Bill Text: NY A03974 | 2011-2012 | General Assembly | Introduced
Bill Title: Relates to the qualified emerging technology company capital tax credit.
Spectrum: Partisan Bill (Democrat 15-0)
Status: (Introduced - Dead) 2012-01-04 - referred to ways and means [A03974 Detail]
Download: New_York-2011-A03974-Introduced.html
S T A T E O F N E W Y O R K ________________________________________________________________________ 3974 2011-2012 Regular Sessions I N A S S E M B L Y January 31, 2011 ___________ Introduced by M. of A. MORELLE, PHEFFER, CANESTRARI, P. RIVERA, HOYT, LUPARDO -- Multi-Sponsored by -- M. of A. BOYLAND, CLARK, DESTITO, GALEF, KELLNER, MAGEE, SCARBOROUGH, SCHIMMINGER, SWEENEY -- read once and referred to the Committee on Ways and Means AN ACT to amend the tax law, in relation to the qualified emerging tech- nology company capital tax credit; to repeal certain provisions of such law relating thereto; and providing for the repeal of such provisions upon expiration thereof THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: 1 Section 1. Legislative intent. The legislature hereby finds and 2 declares that New York state's future economic prosperity is linked to 3 the accelerated growth of companies in emerging technology fields. 4 Entrepreneurs and companies just starting out dominate these rapidly 5 growing segments of the economy. They are key players in translating 6 scientific and technological research into commercial products with 7 significant market and job-creation potential. However, entrepreneurs 8 and start-up companies require large amounts of outside seed capital to 9 prove a new concept and to fuel their growth. 10 The legislature further finds that there is not an adequate supply of 11 seed funding for these entrepreneurial firms. Seed funds account for 12 less than two percent of all venture capital investments. The largest 13 source of seed funds is from angel investors, wealthy individuals will- 14 ing to invest in new companies and new ideas, yet there has been a 15 recent decline in the percentage of angel investments going to seed and 16 start-up deals. Therefore, in order to enable entrepreneurs and young 17 companies to flourish in New York it is necessary to increase the incen- 18 tives available to angel investors and venture capitalists who provide 19 seed and early-stage capital. 20 S 2. Subdivision 12-F of section 210 of the tax law is REPEALED and a 21 new subdivision 12-F is added to read as follows: EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD06505-01-1 A. 3974 2 1 12-F. QUALIFIED EMERGING TECHNOLOGY COMPANY CAPITAL TAX CREDIT. (1) 2 FOR THE PURPOSES OF THIS SECTION, THE FOLLOWING TERMS SHALL HAVE THE 3 FOLLOWING MEANINGS: 4 (A) "QUALIFIED EMERGING TECHNOLOGY COMPANY" IS A PRIVATE COMPANY AS 5 DEFINED IN SECTION THIRTY-ONE HUNDRED TWO-E OF THE PUBLIC AUTHORITIES 6 LAW. 7 (B) "QUALIFIED INVESTMENT" IS THE INVESTMENT OF MONEY IN A QUALIFIED 8 EMERGING TECHNOLOGY COMPANY IN EXCHANGE FOR ORIGINAL ISSUE CAPITAL STOCK 9 OR OTHER OWNERSHIP INTEREST, PROVIDED THAT REPAYMENT OF THE INVESTMENT 10 IS DEPENDENT ON THE SUCCESS OF THE BUSINESS OPERATIONS AND IS NOT 11 