In 2013, New York State legislatures created the SUNY Tax-Free Areas to Revitalize and Transform Upstate New York (START-UP NY) program. This program was created to attract new and growing businesses to New York. Innovators moving to New York would revitalize underused or vacant areas on the state’s public or private university property or their affiliated incubators. Approved START-UP NY businesses and their employees would receive several tax benefits.
Get the Who, What, When, Where, Why and How of START-UP NY tax benefits in this post. If an exemption for employees’ income taxes, your lease, or corporate taxes sound like the cost savings that your business could turn into profit, read on.
Why Apply for START-UP NY?
One of the program’s first businesses, Incodema3D, confirmed that START-UP NY helped them to succeed. The successful owner confirmed that the bureaucracy is a downside to the program. Luckily for Incodema3D, they had the help of their university sponsor.
The upside for new and growing businesses of START-UP NY is an ability to attract talent with the tax incentives and keep costs down during a critical stage in their company’s development.
The tax benefits offered by the START-UP NY program include:
- Exemption from the Metropolitan commuter transportation mobility tax (MCTMT) for employees and sole proprietorships (including LLCs and partnerships).
- Exemption for leases of real property from the New York State real estate transfer tax and local real estate property tax or real estate transfer tax.
- Ability to claim a refund or credit on sales or use tax paid for tangible personal property, utility services, and certain taxable services.
- Eligible START-UP NY businesses that meet certain criteria receive a refundable credit on corporate and income tax.
- Credit on telecommunications excise taxes for businesses that meet specific criteria and are START-UP NY approved.
Who Qualifies for START-UP NY Personal Income Tax Exclusion?
The personal income tax exclusion is very attractive to employers that want to attract top talent. Who qualifies for this benefit?
An eligible employee is one that performs a ‘net new job’ at the tax-free area (TFA). Members of the LLC or partnership are not considered net new employees and do not receive the personal income tax (PIT) exclusion.
The personal tax income exclusion benefit applies to the START-UP NY business; not the employee. The employee must perform their work in the TFA and for at least six months during the calendar year to be eligible for the tax income exclusion benefit. The START-UP NY wage benefit is capped for eligible employees in years 6 through 10.
For answers to other questions about the personal tax income exclusion benefit, call one of our New York-based tempCFO experts for help determining who qualifies for the PIT at your business.
What Do Start-ups Need to Apply to the Empire State Development Program?
START-UP NY was created to attract new business to and create new jobs in New York State. It is administered by the Empire State Development or ESD. The SNY-Business Application is comprised of seven sections, including:
- Sponsor Contact
- Business Information
- Average Number of Employees and Net New Jobs
- Investments to be made by the business of tangible (depreciable) property.
- Business Competitors that compete for customers or clients in the community but outside the TFA.
- Related persons under IRS code section 465 (b) (3) (c ), section 267 (b) relationships, § 707(b).
- Statement of Consequences for failure to reach benchmarks agreed upon by the business and sponsor.
Resources for start-ups considering applying can be found here.
When Do Tax Benefits Begin?
START-UP NY tax benefits start when a business has been approved by the ESD, and not before. Approved businesses receive a certificate of eligibility with a locate date to physically move to the TFA. The date benefits for sales tax and real property transfer tax kick-off are different from the business’s locate date.
Where are the Tax-Free Areas?
The tax-free areas (TFA) are located all over New York State at private and public universities and colleges. There are 81 sites with TFAs to choose from in the University Directory published by the ESD. Regions include Capital, Central NY, Finger Lakes, Long Island, Mid-Hudson, Mohawk Valley, New York City, North Country, Southern Tier, and Western New York.
How Do Entrepreneurs Apply?
The first step is to find a sponsor. New York State’s Empire State Development (ESD) publishes a University Directory on its site. Get in touch with the campus contact at the private or public university, college or community college of your choice to get the ball rolling. Businesses must be sponsored by a START-UP NY two- or four-year college or university chartered in New York State in order to apply.
Business application instructions are available on the ESD website. These instructions cover what qualifies an applicant as a new business or expanding business and how to proceed. There are several types of businesses that do not quality including retail, hospitality, professional services firms, and utilities.
tempCFO is in New York. Contact us. We know start-ups. We can help you get ready to secure a sponsor for START-UP NY and put you on the path to growth.