Will positions created after approval by ESD but prior to a business locating in a TFA, due to the designated space in the TFA not being ready, be considered net new jobs for purposes of meeting job goals? In addition to other criteria, the Economic Development Law defines a net new job as one “created in a tax-free NY area” and “new to the state.” Jobs created pursuant to an application approved by ESD but not yet located in a TFA, will be considered net new jobs only under the following circumstances:
It is the business’s initial year in the program;
The jobs reside outside the TFA because no suitable space exists within such TFA;
The jobs are moved into the TFA within 180 days after the business’s application is approved; and
The jobs are created after the business’s application is approved by ESD.
Tax benefits would not begin until the business locates to the Tax-Free Area, with the exception of the sales tax credit or refund.
Employees counted as net new jobs in the above circumstance are subject to income tax. The employers cannot report those wages as STARTUP NY wages until the business locates to the Tax-Free Area.
The request for a 180-day waiver should be made at time of application submission but must be made prior to the creation of any net new jobs subject to the waiver.
What types of businesses are NOT eligible for START-UP NY? There are a number of types of business that cannot legally receive benefits under START-UP NY. Colleges and universities will not be able to consider applications from:
Retail and wholesale businesses;
Law firms and accounting firms;
Medical or dental practices;
Real estate management companies/brokers;
Businesses providing personal services (e.g. nail salons, etc.);
Businesses providing utilities; or
Utilities, energy production and distribution
If you don’t qualify for START-UP NY, it’s likely there are other incentives or resources that New York State may be able to offer you. A list is available here.
Can a START-UP NY certificate of eligibility be revised or transferred to another business? The specific facts of a case that give rise to the need for a revision or transfer of a certificate of eligibility will be considered by the commissioner of economic development when making a final determination. In all of these cases, the business must contact ESD to obtain the appropriate form to request the revision or transfer of its certificate of eligibility.
If a certified business is changing the name of the certified entity, can the certificate of eligibility be revised to reflect the name change? If the certified business is only changing the name of the certified entity, it may request a revised certificate of eligibility to reflect this change.
If a certified business is changing its Federal Employer Identification Number (FEIN), can the certificate of eligibility be revised to reflect the FEIN change? If the certified business is only changing the FEIN of the certified entity, it may request a revised certificate of eligibility to reflect this change.
Are members of an LLC/partnership considered net new employees? Members of an LLC/partnership are not considered employees and do not qualify as net new jobs, nor are they eligible for the Personal Income Tax (PIT).
Can net new jobs be filled through an employee leasing agency, and are the leased employees eligible for the wage exclusion benefit? Yes, net new jobs of the START-UP NY company can be filled through a registered Professional Employment Organization, and the employees in those positions may be eligible for the wage exclusion benefit, provided they meet all other eligibility criteria.
Can an individual that is performing services for the START-UP NY business as an independent contractor and who receives an IRS Form 1099-Misc for the amount paid by the business to the individual be hired as an employee and count as a net new job? To determine whether a job created by a business participating in the START-UP NY Program in a TFA can be considered a “net new job”, the business must look to the job (not the individual) and the function of the job to see if it qualifies as a “net new job”. If an independent contractor was hired to temporarily assist a business in its formative stage, and was then hired into a new position (new duties of the job) at the business, then the independent contractor can be counted as a net new job. However, if an independent contractor was hired to perform a job function for the STARTUP NY business and performed the job solely for the business full-time (that is, did not offer these services to the general public) and was then hired by the business into the same position performing the same job functions, the position filled by the independent contractor would not be counted as a net new job as the position would be construed as having been previously been performed in the state and thus not new. Conversely, if an independent contractor performed the job function for the START-UP NY business on a limited basis, in addition to working for other clients, and was subsequently hired by the business into a new position to perform the same task full-time, such position would be considered a net new job.
Is a new employee who replaces a departing employee in a net new job eligible for the wage exclusion benefit? Yes, provided the replacement employee works for the certified business at the TFA location for at least six months of the calendar year in a net new job. The net new job would simply be occupied by a different person.
