Presentation on theme: "1 Empire Zone Basics WATERTOWN EMPIRE ZONE March 2007."— Presentation transcript:
1 Empire Zone Basics WATERTOWN EMPIRE ZONE March 2007
2 AGENDA Empire Zone program history 2006 boundaries Empire Zone benefits and incentives Eligibility Certification process and timeline Tips on leveraging the program
3 RECENT CHANGES Origins of the program - Upstate urban redevelopment Recent changes - Development vs. Investment Zones - New benefit formulas - New boundaries Important: Your benefit formulas depend on your date of certification and what zone you are located in.
7 Prior to Certification 485(e) tax abatement Sales tax refund on construction/renovation materials
8 BENEFITS Property Tax Abatement 485(e) abatement Shelters increases in assessment for 7 years, phases out until year 10 Example: Current taxable value$100,000 Improvements $50,000 New taxable value Without 485-e: $150,000 With 485-e: $100,000
9 BENEFITS Sales Tax Refund 100% refund of all sales taxes paid for renovation/construction materials Example: Improvements $50,000 Materials$25,000 Sales tax rate8% Sale tax refund$2,000 AU-11
10 BENEFITS All other benefits require Empire Zone certification.
11 BENEFITS Tax Reduction Credit Credit against NYS income taxes Calculated as New Employment divided by Base Employment Could reduce NYS tax burden to zero Good for ten years Base Employment – average employment for the four years prior to certification. CT604
12 BENEFITS Tax Reduction Credit Example Year of certification: 2007 2006 (base employment) – 5 employees 2007 – 8 employees New employment is 3 Employment increase factor is 3/5 or 60% 60% reduction in NYS income tax
13 BENEFITS Wage Tax Credit $1,500 per employee, per year, for five years Targeted Employees count for $3,000 WTC Employees paid over $40,000 eligible for additional $500 WTC New businesses can apply for 50% refund of unused credits New business – filed NYS income tax return for fewer than 5 years. CT601
14 BENEFITS Wage Tax Credit Example New employment is 3 1. $20,000 salary, not targeted 2. $20,000 salary, targeted 3. $60,000 salary, not targeted WTC = $1,500 + $3,000 + $2,000 = $6,500 New business – filed NYS income tax return for fewer than 5 years..
15 BENEFITS Real Property Tax Credit Property taxes, PILOTs and payments of property taxes made by leasee Up to the full amount of property tax paid Limited to the greater of: 25% of wages and benefits paid to new employees Investment calculation CT606
16 BENEFITS Real Property Tax Credit Wages calculation – 25% of wages and benefits paid to new employees capped at maximum benefit of $10,000 per employee. Example: $20,000 = $5,000 RPTC (x2 employees) $60,000 = $10,000 RPTC Total RPTC = $20,000
17 BENEFITS Real Property Tax Credit Investment Calculation is the product of: Federal basis x 10% X % of the federal basis attributable to renovation or construction, or, % physical occupancy Example: $150,000 building with $50,000 in renovations. $150,000 x 10% x 33% = $5,000
18 BENEFITS Real Property Tax Credit Is a 100% refundable credit Lasts 10 years Bottom line: You pay your property taxes, NYS pays you back.
19 BENEFITS Sales Tax Exemption Exemption of state portion of sales tax for all taxable purchases (4%) Example: Your business purchases utilities, phone and internet service, office supplies, etc. for a total of $10,000 per year - exemption is worth $400. DTF-84 ST-121.6
20 BENEFITS Utility Rate Reduction 50% reduction on delivery charges of electricity (applies to new usage) Reduces utility costs by about 20%
21 BENEFITS Investment Tax Credit (ITC & EITC) ONLY applies to manufacturers and equivalents Up to a 19% tax credit on new investments in buildings (purchase, construction or renovations) and production equipment. ITC: Year of acquisition = 10% (8% for certain taxpayers) EITC: Year 1, 2 & 3 = 3% New businesses are eligible for a 50% refund of any unused portion of ITC CT603 New business – filed NYS income tax return for fewer than 5 years.
