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A02355 Summary:

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A02355 Floor Votes:

A02355 Text:

 
                STATE OF NEW YORK
        ________________________________________________________________________
 
                                          2355
 
                               2013-2014 Regular Sessions
 
                   IN ASSEMBLY
 
                                    January 14, 2013
                                       ___________
 
        Introduced  by  M.  of  A.  SCARBOROUGH -- read once and referred to the
          Committee on Ways and Means
 
        AN ACT to amend the tax law, in relation to authorizing any city  having
          a population of one million or more to provide an angel investor cred-
          it  against the unincorporated business tax and personal income tax of

          such city for certain qualified emerging companies and  medical  tech-
          nology companies
 
          The  People of the State of New York, represented in Senate and Assem-
        bly, do enact as follows:
 
     1    Section 1. Section 1201-a of the tax law is amended by  adding  a  new
     2  subdivision (e) to read as follows:
     3    (e)  Angel  investor  credit. 1. Any city in this state having a popu-
     4  lation of one million or more,  acting  through  its  local  legislative
     5  body,  is  hereby  authorized  to adopt and amend local laws to allow an
     6  angel investor credit against the unincorporated  business  tax  imposed
     7  pursuant  to  the  authority of chapter seven hundred seventy-two of the
     8  laws of nineteen hundred sixty-six to an eligible taxpayer that: (A)  is

     9  an  accredited  investor  as  defined in rule 501 of regulation D of the
    10  securities and exchange commission of the United States pursuant to  the
    11  Securities  Exchange  Act  of  1933,  as  amended; (B) makes a qualified
    12  investment in a qualified emerging technology  company,  as  defined  in
    13  paragraph  (c) of subdivision one of section thirty-one hundred two-e of
    14  the public authorities law, except that such company shall mean a compa-
    15  ny located in such city, that engages in the  activities  referenced  in
    16  subparagraph  five  of paragraph b of subdivision one of section thirty-
    17  one hundred two-e of the public authorities law, or  makes  a  qualified
    18  investment  in  a company that engages in medical technology, as defined

    19  in parts 3345 and 3394 of the  North  American  Industry  Classification
    20  System;  (C)  has no more than one hundred full-time employees, of which
    21  at least seventy-five percent are employed in such city, has a ratio  of
    22  research  and  development funds to net sales, as referred to in section
 
         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.
                                                                   LBD02754-01-3
        A. 2355                             2
 
     1  thirty-one hundred two-e of the public authorities law, which equals  or
     2  exceeds  six  percent  during  its taxable year, and has gross revenues,

     3  along with the gross revenues of its affiliates and related members, not
     4  exceeding  twenty  million  dollars  for  the  taxable  year immediately
     5  preceding the year the taxpayer is allowed a credit under this  subdivi-
     6  sion;  and  (D)  owns  less than fifty percent of the qualified emerging
     7  technology company or medical technology  company  after  the  qualified
     8  investment;  provided, however, no credit authorized by this subdivision
     9  for a qualified investment shall  be  granted  to  a  taxpayer  if  such
    10  taxpayer  is  granted an angel investor credit against the taxes imposed
    11  pursuant to article thirty of this chapter for  such  qualified  invest-
    12  ment.  The amount of the credit shall be equal to the sum of the amounts

    13  specified in paragraph two of this subdivision. For the purposes of this
    14  subdivision, a "qualified investment" shall  mean  the  contribution  of
    15  property  to  a corporation in exchange for original issue capital stock
    16  or other ownership interest, the contribution of property to a  partner-
    17  ship  in  exchange  for  an  interest  in  the  partnership, and similar
    18  contributions in the case of a business entity not in corporate or part-
    19  nership form in exchange for  an  ownership  interest  in  such  entity;
    20  provided,  however, a qualified investment shall not include investments
    21  made by or on behalf of an owner of the  business,  including,  but  not
    22  limited  to,  a  stockholder, partner or sole proprietor, or any related

    23  person, as defined in subparagraph (C) of paragraph three of  subsection
    24  (b) of section four hundred sixty-five of the internal revenue code. For
    25  purposes  of  this  subdivision,  the term "related member" shall mean a
    26  person, corporation, or other entity, including an entity that is treat-
    27  ed as a partnership or other pass-through vehicle for purposes of feder-
    28  al taxation, whether such person, corporation or entity is a taxpayer or
    29  not, where one such person, corporation, or entity, or  set  of  related
    30  persons,  corporations  or  entities,  directly  or  indirectly  owns or
    31  controls a controlling interest in another entity.  Such entity or enti-
    32  ties may include all taxpayers under articles  nine,  nine-A,  thirteen,

