New York Tax Credits and Incentives

By Rosenthal, Corey; Lanza, John et al. | The CPA Journal, June 2015 | Go to article overview

New York Tax Credits and Incentives


Rosenthal, Corey, Lanza, John, Duffany, Patrick, The CPA Journal


The large tax incentive "megadeals" that busmesses have received in some states have been the source of much attention and misconception. Some believe that such incentives are easy to obtain, while others dismiss the idea that they could receive similar assistance. Nevertheless, many busmesses are interested in obtaining audits and incentives (C&I) from jurisdictions to help them relocate or expand their operations.

Before a Credit and Incentives Analysis

Busmesses don't usually move or expand solely to receive C&I. In fact, many factors besides C&I must be addressed before a business deades where to grow. Before pursuing a C&I analysis, a business should ensure that other important concerns aie addressed. A proposed project might consider the following:

* Highway accessibility

* Occupancy and construction costs

* Available land and buildings

* Availability of skilled labor

* Labor costs

* Energy availability and utility costs

* Proximity to major markets.

A project will also need a "sources and uses" schedule before considering C&I; if a funding gap exists after equity and debt investments, C&I can make a project viable.

Understanding the C&I Request

Businesses should be aware that most C&I packages require applicants to negotiate with specialized C&I administrators, who are authorized to reject or deny a request based on their subjective judgment as to the economic interest of their jurisdiction. Here aie a few important considerations for busmesses prior to speaking with a C&I administrator:

* "Butfor...." Almost any incentive administrator vail ask: "But for the C&I package, will the business expand in or move to the jurisdiction?"

* Needs. Does the business need C&I to make the project viable? The sources and uses of funds developed in the research process will be helpful in documenting needs.

* Don't put the cart before the horse. A busmess should never purchase land or a building, or make any public comments regarding expansion plans, before submitting a C&I request. Moving project construction forward without seeking C&I indicates that there is no need for the mcentives, and also violates the "but for ..." test.

* Jobs. States are interested in three things: jobs, jobs and more jobs. The more jobs that an expansion or relocation brings to a state, tlie more likely C&I will be offered.

* Investment. Certain investments voll be attractive to states even though they vail not produce many jobs. For example, data centers often bring veiy few full-time jobs; however, their capital investment can be staggering. Construction costs, construction jobs, purchase of computer servers and equipment, and consumption of electricity aie all revenue drivers for a jurisdiction.

C&I Packages

Typical C&I packages include grants, loans with favorable terms (including forgiveness), tax credits, and property tax relief. Other incentives can include sales tax relief on building construction and offsets to utility costs. Incentives can also be noncash, such as job training, assistance with site selection, and even streamlined regulatory assistance.

Tax credits come with a warning: A nontransferable or nonrefundable credit that offsets taxes is only valuable to the extent that business can use the credits (i.e., owes tax that can be offset with the credits). Moreover, some jurisdictions limit credit usage, such as credit limited to 70% of the businesses' tax. Accordingly, busmesses should look for credits that can be used to offset more than corporate income tax-such as sales and payroll tax-or credits that can be refunded or transferred to other taxpayers.

Refundable tax credits may seem straightforward, but it is important to know the payout period and the tax consequences of the refund as well. …

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