SECURED BY A LIEN ON BUSINESS ASSETS OR A PERSONAL GUARANTY OF ANY PRIN- 12 CIPAL OWNER, AND PROVIDED FURTHER THAT SUCH INVESTMENT IS NOT MADE BY OR 13 ON BEHALF OF AN OWNER OF THE BUSINESS, INCLUDING, BUT NOT LIMITED TO, A 14 STOCKHOLDER, PARTNER OR SOLE PROPRIETOR, OR ANY RELATED PERSON AS 15 DEFINED IN SECTION 465(B)(3)(C) OF THE INTERNAL REVENUE CODE. 16 (C) "QUALIFIED SEED INVESTMENT" IS A QUALIFIED INVESTMENT IN A START- 17 UP COMPANY OR A COMPANY THAT MAY NOT YET HAVE FULLY ESTABLISHED COMMER- 18 CIAL OPERATIONS TO ENABLE SUCH COMPANY TO CONDUCT RESEARCH TO PROVE A 19 CONCEPT. 20 (D) "QUALIFIED FUND INVESTMENT" IS THE AMOUNT OF COMMITTED CAPITAL A 21 LIMITED PARTNER HAS ACTUALLY TRANSFERRED TO A VENTURE CAPITAL FUND, 22 PROVIDED THAT SUCH FUND WAS ESTABLISHED SOLELY TO MAKE QUALIFIED INVEST- 23 MENTS. 24 (E) "QUALIFIED SEED FUND INVESTMENT" IS THE AMOUNT OF COMMITTED CAPI- 25 TAL A LIMITED PARTNER HAS ACTUALLY TRANSFERRED TO A SEED CAPITAL FUND, 26 AS DETERMINED BY THE EMPIRE STATE DEVELOPMENT CORPORATION, PROVIDED THAT 27 SUCH FUND WAS ESTABLISHED SOLELY TO MAKE SEED CAPITAL INVESTMENTS, AS 28 DETERMINED BY THE EMPIRE STATE DEVELOPMENT CORPORATION. 29 (2) A TAXPAYER SHALL BE ALLOWED A CREDIT AGAINST THE TAX IMPOSED BY 30 THIS ARTICLE. THE AMOUNT OF THE CREDIT SHALL BE EQUAL TO THE SUM OF THE 31 AMOUNTS SPECIFIED IN SUBPARAGRAPHS (A), (B), (C) AND (D) OF THIS PARA- 32 GRAPH. 33 (A) TWENTY PERCENT OF A QUALIFIED INVESTMENT, PROVIDED THAT TEN 34 PERCENT OF THE QUALIFIED INVESTMENT CAN BE TAKEN AS A CREDIT IN THE 35 TAXABLE YEAR IN WHICH THE INVESTMENT WAS MADE AND FIVE PERCENT OF THE 36 QUALIFIED INVESTMENT CAN BE TAKEN AS A CREDIT IN EACH OF THE NEXT TWO 37 TAXABLE YEARS, AND FURTHER PROVIDED THAT SUCH INVESTMENT IS NOT SOLD, 38 TRANSFERRED OR OTHERWISE RECOVERED BY THE TAXPAYER DURING THE TAXABLE 39 YEAR THE INVESTMENT WAS MADE OR WITHIN TWENTY-FOUR MONTHS FROM THE CLOSE 40 OF THE TAXABLE YEAR IN WHICH THE CREDIT WAS FIRST CLAIMED. THE TOTAL 41 AMOUNT OF CREDITS ALLOWABLE TO A TAXPAYER UNDER THIS SUBPARAGRAPH FOR 42 ALL YEARS IS THREE HUNDRED THOUSAND DOLLARS. 43 (B) FORTY PERCENT OF A QUALIFIED SEED INVESTMENT, PROVIDED THAT TWENTY 44 PERCENT OF THE QUALIFIED SEED INVESTMENT CAN BE TAKEN AS A CREDIT IN THE 45 TAXABLE YEAR IN WHICH THE INVESTMENT WAS MADE AND TEN PERCENT OF THE 46 QUALIFIED SEED INVESTMENT CAN BE TAKEN AS A CREDIT IN EACH OF THE NEXT 47 TWO TAXABLE YEARS, AND FURTHER PROVIDED THAT SUCH INVESTMENT IS NOT 48 SOLD, TRANSFERRED OR OTHERWISE RECOVERED BY THE TAXPAYER DURING THE 49 TAXABLE YEAR THE INVESTMENT WAS MADE OR WITHIN TWENTY-FOUR MONTHS FROM 50 THE CLOSE OF THE TAXABLE YEAR IN WHICH THE CREDIT WAS FIRST CLAIMED. THE 51 TOTAL AMOUNT OF CREDITS ALLOWABLE TO A TAXPAYER UNDER THIS SUBPARAGRAPH 52 FOR ALL YEARS IS SIX HUNDRED THOUSAND DOLLARS. 