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SUNY Tax-Free Areas to Revitalize and Transform Upstate NY (START-UP NY) Program

Overview. The START-UP NY Program is designed to attract businesses to New York and to create and retain jobs in the state. The START-UP NY Program offers significant tax benefits to eligible businesses that start up, move to or significantly expand in New York, generally on or around a campus of a participating public or private New York college or university (the "Institution").

Tax Benefits. A taxpayer qualifying under the START-UP NY Program may avoid New York State income or franchise, sales, Metropolitan Commuter Transportation Mobility, real estate transfer, organization, and property taxes applicable to its eligible business for 10 years, beginning in 2014. In addition, employees hired by an eligible business for new jobs in New York will not be subject to New York State, New York City or Yonkers income tax for five years and will not pay income tax on income from the eligible business up to $200,000 a year ($250,000 for a head of household and $300,000 for married filing jointly) for an additional five years. Although the program does not require that businesses create a minimum number of net new jobs to participate, the Commissioner of Economic Development (the "Commissioner") will allocate to each participating business a maximum number of net new jobs that are eligible for the employee income tax benefits, with an aggregate statewide cap of 10,000 new jobs per year (with any unused amount carrying over to the next year).

Eligibility Requirements. A business may participate in the START-UP NY Program if (among other things):

  • its mission and activities align with or support the academic mission of an Institution that received approval to participate in the START-UP NY Program, its participation in the program has positive community and economic benefits and it is approved by the Institution;
  • it creates net new jobs in its first year of operation and maintains net new jobs after the first year of operation;
  • it is a start-up business, a business new to New York or a business expanding its current operations in New York;
  • it does not owe past-due federal or state taxes or local property taxes; and
  • it is in the formative stages of development or it is a high-tech company if it is locating in New York City or Nassau, Suffolk or Westchester county.

Ineligible Businesses. The following types of businesses cannot participate in the START-UP NY Program:

  • retail and wholesale businesses;
  • restaurants;
  • real estate brokers or real estate management companies;
  • law firms, medical or dental practices, or accounting firms;
  • hospitality businesses;
  • finance and financial services businesses;
  • businesses providing personal services;
  • businesses providing business administrative or support services (unless the business will create at least 100 new jobs and the business obtains the Commissioner's permission);
  • businesses providing utilities and energy production and distribution businesses; and
  • businesses that would compete unfairly with other local businesses outside of the tax-free area.

Compliance and Disclosure. Participating businesses must submit an annual report to the Commissioner and agree that if the business fails to meet certain performance benchmarks, including the creation of net new jobs, New York may suspend or terminate the business's participation in the START-UP NY Program and/or recover some of the tax benefits awarded under the program. The Commissioner may publicly disclose certain information about participating businesses related to the program.

If you have any questions or would like more information about the START-UP NY Program, please contact Megan A. Stombock (at 212-407-4226).

This client alert is a publication of Loeb & Loeb LLP and is intended to provide information on recent legal developments. This client alert does not create or continue an attorney client relationship nor should it be construed as legal advice or an opinion on specific situations.

Circular 230 Disclosure: To assure compliance with Treasury Department rules governing tax practice, we inform you that any advice (including in any attachment) (1) was not written and is not intended to be used, and cannot be used, for the purpose of avoiding any federal tax penalty that may be imposed on the taxpayer, and (2) may not be used in connection with promoting, marketing or recommending to another person any transaction or matter addressed herein.