a sale tax refund for building materials
(4) a 25% zone capital tax credit
(5) a 485e real property tax abatement
(6) utility rate reductions

How do you qualify?

A business must be EDZ-certified prior to July 1, 2005 and maintain or increase employment in the Zone and in the State in the year they are qualifying based on a previously determined five-year average employment number. The Empire Zone credits are self-administering in that they are claimed when the business files its tax return on an annual basis. (Eligibility must be self-determined each year based on the above criteria).

So what are the credits?

Tax Reduction Tax Credit - is applied against business corporate taxes, personal income taxes, banking corporation taxes or insurance corporation taxes. The credit is computed by formula based on numbers of jobs created, the business assets in the Zone and in the State, the income taxes owed by the business. The credit is available for a 15 years (10 years at 100% decreasing by 20% each year thereafter).

Note: The tax reduction credit may reduce the company's tax liability below the alternative minimum tax to as low as zero if the business is located entirely within the zone, or as low as the fixed dollar minimum where the business has locations both in and outside the zone.

Real Property Tax Credit - This credit is applied against business corporate taxes, personal income taxes, banking corporation taxes or insurance corporation taxes. The credit is figured by formula based on the number of jobs created and the real property taxes paid on property in the Zone. The credit is available for a 15 years (10 years at 100% decreasing by 20% each year thereafter).

Note: The real property tax credit may reduced the company's tax liability to the alternative minimum tax or the fixed dollar minimum. Unused credits may be obtained as a cash refund in the year in which they were earned.

Sales Tax Exemption -from the 4% NYS sales and use taxes for tangible personal property and services sold to a qualified business is available. A company must register with the NYS Dept. of Taxation & Finance and be issued an exemption certificate. This certificate is valid for a 10 year period as long as the business meets or exceeds its base year employment number.

The Economic Development Zones Program saw additional changes with the 2004 State Budget to provide

economic development tools for businesses.  Please review table below.

 

UPDATED PLAN _____________________________________________

 

INVESTMENT ZONES

DEVELOPMENT ZONES

MANUFACTURERS

REGIONALLY SIGNIFICANT PROJECTS

- Designated under (a) and (d)

- Zone acreage must be wholly contained in 3 separate and distinct contiguous areas, subject to one time EZDB unanimous approval.

 - These areas must be identified by January 1, 2006

 - Can apply for one additional area based on need – total not to exceed 2 sq. mi.

 - Must not include stringers

- Designated under (c) and (b)

- Zone acreage must be wholly contained in 6 separate and distinct contiguous areas, subject to one time EZDB unanimous approval.

 - Up to 3 of the separate and distinct areas shall be Investment Zones, based on census tract criteria.

 - These areas must be identified by January 1, 2006

 - Can apply for one additional area based on need – not to exceed 2 sq. mil.

 - Up to 12 contiguous areas for zones within two counties.

 - Must not include stringers

 

- With 50+ new jobs are regionally significant projects

 -- Can be located outside separate and distinct contiguous areas (will not count against zones total acreage).

 -- EDZB approval not required.

 -- Exempt from new BR requirements.

Definition:  engaged in production of goods by manufacturing, processing, assembling, refining, mining, extracting, farming, agriculture, horticulture, floriculture, viticulture, commercial fishing, or engaged in “emerging technologies” (pursuant to PAL).

-   Located outside separate and distinct contiguous areas (will not count against zones total acreage)

 -- Must demonstrate to EZDB that the project cannot be accommodated within the separate and distinct areas.

  1.  Agri-business, High-tech, Bio-tech;

>$10 million investment and > 20 new jobs

 2.  Financial, Insurance, Distribution:  300+ new jobs.

 3.  Other projects (ESD will define via rules and regs.).       

-      Must be presented (and meet criteria) to Designated Board for approval by ZAB and/or DED.