Will a job filled after June 30th of a given year be counted as a “net new job”? Yes, a new job located at a TFA location that is filled on or after the date a business is certified to participate in the Program will be counted as a net new job for purposes of meeting its job performance goals as long as that job remains filled for at least six months of the 12-month period beginning on the date that the business locates to a TFA and/or six months out of each subsequent 12-month period, and it meets all the other net new job criteria.
Does an employee of a business certified to participate in the START-UP NY Program have to reside in New York State for a certain period of time to qualify for the wage exclusion benefit? No, an employee is not required to reside in New York to be eligible for the wage exclusion benefit.
If a business fails to meet its job performance goals, will an employee receiving the wage exclusion benefit retain this benefit for the year? Yes. As long as the employee was employed for at least six months in the calendar year, he or she may retain the wage exclusion benefit for the year. However, he or she will not be eligible for the benefit in subsequent years unless the business returns to compliance.
Will an employee hired after June 30th of a given year be eligible for the wage exclusion benefit for that year? No, an employee hired for a net new job must be on the payroll for at least six months of the calendar year at the TFA location before being eligible for the wage exclusion benefit. He or she will be eligible for the wage exclusion benefit in the following calendar year provided he or she is employed in the TFA for at least six months during that calendar year.
How much work is an employee allowed to perform outside a TFA and still remain eligible for the personal income tax wage exclusion benefit? To be eligible for the personal income tax wage exclusion benefit, the Tax Law requires that the employee must be “engaged in work performed exclusively at the location within the TFA during the taxable year.” This means an employee, to be considered an eligible employee, must perform his or her work within the TFA and that any work performed by the employee outside the TFA must be minimal, and merely incidental to the main purpose of the approved START-UP NY business. Furthermore, employees of the approved START-UP NY business are allowed to perform some of their work in academic facilities owned by the TFA sponsor, but not designated as such area, if such work is integral to the main purpose of the approved START-UP NY business.
Is an employee of an approved START-UP NY business entitled to a full 10-year benefit period for the personal income tax wage exclusion benefit? The 10-year benefit period is linked to the START-UP NY business, not individual employees. Therefore, an eligible employee will only receive 10 years of the wage exclusion benefit if he or she is hired prior to July 1st in the START-UP NY business’s first year of participation in the program and remains employed for the entire 10-year duration. Employees hired in subsequent years can receive the wage exclusion benefit only for the remainder of the business’s benefit period.
Furthermore, the wage exclusion benefit for all eligible employees in years 6 through 10 of a business’s benefit period is capped at the first $200,000 in wages for a single filer, $250,000 in
wages for a head of household filer, and $300,000 in wages for joint return filers.
When do the START-UP NY Program benefit periods actually start? Businesses will receive an approval date from ESD when ESD accepts the business into the Program. No benefits can start earlier than this date.
Businesses will receive a locate date when they physically locate and commence operations in the tax-free NY area (TFA). This date will be listed on the certificate of eligibility issued by the sponsor and marks the start of the 10-year benefit period for the tax credits and personal income tax wage exclusion benefit.
Businesses may also have a separate start date for sales tax and real property transfer tax benefits. This date can occur on or after the approval date but before the date the business locates in the TFA. Form STR-1, which is completed by the TFA sponsor, contains the start date of these benefit periods as agreed to by the approved START-UP NY business. The end date of the period is 10 years after the date on the STR-1, provided no subsequent decertification occurs. For example, for a benefit period start date of October 17th, 2015, the corresponding end date would be October 16th, 2025.
Is a certified business required to offer the wage exclusion benefit to its eligible employees in the net new jobs? Yes.
What colleges or universities can participate in START-UP NY? START-UP NY is open to all two- and four-year, not-for-profit educational institutions chartered in the State of New York. Eligibility rules differ based on the type of institution (i.e., State University of New York campuses, City University of New York campuses, and private educational campuses), the location of the tax-free area (i.e., within New York City and its neighboring counties vs. upstate New York) and the type of eligibility granted (i.e., on-campus space, off-campus space, a designated state incubator or a designated state asset.)
