Investment Tax Credit
Production property including plant and equipment used to produce goods, industrial waste treatment facilities, air pollution control facilities, and research and development property acquired or built in the Empire Zone may qualify for the Investment Tax Credit (EZ-ITC). The credit is equal to 10% for business corporations or 8% for personal income tax. The credit applies to New York State taxes.
The EZ-ITC may also be claimed for property or equipment purchased for the financial securities industry and emerging technologies, but not for other retail or service business purposes.
As stated above, the EZ-ITC is applicable only for production, or research and development property, in addition to waste treatment and air pollution facilities. For example, equipment used to manufacture widgets by the Wonder Widget Co. is eligible for the credit, but office equipment used by the company receptionist is not eligible. When equipment, such as CAD computers may be used for more than one purpose, it must be used 51% of the time for production. In general, equipment which can be depreciated for income tax purposes is eligible for investment credit.
The EZ-ITC cannot reduce the franchise tax due from business corporations for any year to less than the greater of the tax on the minimum taxable income base or fixed dollar minimum. For franchise tax and personal income tax, any amount of the credit that cannot be used in a given year may be carried forward to the following year or years until used up. A new business may elect to treat 50% of the EZ-ITC carryover as an overpayment in the year in which the credit was allowed and have the overpayment refunded or credited to any outstanding tax liability. Companies that claim the EZ-ITC may also be eligible for the Employment Incentive Credit (EZ-EIC).
Leased Property: The law does not permit the credit to be claimed by the property owner if the property is leased to someone else. In cases where a tenant makes leasehold improvements to the property, there is no clear ruling regarding eligibility, unless the tenant is leasing from the IDA in a lease-purchase agreement. In situations involving leasehold improvements, it is recommended that a written opinion be obtained from the NYS Department of Taxation and Finance as to whether business can claim an EZ-ITC on those improvements. The EZ office will assist in requesting an advisory opinion from that office.
Financial Securities Industry: Purchase of facilities and equipment by corporations, banking corporations, individuals and taxable trusts in the financial securities industry may also qualify for EZ-ITC if the purchase is used principally for the sale, purchase, lending and advisory services of stocks or securities. Please note: The EZ-ITC for financial securities companies is available for property placed in service before October 1, 2008.
Emerging Technologies: Businesses engaged in emerging technologies (Section 3102-e of the public authorities law) may also be eligible for the EZ-ITC. This change is in effect tax years beginning 1/1/2005 and after.
EXAMPLE:
Wonder Widget Works, Inc. (Wonder), which has met all the criteria for claiming the Empire Zone Investment Tax Credit (EZ-ITC), is expanding its operation in an Empire Zone in 2005. The new facility will cost $1,000,000 to build, and the necessary machinery and equipment will cost another $500,000. Wonder's Empire Zone Investment Tax Credit:
| Building Cost | $1,000,000 |
| Machinery and Equipment Cost | + $500,000 |
| Total Investment | $1,500,000 |
| 10% ITC | X .10 |
| Total ITC | $150,000 |
If Wonder were a Sole Proprietorship or Partnership, the credit would be $120,000 ($1,500,000 x 8%)