    33  twenty-two,  thirty-two, thirty-three or thirty-three-A of this chapter.
    34  For purposes of this subdivision, the term "affiliates" shall mean those
    35  corporations that are members of the same affiliated group,  as  defined
    36  in  section  fifteen  hundred  four of the internal revenue code, as the
    37  taxpayer.
    38    2. (A) The percentage of the credit allowed to a taxpayer  under  this
    39  subdivision  shall  be  two  percent  per each qualified investment made
    40  during the taxable year and the succeeding four years provided the cred-
    41  it is properly claimed pursuant to the rules established by the New York
    42  city department of finance, up to a maximum  allowed  credit  of  twenty
    43  thousand  dollars per taxable year. The total amount of credit allowable

    44  to a taxpayer under this subdivision for all years, taken in the  aggre-
    45  gate,  shall not exceed one hundred thousand dollars. If the taxpayer is
    46  a partner in a partnership or member in an unincorporated business, then
    47  the limit imposed by the preceding sentence  shall  be  applied  at  the
    48  entity  level,  so that the aggregate credit allowed to all the partners
    49  in such partnership or members in such unincorporated  business  in  any
    50  taxable  year  does  not  exceed  twenty thousand dollars, and the total
    51  amount of credit allowable to all the partners in  such  partnership  or
    52  members  in  such  unincorporated  business  for all years, taken in the
    53  aggregate, shall not exceed one hundred thousand dollars.    The  credit

    54  allowed  under  this subdivision shall not be allowed to a taxpayer with
    55  respect to any unincorporated business tax paid  for  any  taxable  year
    56  beginning  before  January  first,  two  thousand  fourteen.  The credit
        A. 2355                             3
 
     1  allowed under this subdivision for any taxable year shall be  deemed  to
     2  be  an  overpayment  of  tax by the taxpayer to be credited or refunded,
     3  without interest, in accordance with the provisions of section 11-526 of
     4  the administrative code of the city of New York.
     5    (B)  If, at any time during the five year period beginning on the date
     6  that the qualified investment is made by the taxpayer there is a  recap-

     7  ture  event with respect to such investment, then the unincorporated tax
     8  owed by such taxpayer for the taxable year in which  such  event  occurs
     9  shall be increased by the credit recapture amount.
    10    (1)  For purposes of this subparagraph, the credit recapture amount is
    11  an amount equal to the sum of: (i) the aggregate decrease in the credits
    12  allowed to the taxpayer under this subdivision  for  all  prior  taxable
    13  years  which  would have resulted if no credit had been determined under
    14  this subdivision with respect to such qualified  investment,  plus  (ii)
    15  interest  at  the  underpayment  rate  established  by the New York city
    16  department of finance for each prior taxable year for the period  begin-

    17  ning  on  the  due date for filing the return for the prior taxable year
    18  involved.
    19    (2) For purposes of this subparagraph, a recapture event shall mean if
    20  at the close of any taxable year in the five-year period: (i) the quali-
    21  fied emerging technology company or medical technology company no longer
    22  qualifies as a qualified emerging technology company or medical technol-
    23  ogy company; (ii) the qualified emerging technology company  or  medical
    24  technology  company  has  been  sold  by  the taxpayer investing in such
    25  company; or (iii) the taxpayer has withdrawn the  taxpayer's  investment
    26  wholly  or  partially  from the qualified emerging technology company or
    27  medical technology company.

    28    3. The New York city department of finance shall establish by rule  by
    29  October  thirty-first,  two  thousand  thirteen procedures for the allo-
    30  cation of tax credits as required by paragraph two of this  subdivision.
    31  Such  rules shall include provisions describing the application process,
    32  the due dates for such applications, the standards that shall be used to
    33  evaluate the applications, the documentation that will  be  provided  to
    34  taxpayers  to  substantiate  the amount of tax credits allocated to such
    35  taxpayers, and such other provisions as deemed necessary  and  appropri-
    36  ate.
    37    4.  Any local law adopted pursuant to this subdivision may provide for
    38  a credit as authorized by  this  subdivision  for  a  maximum  of  three

    39  consecutive  calendar years, provided, however, that any such credit may
    40  not apply to taxable years beginning before January first, two  thousand
    41  fourteen or beginning on or after January first, two thousand seventeen.
    42    § 2. Section 1310 of the tax law is amended by adding a new subsection
    43  (g) to read as follows:
    44    (g)  Angel investor credit. (1) Notwithstanding any other provision of
    45  law to the contrary, any city having a  population  of  one  million  or
    46  more,  acting  through  its local legislative body, is hereby authorized
    47  and empowered to adopt and amend local laws granting in any  such  city,
    48  an angel investor credit against the taxes authorized in this article to
    49  an  eligible  taxpayer that: (A) is an accredited investor as defined in

