A Qualified Empire Zone Enterprise (QEZE) may claim a credit against New York State corporate, personal income, banking, or insurance corporation taxes based on employment increase. The credit is computed by a formula based on four factors:
- The percent employment increase in Zone
- The Zone allocation
- The income taxes owed by the company
- The benefit factor
The tax reduction credit may reduce the company's tax liability to zero if the company is located entirely within Empire Zones, or as low as the fixed dollar minimum if located both inside and outside the Zones. There is no carry-over or refund provision with this credit.
How to Compute the Factors:
The employment increase is the increase in average annual full-time employment in the current year minus the test year Zone employment, divided by the test year Zone employment. Alternatively, companies may choose to divide the increase by 100, and elect whichever method is more favorable. If the test year employment is 0, the percent increase is 100%.
The Zone allocation is determined by adding (a) the company's total assets in all NYS Zones for the tax year, divided by the company's total assets in the state with (b) the company's total wages and compensation in the Zones, divided by the company's total wages and compensation in the state. The sum is divided by two.
Income taxes are the taxes owed under Article 9A, Article 22, Article 32 or Article 33.
The benefit factor is the percentage of the taxes to be credited according to a schedule. It varies depending on when a company was certified.
For companies certified prior to April 1, 2005, the benefit factor is based on a 15-year schedule. Year 1 is the beginning of the benefit period. 100% credit is offered for years 1-10. For each of the next four years, the benefit decreases by 20%, reducing to 0 in the 15th year.
For companies certified on or after April 1, 2005, the benefit factor will be 100% for years 1-10 of the 10 year benefit period. The credit ends after year 10.
Please contact EZ staff with any questions regarding the calculation of the tax reduction credit.
Example: New Business
Widget.com is a new business to the state with no previous employment or assets in the state and no facilities outside of the Empire Zone. In the current tax year it creates 50 jobs and owes $300,000 in taxes.
| Base Period Employment | 0 |
| Test Year Employment | 0 |
| Current Year Employment | 50 |
| Employment Increase | 100% |
| Zone Allocation | 100% |
| Benefit Factor | 100% |
| Income Taxes | $300,000 |
| Credit: Employment x Allocation x Benefit x Tax (1 x 1 x $300,000) | $300,000 |