What businesses are eligible for START-UP NY? To participate in START-UP NY, a business must support the academic mission of the college or university it is looking to work with. In New York City, Long Island and Westchester County, businesses must be start-ups or one of a number of broadly defined “high tech” businesses. Also, eligible businesses must be one of the following:
A new company in New York State
A company from out-of-state that is relocating to New York State
An expansion of a company that already has employees in New York State. Expanding businesses applying for START-UP NY will have to demonstrate that they are creating new jobs and not moving existing jobs from elsewhere in the State.
Eligible businesses may not locate in an area where they would compete with existing local businesses. If you have questions about eligibility, please contact us.
What land and properties are eligible for a business under this program? Participating START-UP NY businesses will occupy property or land affiliated with public and private colleges and universities. START-UP NY facility space will be on or near academic campuses and will be available in urban and rural areas across New York State. Note that if a piece of property is not currently part of an academic institution’s campus, it may be possible under special circumstances for that property to become affiliated with a sponsoring academic institution.
Are retained jobs eligible for tax-free benefits under START-UP NY? No. The benefits of START-UP NY can only be applied to newly created jobs in New York State that occur through:
The relocation of an out-of-state or foreign company to New York State
The significant expansion of an existing business in New York State
The formation of a new business in New York State
Is a business eligible for any other programs or tax benefits in addition to START-UP NY? A business may be eligible for additional programs or grants, but START-UP NY tax benefits cannot be combined with any other tax credit as it relates to the company’s operations within the tax-free area. Please contact us, so that we may help you identify programs for which your business may be eligible.
What tax benefits will participating companies receive? START-UP NY will provide new and expanding businesses that create net new jobs the opportunity to operate completely tax-free — including no income tax for employees and no sales, property or business tax — while partnering with higher education institutions. Business and employee tax benefits will be available for up to ten years. After five years, for extremely high-earners, there is a limit on the amount of employee earnings exempted from the Personal Income Tax.
How many jobs must a business create to be eligible for START-UP NY? There is no minimum requirement for the number of net new jobs that must be created, but all participating businesses must create jobs to receive the program’s benefits.
How does a college or university begin hosting companies under START-UP NY? Eligible academic institutions are first required to develop a plan that will include:
A description of the land or property to be designated as tax-free
A description of the institution’s academic mission
A description of the type of companies it will be seeking to attract
Once this plan is approved, schools will be eligible to begin accepting applications from companies. After a school approves an application for a company, Empire State Development (ESD) will have 60 days to review the company’s application. If ESD does not overrule the company’s acceptance within 60 days, the company will be deemed accepted into the START-UP NY Program and immediately will be able to begin operating on the tax-free space.
Will participation in START-UP NY impact a college or university’s non-profit, tax-exempt status? No. Appropriate participation in START-UP NY will not impair this status. However, as not-for-profit educational institutions, all participating schools should be aware of certain prohibitions applicable to such institutions. For specific questions, we encourage you to reach out to your institution’s legal counsel.
What if a college or university does not want an individual company to locate on its campus? Only a college or university can give a company the right to locate on their space. Additionally, companies are required to support an institution’s academic mission. A company might support this mission by allowing faculty to perform applied research, establishing internship and experiential learning opportunities for students, hiring directly from the campus population or by undertaking numerous other mutually beneficial partnerships.
When must a company apply to qualify? Under the current legislation, the last date for a company to be accepted into the program is December 31, 2020. Regardless of the date of its acceptance into the program, a company participating in START-UP NY and in fulfillment of its job creation commitments will be eligible for ten years of tax benefits, with the aforementioned Personal Income Tax exemption cap beginning after five years.
Can a campus relocate its existing programs, students, faculty or staff in order to make room for START-UP NY businesses? No. Relocating existing programs, students, faculty or staff is expressly prohibited. Colleges and universities will use vacant land or building space or identify other non-owned but eligible real estate that might be included in the program. Furthermore, institutions are prohibited from outsourcing functions that are performed currently by existing organizational employees in order to make available facility space for the program.