Starting at the beginning of 2014, New York’s STARTUP-NY Program went live. Here is the official website for the initiative. Its goals are laudable but its only available to a small niche of companies. If your company qualifies, however, the benefits are rather nice.
In summary, the Program provides eligible companies with free office space (at certain locations) for a period of time and the employees of the company pay no state income tax on their income (at least for the first five years, with a small amount possibly paid in years 5 through ten). The Program is attempting to lure out-of-state companies into New York, while encouraging sprouting of new startups that otherwise may not have started without these benefits. Overall New York is looking to add more jobs in the state, and the more jobs now (even with tax breaks) the more taxes the state can collect in teh future.
The office space must be located at, or sponsored by, a University or College approved by the State for the Program. Here is the current official list, although others can apply.
Eligible companies are those that support the school they are associated with and are “new businesses” that are involved in high technology lines of business (an amorphous term).
The phrase “new business” is defined in the regulations as:
a business that satisfies the following conditions:
1) the business must not be operating or located within the State as of the date it
submits its application to participate in the START‐UP NY Program;
2) the business must not be moving existing jobs into the Tax‐Free NY area from
another area in the State;
3) the business is not substantially similar in operation and in ownership to a
business entity (or entities) taxable, or previously taxable within the last five
taxable years, under Sections 183, 184, 185 or 186 of the Tax Law; Articles 9‐A,
32, or 33 of the Tax Law; Article 23 of the Tax Law or which would have been
subject to tax under Article 23 of the Tax Law (as such article was in effect on
January 1, 1980), or the income or losses of which is or was includable under
Article 22 of the Tax Law; and
4) the business must not have caused individuals to transfer from existing
employment with a related person located in the State to similar employment
with the business, unless such business has received approval for such transfers
from the Commissioner after demonstrating that the related person has not
eliminated those existing positions.
The regulations also state what types of companies are expressly deemed ineligible to participate in the Program, those being:
- retail and wholesale businesses;
- real estate brokers;
- law firms;
- medical or dental practices;
- real estate management companies;
- finance and financial services;
- businesses providing personal services;
- businesses providing business administrative or support services (unless the business is creating at least 100 new jobs and has received permission to participate);
- accounting firms;
- businesses providing utilities; or
- energy production and distribution companies.
So all in all the Program will work and be a boon for a certain niche type of company. Those lucky enough to have a campus or school sponsored location nearby and in the high tech industry will luck out. Only time will tell how well the Program will attract new businesses to either come to New York or start up here. I think its a great start, while a bit narrow, a great start nonetheless.
I think that the outlines of the Program should be grabbed by Congress and a bill passed to extend similar benefits to companies starting businesses in blighted and industrial areas throughout the country, with a break on Federal income taxes as well. The more places offering benefits to new companies the better.