Add Art 21 SS430 - 440, amd SS353, 354 & 359, Ec Dev L; amd Tax L, generally; amd S11-1712, NYC Ad Cd; amd
S420-a, RPT L; amd S355, add S361, Ed L; amd S666, Exec L
Establishes the START-UP NY program; establishes tax benefits for businesses located in tax free NY areas and employees of such businesses; provides penalties for fraud in such START-UP NY program; provides for START-UP NY program leases.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A8113
SPONSOR: Silver (MS) TITLE OF BILL: An act to amend the economic development law, the tax
law, the administrative code of the city of New York, the real property
tax law and the education law, in relation to establishing the START-UP
NY program (Part A); to amend the executive law, in relation to the
mandate and regulatory relief council (Part B); and to amend the econom-
ic development law and the tax law, in relation to enhancing the excels-
ior jobs program act (Part C)
PURPOSE:
This makes technical corrections to Governor's Program Bill No. 32
(submitted June 18, 2013) which would enact the SUNY Tax-free Areas to
Revitalize and Transform UPstate NY (START-UP NY) legislation. This
will promote entrepreneurialism and job creation by transforming public
higher education through tax-free communities across the state, partic-
ularly upstate. The State University of New York (SUNY) campus system
will serve as the framework of the START-UP NY program to attract high-
tech and other start-ups, venture capital, new business and investments
from across the world. As important, the START-UP NY program will help
existing companies, especially high-tech and start-ups, stay in New York
and grow.
The START-UP NY program will enable campuses to serve as economic
engines for their communities by harnessing the world-class research and
innovation power of New York State's higher education sector while
providing transformative financial incentives to spur business creation
and expansion. Higher ed communities under START-UP NY will be 100 % tax
free (e.g. including no income tax for employees, no sales, property or
business tax) as a way to entice companies to bring their ventures to
these communities by offering new businesses and expanding businesses
that create net new jobs.
This program builds on the State's rich tradition of positioning
colleges and universities as centerpieces for upstate economic develop-
ment. As Governor Rockefeller said in 1973, reflecting on the dramatic
expansion of upstate SUNY campuses during his tenure: "There's been a
tremendous effect in terms of impact on the communities in which they
live, because all of a sudden these communities had large student
bodies, professors, faculty coming from all over the country and around
the world. It was a whole new force, a whole new sense of optimism. And
it has, I think, been an important force in self-renewal."
The START-UP NY program will serve a similar catalytic function in the
21st Century: creating new businesses and new jobs for upstate New York
and other strategically-designated locations, and benefiting the campus
communities as well as their entire regions.
SUMMARY OF PROVISIONS:
Part A
This bill would create the START-UP NY Program. Section 1 of the bill
would add a new Article 21 to the Economic Development Law to create
this program. Under this program, public and private colleges and
universities in New York will be able to apply to have vacant space or
land designated as tax-free areas. Generally (but with some limited
exceptions), the space or land of a State university or community
college must be located outside of New York City. SUNY campuses and
community colleges can designate vacant land and vacant space on their
campus and any business incubator with a bona fide affiliation to the
campus, university or college to be part of a Tax-Free NY Area, and SUNY
campuses and community colleges located north of Westchester can also
designate property not to exceed 200,000 square feet located within one
mile of the campus.
Five City University of New York (CUNY) campuses, one in each borough,
will also qualify. Each designated campus must be located in an econom-
ically distressed community in that borough, and the tax-free area can
include vacant land and vacant space on the CUNY campus and any business
incubator with a bona fide affiliation to the campus, university or
college.
The tax-free areas sponsored by public universities and colleges must be
approved by the Commissioner of Economic Development in consultation
with the chancellor of the applicable university system.
The program also provides 3 million square feet of tax-free areas prima-
rily dedicated to private colleges and universities on land north of
Westchester County, which will be allocated by the START-UP NY program
board (consisting of three members with significant experience in
academic-based entrepreneurship appointed by the Governor, the Speaker
of the Assembly and the Temporary President of the Senate) in a manner
that ensures regional balance and balance among eligible rural, urban
and suburban areas in the State. For private colleges and universities
north of Westchester County, the tax-free areas can include vacant land
and vacant space on- or off-campus, as well as any business incubator
with a bona fide affiliation to the campus, university or college.
Of these 3 million square feet, 75,000 square feet will be allocated for
each of the following: Nassau County, Suffolk County, Westchester Coun-
ty, Brooklyn, the Bronx, Manhattan, Queens and Staten Island. Private
colleges and universities in New York City and Westchester, Suffolk and
Nassau Counties, as well as SUNY and CUNY campuses that are excluded
from the general provisions described above, may apply to sponsor these
tax-free areas on college campuses. Once the 75,000 square foot cap is
reached in these counties and boroughs, the board may designate up to an
additional 75,000 square feet in each. Therefore, a potential of
150,000 square feet of space will be available in these counties and
boroughs.
In addition, up to 20 strategic state assets on vacant State-owned land,
in closed State-owned buildings or on state-owned strategically-located
property slated for closure may be designated by the START-UP NY program
board as tax-free areas in affiliation with a college or university.