    50  rule 501 of regulation D of the securities and  exchange  commission  of
    51  the  United  States  pursuant to the Securities Exchange Act of 1933, as
    52  amended; (B) makes a qualified investment in a qualified emerging  tech-
    53  nology  company,  as  defined  in  paragraph (c) of subdivision one   of
    54  section thirty-one hundred two-e of the public authorities  law,  except
    55  that  such  company  shall  mean  a  company  located in such city, that
    56  engages in the activities referenced in subparagraph five of paragraph b
        A. 2355                             4
 
     1  of subdivision one of section thirty-one hundred  two-e  of  the  public
     2  authorities  law,  or  makes  a  qualified  investment in a company that

     3  engages in medical technology, as defined in parts 3345 and 3394 of  the
     4  North  American Industry Classification System; (C) has no more than one
     5  hundred full-time employees, of which at least seventy-five percent  are
     6  employed  in such city, has a ratio of research and development funds to
     7  net sales, as referred to in section thirty-one  hundred  two-e  of  the
     8  public  authorities  law, which equals or exceeds six percent during its
     9  taxable year, and has gross revenues, along with the gross  revenues  of
    10  its affiliates and related members, not exceeding twenty million dollars
    11  for  the  taxable  year  immediately  preceding the year the taxpayer is
    12  allowed a credit under this subsection; and (D)  owns  less  than  fifty

    13  percent of the qualified emerging technology company or medical technol-
    14  ogy  company  after  their  qualified  investment; provided, however, no
    15  credit authorized by this subsection for a qualified investment shall be
    16  granted to a taxpayer if such taxpayer  is  granted  an  angel  investor
    17  credit  against  the unincorporated business tax imposed pursuant to the
    18  authority of chapter seven hundred seventy-two of the laws  of  nineteen
    19  hundred sixty-six for such qualified investment. The amount of the cred-
    20  it  shall  be equal to the sum of the amounts specified in paragraph two
    21  of this subsection subject to the limitations in  paragraphs  three  and
    22  four  of  this subsection. For purposes of this subsection, a "qualified

    23  investment" shall mean the contribution of property to a corporation  in
    24  exchange  for  original issue capital stock or other ownership interest,
    25  the contribution of property to a partnership in exchange for an  inter-
    26  est in the partnership, and similar contributions in the case of a busi-
    27  ness  entity  not  in  corporate  or partnership form in exchange for an
    28  ownership interest  in  such  entity;  provided,  however,  a  qualified
    29  investment  shall  not  include  investments  made by or on behalf of an
    30  owner of the business, including, but not  limited  to,  a  stockholder,
    31  partner or sole proprietor, or any related person, as defined in subpar-
    32  agraph  (C) of paragraph three of subsection (b) of section four hundred

    33  sixty-five of the internal revenue code. For purposes of this subsection
    34  a "related member" shall mean a person, corporation,  or  other  entity,
    35  including  an  entity  that  is  treated as a partnership or other pass-
    36  through vehicle for purposes of federal taxation, whether  such  person,
    37  corporation  or  entity  is  a  taxpayer  or not, where one such person,
    38  corporation, or entity, or set of related persons, corporations or enti-
    39  ties, directly or indirectly owns or controls a controlling interest  in
    40  another entity.  Such entity or entities may include all taxpayers under
    41  articles nine, nine-A, thirteen, twenty-two, thirty-two, thirty-three or
    42  thirty-three-A of this chapter. For purposes of this subsection, "affil-

    43  iates" shall mean those corporations that are members of the same affil-
    44  iated  group, as defined in section fifteen hundred four of the internal
    45  revenue code, as the taxpayer.
    46    (2) (A) The percentage of the credit allowed to a taxpayer under  this
    47  subsection  shall  be  two  percent  per  each qualified investment made
    48  during the taxable year and the succeeding four years provided the cred-
    49  it is properly claimed pursuant to the rules established by the New York
    50  city department of finance, up to a maximum  allowed  credit  of  twenty
    51  thousand  dollars per taxable year. The total amount of credit allowable
    52  to a taxpayer under this subsection for all years, taken in  the  aggre-

    53  gate,  shall not exceed one hundred thousand dollars. If the taxpayer is
    54  a partner in a partnership or member in an unincorporated business, then
    55  the limit imposed by the preceding sentence  shall  be  applied  at  the
    56  entity  level,  so that the aggregate credit allowed to all the partners
        A. 2355                             5
 
     1  in such partnership or members in such unincorporated  business  in  any
     2  taxable  year  does  not  exceed  twenty thousand dollars, and the total
     3  amount of credit allowable to all the partners in  such  partnership  or
     4  members  in  such  unincorporated  business  for all years, taken in the
     5  aggregate, shall not exceed one hundred thousand dollars.    The  credit

