New Empire Zone Legislation
New Empire Zone Legislation
Some new Empire Zone rules and regulations took effect April 1, 2005. These pertain to:
Empire Zone Administration: The program will continue to be managed by the pre-existing Empire Zone Designation Board, whose voting membership consists of five administration officials and two legislative appointments. A three-way memo of understanding is required for the designation of additional zones authorized by the bill; unanimous approval of the designation board is required for the boundary amendments required of existing zones.
Grandfathering: Existing QEZEs will not have their benefit calculations or durations changed by this legislation, with one limited exception (“zero-base” businesses certified before August 2002 whose creation served no “valid business purpose”- for the sole purpose of qualifying for benefits, for example). Therefore, QEZEs certified prior to the effective date of this bill, and QEZEs that fall outside of an Empire Zone because of zone boundary amendments, will not have their benefits affected. They will be grandfathered at their current benefit levels for their current benefit period.
Regionally Significant Projects: The legislation authorizes zone benefits for “regionally significant projects” located outside of Empire Zone boundaries. These are defined as a manufacturing project creating more than 50 jobs, an agri-, hi-tech, or biotech business that makes a capital investment of more than $10 million or creates 20 or more jobs, or a financial or insurance services/ distribution center creating 300 new jobs. The zone designation board has discretion to approve other regionally significant projects on a case by case basis. This is the only time that an Empire Zone can go outside those 6 development areas, and the acreage that this manufacturing facility occupy will not count toward the acreage that were allowed to work with (the two-squared miles). As of April 1, 2005, municipalities must demonstrate in all applications for designation as an Empire Zone that there is no viable alternative area that has existing infrastructure available other than the proposed one.
Additional Zones: The law authorizes the creation of three additional zones in each of the next four years. The bill specifies that these zones will be designated from a list of eleven counties (all currently without zones) and the “Chinatown” section of New York City.
Zone Reconfiguration: All existing Empire Zones are required to be reconfigured so that all zone acreage designated by “investment zones” (i.e. census tract zones) are contained within three separate contiguous areas, and “development zones” (i.e. county-wide zones) must have all acreage within six distinct and separate contiguous areas. These contiguous areas would not have to touch or otherwise be connected to one another. In relation to our area, no new boundary revisions can be approved until the Cattaraugus Empire Zone identifies (and the Zone Designation Board has approved) the distinct and separate 6 contiguous development areas. County zones can apply for designation of up to three “investment zones”. The deadline to identify the six development areas is January 1, 2006.
Program Extension: The overall Empire Zone program was extended from March 31, 2005 to March 31, 2010
Benefits for Future QEZEs: For QEZEs certified after 4/1/05, the duration of QEZE benefits will be 10 (rather than 12) years. Also, these QEZEs will be subject to new Real Property Tax Benefit criteria that calculates EZ benefits based on wages and benefits paid to employees, rather than on the number or percentage increase of new jobs.
Agricultural Cooperatives: A new EZ tax credit program was established for agricultural cooperatives.
Accountability: The law contains new and expanded accountability/reporting requirements for local zone boards.
Also, a cost benefit analysis must accompany any new application for certification to be forwarded to the state. The analysis would list the anticipated benefits/credits that the business would be receiving, the projected job creation, and/or investment to the zone. Other non-quantifiable factors may be included in some “special” circumstances. The analysis will compare benefits of Tax Reduction Credit, Sales Tax Exemption, Real Property Tax Credit, Wage Tax Credit, Investment Tax Credit and Employment Incentive Credit for the first five years WITH the estimated number of jobs created, wage and benefits provided to zone employees, Capital Investments, and other qualitative factors. The overall analysis should result in a BENEFIT to the Empire Zone Community.
Benefit levels:
*The benefit period has been reduced from 15 years to 10 years for businesses certified after April 1st, 2005.
*Job creation would be a criterion for claiming sales tax benefits.
*QEZE benefit levels will be modified as follows:
~Businesses certified in investment zones or as “regionally significant projects”:
-Real Property Tax Credit would be calculated as the greater of 25 percent of wages and benefits of new employees not to exceed $10,000/employee, or the investment limitation.
-The Tax Reduction Credit holds no change from the current law.
~Businesses certified in development zones:
-The Real Property Tax Credit would be calculated as the greater of 25 percent of wages and benefits of zone employees multiplied by a new Development Zone Employment Increase Factor or the investment limitation.
-The Tax Reduction Credit holds no change from the current law.
Development Zone Employment Increase Factor formula:
Net new jobs DZ Employment Increase Factor
1-10 .25
11-49 .50
50-75 .75
76 and above The amount, not to exceed 1.0, of the new employees divided by 100
* “Regionally significant projects” would not be subject to Development Zone Employment Increase Factor. |