Each strategic state asset may include up to 200,000 square feet of
vacant land or vacant building space.
For all properties designated as tax-free areas under this program, the
sponsoring universities and colleges must present a plan that specifies
the land or space that they want designated as a tax-free area and
demonstrates how the businesses that would locate in the tax-free area
would be aligned with or will further the academic mission of the
university or college, and how the businesses' participation in the
program would have positive community and economic effects, including
whether the businesses would compete with businesses in the same commu-
nity but located outside of the tax-free areas, as well as set perform-
ance metrics including the creation of net new jobs.
Any capital project undertaken by a business in a tax-free area on prop-
erty owned or leased by the State, a State university campus, community
college, or city university campus will be subject to prevailing wage
requirements under the Labor Law. In addition, any capital project on
property owned or leased by the state, a state university campus or city
university campus will be required to comply with MWBE objectives.
In order to locate in a tax-free area, a business will be required to be
a new business in the State or an expanding business that would create
net new jobs. In New York City and Nassau, Suffolk and Westchester Coun-
ties, the business must also be a high-tech company or a company in the
formative stage of development. The mission and activities of the busi-
ness must align with, or further the academic mission of the university
or college sponsoring the tax-free area in which the business seeks to
locate and the business's participation in the program must have posi-
tive community and economic effects. In order to be eligible for the
benefits under the START-UP NY Program, business must apply by December
31, 2020, by which time the Commissioner of Economic Development will
prepare an evaluation of the program's effectiveness in order to deter-
mine continued eligibility for application submissions. Businesses that
locate within a tax-free area will be entitled to a tax elimination
credit to eliminate their taxes.
In addition, businesses would be exempted from other taxes such as the
organization tax, the Metropolitan Commuter Transportation District
(MCTD) mobility tax for those businesses located within the MCTD, and
businesses would receive refunds of the sales taxes paid on the busi-
nesses' purchases of tangible personal property and services for their
locations within the tax-free areas. The tax benefits would extend for
10 years provided a business continues to maintain net new jobs, and the
employment numbers of the business and its related companies throughout
the state do not decrease and its activities continue to be consistent
with the program.
In the first five years of a business's 10-year tax benefit period, the
wages of the employees of a business located in a tax-free area that are
employed in the new jobs created by the business within these areas will
be exempt from all personal income taxes. In years 6-10, $200,000 of the
wages of single individuals, $250,000 of the wages of individuals who
are heads of household and $300,000 of the wages of individuals who file
as married are exempt. The aggregate number of net new jobs designated
each year as eligible for personal income tax benefits will not exceed
10,000 new jobs.
A business that does not meet its net new job creation performance
metrics will face sanctions subject to the contract established between
the business and the college or university, including proportionate
reduction of benefits, suspension and/or termination. Certain types of
businesses are prohibited from participating in this program, including
retail, real estate, and professional services type businesses.
Sections 2 through 16 would amend the Tax Law and the New York City
Administrative Code to detail these tax benefits.
Section 3 includes tough penalties for fraud. In the case of a business
that acted fraudulently, the business would: (1) be immediately termi-
nated from such program; (2) be subject to applicable criminal penal-
ties, including the felony crime of offering a false instrument for
filing in the first degree; and (3) be required to pay back all tax
benefits that the company and its employees have received (the "claw-
back").
Section 17 would amend the Real Property Tax Law to allow private
universities and colleges to maintain tax-exempt status on property that
is currently tax-exempt and that they subsequently lease to businesses
participating in the START-UP NY program.
Sections 18 through 20 would amend the Education Law to allow SUNY
campuses to participate in this program.
Section 21 would establish the terms for SUNY, CUNY and community
college leases to participating businesses, which include provisions to
ensure that revenue from any lease or contract benefits the students and
faculty of the college or university.
Section 22 provides that the bill would take effect immediately and the
tax benefits would apply to taxable years beginning on or after January
1, 2014, calendar quarters beginning on or after January 1, 2014, sales
tax quarters beginning on or after March 1, 2014, or transactions occur-
ring on or after January 1, 2014, whichever is applicable.
Part B
Part B amends the Mandate Relief Council to expand and rename it the
Council to the Mandate Relief and Regulatory Relief Council to allow
businesses to request the Council review regulations.
Part C
Part C makes changes that enhance the Excelsior Jobs Program. Section 1
would amend Economic Development L. § 353 to reduce generally by half
the job creation requirements for participants in the Excelsior Program.
Thus, for example, instead of being required to create 10 manufacturing
jobs, a participant would only be required to create 5 manufacturing
jobs.
Sections 2 and 4 provide that a taxpayer that doesn't create all the
required jobs but creates at least 75% of those jobs will be required to
proportionally reduce its tax credits. Section 3 would amend the cap of
the excelsior program to allow the Commissioner to carry over one half
of the amount of unallocated credits to the next year as a way to expand
job growth in the State of New York.
