Qualified Empire Zone Enterprises FAQ's

Qualified Empire Zone Enterprise (QEZE) is a term used to represent a zone-certified business that qualifies to apply the new enhanced tax credits.

 

If certified prior to July 1, 2005 you do not have to be recertified. However, you must meet the employment test where the taxpayer’s employment must equal or exceed its employment in the base period.

 

Yes, providing that each company is a separate tax paying entity and each company possesses a separate and distinct Taxpayer Identification Number or Employer Identification Number (EIN).

 

No. You would be eligible to apply for certification for the company that is located within the Empire Zone. The Empire Zone tax credits and exemptions would only be applicable to business activities and tax liability to the business located within the Empire Zone.

 

No. Certification is mostly a one-time occurrence that is expedited through a local Zone Coordinator. “Qualify” indicates that a Zone-certified business has calculated the employment comparative between the tax year that the company is applying for credits AND a base period or test year. If your accountant determines that your employment comparative equals or exceeds the base period or test year, you can qualify for the enhanced credits.

 

New businesses that create jobs in New York State will have a base period employment equal to zero (0). Any new business that creates jobs would- in the first and future years- meet the employment test for maintaining or increasing employment.

 

No. You must maintain your employment average in the area that is outside of an Empire Zone in order to qualify for enhanced Zone benefits inside the Zone. Additionally, you must apply for permission with your current location’s municipal officer to access Zone credits prior to your move into the Zone because of your shift in operations. After a public hearing and written approval from the municipal authority where you are closing your operations, you may be eligible to claim the basic Zone benefits and not the enhanced benefits.

 

A single taxpaying Zone certified business must be located 100 percent within the Zone. It cannot have any other property or payroll outside the Zone.

 

Claiming other incentives, such as the Investment Tax Credit, or the Employment Incentive Tax Credit will not affect your eligibility to claim the enhanced QEZE credits.

 

You will apply to the Department of Taxation and Finance to obtain your QEZE exemption certificate. You must first obtain and complete the tax for DTF-80. You may obtain this form from the New York State Department of Tax and Finance website or apply directly to the Department for a copy to be sent by mail to you.

 

The Department of Taxation and Finance is currently examining the issue.

 

You will be eligible to claim these exemptions on March 1, 2001 if your employment number in 200 (the taxable year immediately preceding the year in which QEZE is seeking the sales and use tax exemptions) equals or exceeds your employment number in your base period of 1994-1998.

 

As a new business creating jobs in New York State, you would have a base period of zero (0). You would, in the first and future years, meet the employment test for maintaining or increasing employment.

 

Credits can be claimed for tax years beginning on or after January 1, 2001. The sales tax exemptions begin March 1, 2001. You must also meet the annual employment test to continue to claim the benefits.

 

Credits that cannot be carried forward are applied first. Refundable credits are applied last. The ordering of your tax returns would be: Tax Reduction Tax Credit; Wage Tax Credit; Investment Tax Credit; Real Property Tax Credit.

 

The “employment number” is the average number of people that the business enterprise employs full-time for at least half of the business’s taxable year. For corporations, it does not include general executive officers. You compute that average by determining how many of those people were employed on March 31^st, June 30^th, September 30^th, and December 31^st and averaging those four numbers.

 

The Sales and Use Tax Incentive is a credit or refund of the sales or use tax paid on building materials that are incorporated into a qualifying commercial or industrial structure within an Empire Zone. The Sales Tax Exemption is not a refund. It is an exemption from the four percent NYS sales and uses taxes for tangible personal property and service sold to a qualified business. A company must register with the New York State Department of Taxation and Finance and be issued an exemption certificate. That certificate is valid for a 10-year period as long as the business meets or exceeds its base year employment number.

 

You will apply to the Department of Taxation & Finance to obtain your QEZE exemption certificate. You must first obtain and complete the Tax form DTF-80. You may obtain this form from the NYS Department of Tax & Finance Website or apply directly to the Department for a copy to be sent by mail.

 

The Department of Taxation & Finance is currently examining the issue.

 

While this question has not been finally decided by the Department of Taxation & Finance, it is likely that a QEZE would give an exemption document to each vendor at the time of purchase, as either a single use or blanket certificate.

 

Your purchases will be exempt from local sales and use taxes, if the county, city or school district in which the QEZE is located has elected to provide the QEZE exemptions.

 

Your purchases will be exempt from local sales and use taxes, if the county, city or school district in which the QEZE is located has elected to provide the QEZE exemptions.

The Department will maintain a list of localities, which have elected the exemptions.

The Department will advise vendors of which localities have elected to participate with the sales tax exemptions. The list of localities may change each year. If a locality elects to provide the QEZE exemptions, that election takes effect on March 1st and stays in effect until the locality chooses the rescind the exemptions. However, the locality may not rescind the exemptions in the middle of a year. All changes may take effect only on March 1st of a given year.

 

No, the tests are not identical. While both have to be businesses certified under Article 18-B of the General Municipal Law, a QEZE for sales tax purposes must satisfy the employment test for the taxable year immediately preceding the year in which the QEZE is seeking the sales and use tax exemptions. For an individual or a corporation seeking to claim the QEZE tax credits, it must satisfy the employment test for the year it intends to claim the credits.

 

The QEZE sales and use tax exemptions are an alternative to the Empire Zone refund/credit provisions. The QEZE exemptions provide an up-front exemption at the time of purchase rather than a refund or credit. In addition, they apply to a broad class of tangible personal property and to utility and other services, provided that the property or services are used by the QEZE in the Empire Zone. The existing Empire Zone refund/credit provisions apply only to tangible personal property that is incorporated into industrial or commercial real property which is being constructed, expanded or rehabilitated within an Empire Zone and which becomes an integral component part of that real property. The QEZE benefits may only be claimed by a certified business. The person claiming the existing sales and use tax refund or credit does not have to be a certified business.

 

The tax reduction tax credit is measured by a taxpayer's income base. For the corporation franchise tax, this is the entire net income base and the alternative minimum tax base. If you pay tax under the capital base, because it was higher that the income base, you would still be eligible to claim the tax reduction credit measured by that income base.

No. The credit for real property taxes is applied against your tax under the Tax Law. Business corporations would use the credit to reduce their corporation franchise tax and sole proprietors would use it to reduce their personal income tax.

 

If the QEZE transfers title to an IDA so as to receive financial assistance from the IDA and enters into a PILOT agreement with the IDA, the QEZE will be considered the owner of the property and the PILOT payments will be considered to be real property taxes paid by the QEZE.

You would not need to apply remaining Real Property Tax Credits to future tax years as all remaining credit is fully refundable in a cash refund.