22 BENEFITS Other Benefits Zone Capital Credits You must request an allotment of ZCCs from the zone If awarded, can be used to attract equity investment into your company Your business can give a new investor $0.25 in personal or business income tax credits for every $1.00 they invest * Restrictions apply. ZCCs are awarded solely at the discretion of the board. CT602
23 BENEFITS Other Benefits Verizon reductions Access to other programs, including financing through the Statewide Zone Capital Corporation.
24 BENEFITS Statewide Zone Capital Corporation http://www.tax.state.ny.us/forms/corp_credit_forms.htm Tax Forms http://www.tax.state.ny.us/sbc/empire_zone.htm Publications http://www.nybdc.com/empirezone.htm
26 ELIGIBILITY Requirements For Certification: Located (or soon to be located) in the current boundaries of the zone Project minimum job creation and investment 1 job and $10,000 for most areas of the zone 10 jobs and $100,000 for the business parks
27 ELIGIBILITY Requirements For Certification: No violations of NYS Labor Laws Need federal identification number and unemployment insurance registration Maintain disability and workers comp insurance if you have employees or will be hiring within 90 days
29 CERTIFICATION PROCESS Process: Located (or soon-to-be located) in the Empire Zone boundaries Call me to discuss project and see if the Empire Zone is a good fit Fill out application – may need assistance from accountant, bookkeeper, small business development center and zone coordinator
30 CERTIFICATION PROCESS Process: Fax your draft application to me for review and we can discuss any edits Sign, notarize and send original
31 CERTIFICATION PROCESS Process: Application reviewed by local Zone Administrative Board (last Wednesday of every other month) Signed by local Zone Certification Official and sent to Albany Approval by Empire State Development in Albany (can take 1-6 months) Business to receives benefits retroactive to local approval by Zone Certification Official
32 CERTIFICATION PROCESS Process: Albany sends Empire Zone certificate Fill out sales tax exemption forms and send in (turnaround 1-2 months) Request utility rate reductions Notify your accountant about benefits – most are schedules that you attach to your NYS tax returns Your only requirement – submit Business Annual Report each year
34 TIPS TO MAXIMIZE BENEFITS For new businesses: Talk to me and small business development center as soon as possible Incorporate as an LLC where possible Get certification the year you begin hiring
35 TIPS TO MAXIMIZE BENEFITS For new businesses: EZ defines a new business as one that has filed fewer than 5 NYS tax returns Therefore, make sure you incorporate and are certified in the same calendar year (esp. important near end of year)
36 TIPS TO MAXIMIZE BENEFITS For existing businesses: If you are a renter, you can now renegotiate your lease so that any property taxes you pay (through triple net) can be eligible for the Real Property Tax Credit Make sure you get your construction/renovation sales taxes refunded to you Apply to assessor for 485-e after construction is complete
37 TIPS TO MAXIMIZE BENEFITS For existing businesses: If you are expanding your business into a totally new domain, consider incorporating a brand new entity for maximum EZ benefits and term of benefits Note: you can not reincorporate the same business (under the same ownership) to get access to more benefits
38 TIPS TO MAXIMIZE BENEFITS For new or existing businesses: For anything to do with manufacturing, incorporate the manufacturing elements of the business into a new entity This will give you access to ITC and EITC credits (and the refund as a new business)
39 TIPS TO MAXIMIZE BENEFITS For existing businesses: Remember – you only get Empire Zone benefits for employment you create and investment you make in a certified Empire Zone company If you have multiple entities, make sure the certified company: Has the employees on its payroll Makes any investments in real property Incurs the NYS tax burden Pays for taxable goods
40 TIPS TO MAXIMIZE BENEFITS For new or existing businesses: If you want to have a holding company and an operating company (for liability reasons,) it may be to your advantage to have them both get certification.
41 TIPS TO MAXIMIZE BENEFITS For new or existing businesses: Use the Statewide Zone Capital Corporation to get access to low- interest financing Use Zone Capital Credits to attract investment equity into your business to create jobs