EXISTING LAW:
Part A is a new proposal, but builds on and brings together on scale the
Governor's regional-based higher education driven public/private sector
partnerships including the Regional Economic Development Councils, NYSU-
NY 2020, Innovation Hot Spots, Venture Capital Fund and Next Generation
Job Linkage program.
Part B continues the effort to reduce burdensome and unnecessary regu-
lations in the state.
Part C builds upon the 2011 effort to enhance the Excelsior Jobs Program
to create additional job growth opportunities.
JUSTIFICATION:
The New Economy is growing in higher education, and there is a positive
synergy between academia and entrepreneurial activity. New York has a
great asset in the public and private education system and while gener-
ating jobs, the State cannot keep jobs given the perception and reality
of New York as a high-tax state. The START-UP NY program will transform
New York into a magnet for new jobs and businesses using its world class
system of higher education. The START-UP NY program complements and
builds on the State's current economic development agenda, which
includes:
*A paradigm shift in higher education that builds closer linkages
between colleges and employers in order to prepare students for next-
generation jobs;
*A focus on entrepreneurial academics through tech transfer, including
R&D clusters, incubators and the newly enacted Innovation Hot Spots and
Venture Capital Fund; and
*A business-friendly environment through lower taxes, entrepreneurial
government and active partnerships with key industries.
Research shows that colleges and universities can strategically fill two
critical needs for employers: they can advance innovation with new tech-
nologies, new processes, new products, and new ideas that all fuel know-
ledge creation; and they can provide knowledge transfer, an innovation-
based culture for employers and entrepreneurs, and access to a skilled
workforce.
Since their establishment, SUNY's campuses have improved the economic
vitality of their communities and entire regions - fostering new jobs
on- and off-campus and leading to the development of new businesses and
ideas. SUNY's history of invention has spanned the decades, from intro-
ducing the first implantable heart pacemaker at SUNY Buffalo, to the
groundbreaking research and job creation occurring right now at SUNY's
NanoCollege. In addition, SUNY campuses across the state offer world-
class programs in fields ranging from business to viticulture to comput-
er science to electrical engineering which translate into a highly
skilled workforce that can help companies and communities thrive
upstate.
Although New York has all of the needed ingredients and even some note-
worthy success stories, the "2010 Report by the Task Force on Diversify-
ing the New York State Economy through Industry-Higher Education Part-
nerships" identified significant opportunities for growth. The task
force found that while New York was near the top nationally in total
research expenditures, it lagged significantly behind other states in
successfully commercializing those research ideas. For example:
*New York universities rank second nationally in total research spending
with nearly $4 billion spent annually (California ranks first with $6.5
billion), but only 4.6 % of that total is sponsored by industry, ranking
New York 22nd among states (North Carolina ranks first with 13.6 %, the
national average is 5.4 %).
*New York attracts only 4 % of the nation's venture capital investment
(California attracts 47 %).
*New York's colleges incubate fewer new companies, with 35 start-ups
launched in 2007 (California schools had 58 and Massachusetts schools,
60).
As important, the START-UP NY program will help keep existing New York
start-ups and other high-tech companies in the state. The state spends
billions on public higher education but we do not get an adequate return
on investment. For example, New York is second in the nation in number
high tech start-ups, but 75 % of these small firms leave the state
before five years. That is, they are either wooed away by other states'
incentives or they leave of their own accord to take advantage of lower
operating costs in lower taxed environments. So we pay for their devel-
opment, but other states reap the economic rewards.
We must create the jobs to keep college graduates in the state. The
latest data show only a little more than three-fourths of college grads
in NY stay following graduation (76.4 %). This places New York 10th
nationally -- well below places like California, Texas and Washington,
but also places like New Mexico, New Jersey, Nevada, South Carolina and
Mississippi.
Thirty-five Upstate counties lost population between 2010 and 2012. In
just those two years, every county that lost population is upstate. In
Central NY, Finger Lakes, Mid-Hudson, Mohawk Valley, the Southern Tier
and Western NY, thousands more people chose to move out than moved in.
START-UP NY, along with the expansion of the Mandate and Regulatory
Relief Council and the enhanced Excelsior Jobs Program, will create
business climate of job creation for New Yorkers, as well as the innova-
tors from around the country and the works we are trying to have join us
in New York.
LEGISLATIVE HISTORY:
This is a new proposal.
BUDGET IMPLICATIONS:
The bill will not have a fiscal impact in SFY13-14. Beginning in SFY14-
15, there is a potential "loss" resulting from forecasted future revenue
growth. The bill does not include any direct costs to the State. For
example, unlike other tax benefit programs, there are no State
reimbursements to local governments to account for local property tax
revenue loss.
EFFECTIVE DATE:
Part A takes effect immediately and the tax benefits apply to taxable
years beginning on or after January 1, 2014, calendar quarters beginning
on or after January 1, 2014, sales tax quarters beginning on or after
March 1, 2014, or transactions occurring on or after January 1, 2014,
whichever is applicable. Part B takes effect immediately. Part C takes
effect in 60 days.