     6  allowed  under  this  subsection shall not be allowed to a taxpayer with
     7  respect to any city personal income tax imposed under this article  paid
     8  for  any taxable year beginning before January first, two thousand four-
     9  teen.
    10    (B) If, at any time during the five year period beginning on the  date
    11  that  the qualified investment is made by the taxpayer there is a recap-
    12  ture event with respect to  such  investment,  then  the  city  personal
    13  income  tax  owed  by  such  taxpayer for the taxable year in which such
    14  event occurs shall be increased by  the  credit  recapture  amount.  For
    15  purposes  of this subparagraph, the credit recapture amount is an amount
    16  equal to the sum of: (i) the aggregate decrease in the  credits  allowed

    17  to  the taxpayer under this subsection for all prior taxable years which
    18  would have  resulted  if  no  credit  had  been  determined  under  this
    19  subsection with respect to such qualified investment, plus (ii) interest
    20  at  the underpayment rate established by the New York City department of
    21  finance for each prior taxable year for the period beginning on the  due
    22  date  for  filing  the  return  for the prior taxable year involved. For
    23  purposes of this subparagraph, a "recapture event" shall mean if at  the
    24  close  of  any  taxable  year in the five-year period: (i) the qualified
    25  emerging technology company or  medical  technology  company  no  longer
    26  qualifies  as a qualified emerging technology company or a medical tech-

    27  nology company; (ii) the qualified emerging technology  company  or  the
    28  medical  technology  company  has been sold by the taxpayer investing in
    29  such company; or (iii) the taxpayer has withdrawn the taxpayer's invest-
    30  ment wholly or partially from the qualified emerging technology  company
    31  or the medical technology company.
    32    (3)  In  the case of a resident taxpayer, the credit provided by local
    33  law adopted pursuant to this subsection shall  be  allowed  against  the
    34  taxes  authorized  by  this  article for the taxable year reduced by the
    35  credits permitted by this article. If the credit exceeds the tax  as  so
    36  reduced,  the  taxpayer  may  receive, and the comptroller, subject to a

    37  certificate of the commissioner of  the  New  York  city  department  of
    38  finance,  shall  pay  as an overpayment, without interest, the amount of
    39  such excess.
    40    (4) If a taxpayer changes status during the taxable year from resident
    41  to nonresident, or from nonresident to resident,  the  credit  shall  be
    42  prorated according to the number of months in the period of residence.
    43    (5)  Subject  to the provisions of paragraph three of this subsection,
    44  in the case of a husband and wife who file a joint return, but  who  are
    45  required  to  determine their city personal income taxes separately, the
    46  credit authorized pursuant to this subsection may be applied against the
    47  tax of either or divided between them as they may elect. In the case  of

    48  a  husband  and  wife who are not required to file a federal return, the
    49  credit under this subsection shall be allowed  only  if  such  taxpayers
    50  file a joint city personal income tax return.
    51    (6) The New York city department of finance shall establish by rule by
    52  October  thirty-first,  two  thousand  thirteen procedures for the allo-
    53  cation of tax credits as required by paragraphs two and  three  of  this
    54  subsection.  Such rules shall include provisions describing the applica-
    55  tion process, the due dates for such applications,  the  standards  that
    56  shall  be used to evaluate the applications, the documentation that will
        A. 2355                             6
 

     1  be provided to taxpayers to substantiate the amount of tax credits allo-
     2  cated to such taxpayers, and such other provisions as  deemed  necessary
     3  and appropriate.
     4    (7)  Any local law adopted pursuant to this subsection may provide for
     5  a credit as authorized by this subsection for a maximum of three consec-
     6  utive calendar years, provided, however, that any such  credit  may  not
     7  apply to taxable years beginning January first, two thousand fourteen or
     8  beginning on or after January first, two thousand seventeen.
     9    § 3. The aggregate amount of tax credits allowed under this act in any
    10  calendar  year  shall  be  up  to  three million dollars. Such aggregate
    11  amount of credits shall be allocated by the New York city department  of

    12  finance  among  taxpayers  in  order  of priority based upon the date of
    13  filing an application for allocation of an angel  investor  credit  with
    14  such department. If the total amount of allocated credits applied for in
    15  any  particular year exceeds the aggregate amount of tax credits allowed
    16  for such year, such excess shall be treated as having been  applied  for
    17  on the first day of the subsequent year.
    18    §  4.  A  certified copy of the local law enacted pursuant to this act
    19  shall be mailed by registered mail to the state department  of  taxation
    20  and  finance  at  its office in Albany within fifteen days of its enact-
    21  ment. However, the state department of taxation and  finance  may  allow
    22  additional  time  for  such certified copy to be mailed if it deems such
    23  action to be consistent with its duties under this act.
    24    § 5. This act shall take effect immediately.