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Tax Credits for Startups in New York State

As our federal and state government continue to worry about job creation, they’re trying their best to promote entrepreneurship.  Our CFO Alex Katz just sent out a memo to our portfolio, attached below, about 2 tax credits available to companies that do business in New York State.

For background, we rarely see a CPA come to us with a startup idea.  As a result, we offer our portfolio companies a wide range of accounting services, including  Accounts Payable/Expenses; Accounts Receivable/Revenue; Payroll; General Ledger; Management Reporting; Annual tax and financial reporting.  In addition to relieving our companies of a time-consuming burden, this also gives us deep insight into their growth and ability to help them see upcoming issues well ahead of time.  Alex leads the four-person team that provides these services.

Enter Alex:

I am writing to tell you about two tax credits available to companies that do business in New York State.  The first credit, called the “Qualified Emerging Technology Company” tax credit, is available to companies located in New York State that are involved in “emerging technologies.”  The credit can benefit companies even if they are not yet paying taxes to New York State, because New York will refund the credit amount.  This can be a boon to your Company or your investors.  New York also enacted this year a “New York Jobs Tax Credit” that is available to companies who increase their New York employment in 2011 over 2010 levels, even if 2010 was zero.

Qualifying Emerging Technology Credit

The Qualifying Emerging Tax Credit is available to companies involved in R&D activities in information and communication technologies, among other things.  The amount that can be refunded includes the following:

  • Up to $250,000 per year based on a portion of amounts paid for payroll, training, computer equipment and other items;
  • $1,000 per year for each new employee hired; and
  • Up to $300,000 for amounts invested in QETC companies (this credit is available to shareholders directly, but is not refundable).

New York Jobs Tax Credit

The New York Jobs Tax Credit is for New York companies who increase employment in 2011 over 2010 levels.  The amount of the credit equals the amount that the employees paid in individual withholding taxes.

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Act Now!

If you have not taken advantage of the tax credit before, you can amend your 2008, 2009 or 2010 tax returns to do so, and New York may issue a refund to you for those prior years.  Note, however, that the credit is scheduled to expire at the end of 2011.  I am told that the Governor is engaged in discussions with the Legislature about extending the credit, but it would be wise to consider this opportunity as soon as possible.

The process can be involved and detailed.  It involves filing an application to the New York Department of Taxation and Finance to be deemed a QETC and then submitting an application each year as part of your annual tax return.   I have spoken with two CPA firms who can help in the process, and I can be available to answer any questions you may have.

(Photo courtesy Shedboy.)

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