Startups in New York State (or those willing to relocate to NYS) could be eligible for significant tax benefits through either the Innovation Hot Spot Program, or through START-UP NY.
So, what benefits might you qualify for?
Hot Spot Program
Companies certified by an innovation hot spot may be eligible for tax benefits. To be certified, your company must:
- Belong to an incubator that is a designated Hot Spot in New York State. See this page for a list of Hot Spot incubators. Partner incubators of the Southern Tier Startup Alliance (The Center, IncubatorWorks, the Kevin M. McGovern Center for Venture Development in the Life Sciences, Rev: Ithaca Startup Works, and the Start-Up Suites at Binghamton University) are considered part of the Hot Spot program.
- Be less than five years old, or less than 7 years old for life science companies.
- Have less than $2 million per year in annual revenue.
Final determination for tax benefit eligibility is up to the New York State Division of Taxation and Finance. See this blog post for more information on the Hot Spot program.
START-UP NY Program
You are eligible for START-UP NY tax benefits if:
- You secure the sponsorship of a participating college or university. You can search the list of participating colleges and universities here.
- The college or university has reviewed your commitment to create a certain number of jobs over a five-year period.
- You agree to occupy physical space that the university has put on its START-UP NY Campus Plan as a designated tax-free area.
- Your company does not have a pre-existing competitor in the community.
See this blog post for more information on the START-UP NY program.
Hot Spot vs. START-UP NY
Here are the differences in a nutshell:
- START-UP NY offers 10 years of benefits; the Hot Spot program offers 5.
- START-UP NY offers a personal income tax exemption for new employees; the Hot Spot exemption doesn’t.
- START-UP NY requires an application and a campus to sponsor the company; the Hot Spot only requires that the company is certified as a member of the Hot Spot.
- START-UP NY requires the company to move into specific space that is designated as a ‘tax-free area’ in the participating university’s campus plan. Hot Spot benefits are available regardless of where the company is, as long as they meet the membership requirements of the incubator.
Q: Can I start with Hot Spot tax benefits and then move into START-UP NY later?
A: Yes. The Hot Spot program is designed to support companies starting and developing in certified incubators. A company then has the option to apply for START-UP NY once they are at a point in their development where they can predict and quantify future job growth.
Q: If I meet the above criteria, am I guaranteed tax benefits?
A: No, it is ultimately up to the NYS Department of Taxation and Finance on whether or not your company receives tax benefits.
Q: Are you my lawyer or tax advisor?
A: No! You should consult your own advisors to understand exactly how these programs might impact your own tax situation.
This is the first in a 3-part series on tax benefits by Marketing & Communications Associate Kristi Krulcik to be published throughout February and March. To stay up-to-date on new resources from the Southern Tier Startup Alliance, join our email newsletter.