-      #3 requires 5 of 7 voting members approval vs. simple majority for #1 & #2

  

 

ORIGINAL ZONE BENEFITS – (AS OF 4/1/05)

 

INVESTMENT ZONES

DEVELOPMENT ZONES

MANUFACTURERS

Investment Tax Credit / EITC:  no change

 

Investment Tax Credits / EITC:  no change

 

Wage Tax Credit:

 

  • Base period = four years proceeding year certified (includes jobs in the zone and in NYS)
  • Credit increased $500 for wages over $40,000
  • Adds Honorably Discharged as targeted workers

Wage Tax Credit:

 

  • Base period = four years proceeding year certified (includes jobs in the zone and in NYS)
  • Adds Honorably Discharged as targeted workers

 

 

 

Zone Capital Credits:

 

  • New Zone Capital Credit Corporations allowed.  (Existing Zone Capital Credit Corps are not affected, however, contributions from 1/1/05 are no longer eligible for the 25% tax credit.)
  • No change to Direct Investments or Community Development

Zone Capital Credits:

 

  • New Zone Capital Credit Corporations allowed.  (Existing Zone Capital Credit Corps are not affected, however, contributions from 1/1/05 are no longer eligible for the 25% tax credit.)

No change to Direct Investments or Community Development

 

Sales Tax Refund:  No change

 

Sales Tax Refund:  No change

 

 

Utility Rate Reduction:  No change

 

Utility Rate Reduction:  No change

 

 

485-3 Real Property Tax Abatement: No

change

485-3 Real Property Tax Abatement: No

change

 

 

  

QEZE TAX CREDITS – (as of 4/1/05)

QEZE New Business Test

 -        No similar in ownership and operation, or, Identical to ownership and operation is operating in different counties of the State (will have same business tax benefit period)

-        For businesses certified before 8/1/2002, with base period of zero years, or zero employment for its base period – deemed not to be a new business if not formed for valid business purpose and formed solely to gain EZ benefits.

-         

INVESTMENT ZONES

DEVELOPMENT ZONES

MANUFACTURERS

 

Sales Tax Exemption 

  • Benefit period of 10 years
  • Employment great than zero
  • New Business Test
  • Base period = three years preceding test year (includes jobs in zone and in NYS)

 

Sales Tax Exemption 

  • Benefit period of 10 years
  • Employment great than zero
  • New Business Test
  • Base period = three years preceding test year (includes jobs in zone and in NYS)

 

 

Tax Reduction Credits 

  • No change in the formula from pre-4/1/05
  • Benefit period of 10 years
  • Employment increased in zone and in NYS
  • New Business Test
  • Base period = four years preceding the year of certification (includes jobs in zone and in NYS)

Tax Reduction Credits 

  • No change in the formula from pre-4/1/05
  • Benefit period of 10 years
  • Employment increased in zone and in NYS
  • New Business Test
  • Base period = four years preceding the year of certification (includes jobs in zone and in NYS)

 

  

QEZE TAX CREDITS – (as of 4/1/05)

INVESTMENT ZONES

DEVELOPMENT ZONES

MANUFACTURERS

RP Tax Credit – the greater of wages/benefit formula or capital investments amount not to exceed RP taxes:

Wages/Benefits formula

25% of total wages and benefits to net new employees, capped to $10,000 per new job (wages/benefits over $40,000 excluded)

Capital Investment Amount –

10% of the federal basis of the real property and the great of:

-- the % of such property occupied and used by the QEZE or related person, or,

-- The % of such costs or other basis attributable to construction rehab, or expansion of zone property.

n     If more than 50%, then the percentage is deemed to be 100%.

n     Includes costs of acquisitions.                    

-- Benefit period of 10 years

-- Employment increase in zone and in NYS

-- New Business Test

-- Base Period = four years preceding the year of certification (includes jobs in zone and in NYS)

-- Eligible RP taxes:

  • Paid by property owner
  • Paid by lessee under certain conditions (applies to businesses certified pre- and post 4/1/05 that enter into or amended leases on or after June 1, 05).
  • * PILOTS not exceeding what fully assessed RP taxes would be.

RP Tax Credit – the greater of wages/benefit formula or capital investments amount not to exceed RP taxes:

Wages/Benefits formula

25% of total wages and benefits to net new employees, capped to $10,000 per new job (wages/benefits over $40,000 excluded); times the Development Zone Employment increase factor (for non-mfgrs.): 1-10 = .25; 11-49 = .50; 50-75 = .75; over 75 not to exceed 1.00; divided by 100.

