New York Credits and Incentives for Businesses Included in 2022-2023 Budget
On April 11, 2022, New York State Governor Kathy Hochul signed into legislation the more than $220 billion 2022-2023 fiscal year budget package. The budget includes the creation, extension and enhancement of various credits and incentives for businesses within targeted industries.
Below are some highlights of the bill:
PASS-THROUGH ENTITY TAX
- Amends the law to allow an eligible S-corporation to certify that it meets the requirements as a resident S-corporation for New York State’s Pass-through Entity Tax.
- A resident S-corporation is an S-corporation that certifies at the time of the election that all of its shareholders are residents of New York State.
- For an electing resident S-corporation, all income is subject to the Pass-through E Tax.
- For 2022, the certification must be made by March 15th, 2023 (awaiting guidance from New York for the certification process).
- Provides for an elective New York City tax on pass-through entities, applicable for taxable years beginning on or after January 1, 2023.
- Available to city partnerships and city resident S-corporations.
- The tax is 3.876% of the eligible entity’s taxable income.
- Eligible partnerships or S-corporations must make an annual irrevocable election by the due date of the first estimated payment (generally by March 15).
- A corresponding personal income tax credit is available.
CREDITS AND INCENTIVES
The bill creates the following credits and incentives:
- Capital cost tax credit for small business COVID-19-related expenses. Credit is for small businesses ($2.5 million or less of gross receipts) that incurred expenses in 2021 and 2022 to comply with public health or other emergency orders to keep their businesses safe. The credit is 50% of qualifying COVID-19 capital costs (capped at $25,000). The program is capped at $250 million.
- Empire State digital gaming media production credit for certain entities engaged in qualified digital gaming media productions. Credit is against corporate franchise or personal income tax of 25% of qualified production cost. There is an enhanced credit for production costs incurred and paid outside the Metropolitan district. Application process and certain diverse workforce plan is required. Annual credit cap of $5 million.
The bill also extends and expands the following credits and incentives:
- New York City musical and theatrical production credit. Extends the expenditure cap of $3 million per production for productions that have their first performance prior to January 1, 2023 (and up to $1.5 million per production for productions with initial performance dates after January 1, 2023). Extends the initial application deadline from December 31, 2022, to June 30, 2023.
- Hire a Vet credit extended through 2025. Increases the credit from 10% to 15% of wages paid to non-disabled veterans (20% for disabled veterans). Increases the credit maximum from $5,000 to $15,000 for full-time (1,820 hours over 12 months) non-disabled ($20,000 for disabled) veterans. Establishes a credit of up to $7,500 for the employment of veterans non-disabled ($10,000 for disabled) working part-time (1,040 hours over 12 months).
- Empire film production tax credit is extended through 2029. Requires productions to submit a diversity plan starting with tax year 2023
- New York youth jobs program tax credit is extended through 2027. Credit is for employers in New York State that hire and employ at-risk youth on a full-time or part-time basis.
- Restaurant Return to Work Credit. Extends until May 1, 2022, the deadline to submit applications for the credit. Creates the “additional” Restaurant Return-to-Work Credit for eligible businesses approved for the program that have hired more than 10 employees. Credit is $5,000 per net new job above 10 (up to 20 employees). Applications must be submitted by July 1, 2022.
- Clean heating fuel credit.
- Credit for companies that provide transportation to individuals with disabilities.
- Empire State apprenticeship tax credit.
- Alternative fuels and electric vehicle recharging property credit.
- Employment of persons with disabilities tax credits.
- Investment tax credits for farmers.
The information presented here should not be construed as legal, tax, accounting, or valuation advice. No one should act on such information without appropriate professional advice and after a thorough examination of the particular situation.