Capital Investment Amount –

The product of: 10% and the portion of the federal basis (percentage) that is attributable to construction, rehab, or expansion of the real property and the percentage of such real property physically occupied and used by the QEZE, or related person;.

n     If the % basis is at least 50%, then the percentage is deemed to be 100%.

n     Includes costs of acquisitions.                   

-- Benefit period of 10 years

-- Employment increase in zone and in NYS

-- New Business Test

-- Base Period = four years preceding the year of certification (includes jobs in zone and in NYS)

-- Eligible RP taxes:

  • Paid by property owner
  • Paid by lessee under certain conditions (applies to businesses certified pre- and post 4/1/05 that enter into or amended leases on or after June 1, 05).

* PILOTS not exceeding what fully assessed RP taxes would be.

RP Tax Credits – same as Investment Zones

OTHER NEW LEGISLATION:

 

n     Three new zones would be designated each year, for the next four years.  Timing order of those new zones is subject to an MOU and a “priority system of need.”  The following are expressly stated as eligible for designation:  Delaware, Green; Hamilton; Livingston; Nassau; Putnam; Rockland, Schoharie; Tompkins; Wyoming: Yates: and, Chinatown

n     Allows one square miles zones designated under 485-b to become two square mile zones.

n     Allows the Oneida/Herkimer Counties Zone to apply for two separate two square mile zones.

n     Zones are prohibited from charging fees.

n     ZEA have expired with no soft landing.

Development Plans:

 

n     Zones shall submit a new development plan for approval by ESD.

n     Plans will include all elements of existing development policies, plus the basis for the cost benefit analysis; demonstration of cooperation with other economic development entities to insure maximum integration of resources; and, anti-sprawl language.

n     Plans should also include the basis for determining the distinct and separate contiguous areas

n     On or before 1/1/06, draft plans can be submitted to ESD in conjunction with the zones proposal to reconfigure boundaries re: distrct and separate areas.

 

Development Policies:

n     Existing development policies will remain in place until the final Development Plan is approved by ESD.

n     Existing policies (or those revised by June 30, 2005) will be used in the zones evaluation process to determine 05-06 funding allocations.

 

Boundary Revisions

 

n     Will not be approved prior to designation of contiguous areas, unless the ZAB can demonstrate that it was working with a business prior to April 1, 2005 for the purposes of submitting such a boundary revision that will result in the creation of jobs; subsequent certification will be deemed effective prior to April 1, 2005.

n     After configuration of contiguous areas, boundary revisions will be subject to DED approval (not EZDB).

n     BR’s submitted after 4/1/05 must demonstrate there is no viable alterative area that has existing infrastructure other than the proposed zone.

n     Boundaries cannot include stringers.

n     Acreage designated via boundary revisions, except acreage designated for future development, that has not demonstrated commercial activity or capital investment over a two-year period shall be referred to the ZAB for removal from the zone/business decertification.

 

  

Certification:

 

n     Certification must indicate that the business meets requirements of a cost benefit analysis

n     Cost benefit formula shall consider, but not be limited to:  1.  estimated tax credits (including sales tax) to the entity or its members, partners or shareholders over five years; 2. projected jobs; 3. projected wages and benefits in the zone; 4. projected investment (benchmarks for all zones will be provided by ESD – upon approval of distinct and separate contiguous areas, each zone can establish benchmarks specific to their zone.

n     Non-quantifiable criteria may also be considered, including:  1. positive impact on an area that has high commercial vacancy rates, and/or is characterized by blight or disinvestment; or 2. the business enterprise is part of a strategic industry cluster or supply chain, or 3. the business enterprise is anticipating accessing zone capital credits.

n     The ZAB must review/approval all certifications – after which the application will be deemed complete and the ZCO has 10 days to either approve or disapprove.

n     Adding other locations to a certificate will be via addendum to the original cert application (vs. EZ-4 form).