53 (C) TWENTY PERCENT OF A QUALIFIED FUND INVESTMENT, PROVIDED THAT TEN 54 PERCENT OF THE QUALIFIED FUND INVESTMENT CAN BE TAKEN AS A CREDIT IN THE 55 TAXABLE YEAR IN WHICH THE INVESTMENT WAS MADE AND FIVE PERCENT OF THE 56 QUALIFIED FUND INVESTMENT CAN BE TAKEN AS A CREDIT IN EACH OF THE NEXT A. 3974 3 1 TWO TAXABLE YEARS, AND FURTHER PROVIDED THAT SUCH INVESTMENT IS NOT 2 SOLD, TRANSFERRED OR OTHERWISE RECOVERED BY THE TAXPAYER DURING THE 3 TAXABLE YEAR THE INVESTMENT WAS MADE OR WITHIN TWENTY-FOUR MONTHS FROM 4 THE CLOSE OF THE TAXABLE YEAR IN WHICH THE CREDIT WAS FIRST CLAIMED. THE 5 TOTAL AMOUNT OF CREDITS ALLOWABLE TO A TAXPAYER UNDER THIS SUBPARAGRAPH 6 FOR ALL YEARS IS THREE HUNDRED THOUSAND DOLLARS. 7 (D) TWENTY PERCENT OF A QUALIFIED SEED FUND INVESTMENT, PROVIDED THAT 8 TEN PERCENT OF THE QUALIFIED SEED FUND INVESTMENT CAN BE TAKEN AS CREDIT 9 IN THE TAXABLE YEAR IN WHICH THE INVESTMENT WAS MADE AND FIVE PERCENT OF 10 THE QUALIFIED SEED FUND INVESTMENT CAN BE TAKEN AS A CREDIT IN EACH OF 11 THE NEXT TWO TAXABLE YEARS, AND FURTHER PROVIDED THAT SUCH INVESTMENT IS 12 NOT SOLD, TRANSFERRED OR OTHERWISE RECOVERED BY THE TAXPAYER DURING THE 13 TAXABLE YEAR THE INVESTMENT WAS MADE OR WITHIN TWENTY-FOUR MONTHS FROM 14 THE CLOSE OF THE TAXABLE YEAR IN WHICH THE CREDIT WAS FIRST CLAIMED. THE 15 TOTAL AMOUNT OF CREDITS ALLOWABLE TO A TAXPAYER UNDER THIS SUBPARAGRAPH 16 FOR ALL YEARS IS THREE HUNDRED THOUSAND DOLLARS. 17 (3) IN NO EVENT SHALL THE CREDIT AND CARRYOVER OF SUCH CREDIT ALLOWED 18 UNDER THIS SUBDIVISION FOR ANY TAXABLE YEAR, IN THE AGGREGATE, REDUCE 19 THE TAX DUE FOR SUCH YEAR TO LESS THAN THE HIGHER OF THE AMOUNTS 20 PRESCRIBED IN PARAGRAPHS (C) AND (D) OF SUBDIVISION ONE OF THIS SECTION. 21 HOWEVER, IF THE AMOUNT OF CREDIT OR CARRYOVERS OF SUCH CREDIT, OR BOTH, 22 ALLOWED UNDER THIS SUBDIVISION FOR ANY TAXABLE YEAR REDUCES THE TAX TO 23 SUCH AMOUNT, OR IF ANY PART OF THE CREDIT OR CARRYOVERS OF SUCH CREDIT 24 MAY NOT BE DEDUCTED FROM THE TAX OTHERWISE DUE BY REASON OF THE FINAL 25 SENTENCE OF THIS PARAGRAPH, ANY AMOUNT OF CREDIT OR CARRYOVERS OF SUCH 26 CREDIT THUS NOT DEDUCTIBLE IN SUCH TAXABLE YEAR MAY BE CARRIED OVER TO 27 THE FOLLOWING YEAR OR YEARS AND MAY BE DEDUCTED FROM THE TAX FOR SUCH 28 YEAR OR YEARS. IN ADDITION, THE AMOUNT OF SUCH CREDIT, AND CARRYOVERS 29 OF SUCH CREDIT TO THE TAXABLE YEAR, DEDUCTED FROM THE TAX OTHERWISE DUE 30 MAY NOT, IN THE AGGREGATE, EXCEED FIFTY PERCENT OF THE TAX IMPOSED UNDER 31 SECTION TWO HUNDRED NINE OF THIS ARTICLE COMPUTED WITHOUT REGARD TO ANY 32 CREDIT PROVIDED FOR BY THIS SECTION. 33 S 3. Paragraph 1 of subsection (r) of section 606 of the tax law is 34 REPEALED and a new paragraph 1 is added to read as follows: 35 (1) FOR THE PURPOSES OF THIS SUBSECTION, THE FOLLOWING TERMS SHALL 36 HAVE THE FOLLOWING MEANINGS: 37 (A) "QUALIFIED EMERGING TECHNOLOGY COMPANY" IS A PRIVATE COMPANY AS 38 DEFINED IN SECTION THIRTY-ONE HUNDRED TWO-E OF THE PUBLIC AUTHORITIES 39 LAW. 40 (B) "QUALIFIED INVESTMENT" IS THE INVESTMENT OF MONEY IN A QUALIFIED 41 EMERGING TECHNOLOGY COMPANY IN EXCHANGE FOR ORIGINAL ISSUE CAPITAL STOCK 42 OR OTHER OWNERSHIP INTEREST, PROVIDED THAT REPAYMENT OF THE INVESTMENT 43 IS DEPENDENT ON THE SUCCESS OF THE BUSINESS OPERATIONS AND IS NOT 44 SECURED BY A LIEN ON BUSINESS ASSETS OR A PERSONAL GUARANTY OF ANY PRIN- 45 CIPAL OWNER, AND PROVIDED FURTHER THAT SUCH INVESTMENT IS NOT MADE BY OR 46 ON BEHALF OF AN OWNER OF THE BUSINESS, INCLUDING, BUT NOT LIMITED TO, A 47 STOCKHOLDER, PARTNER OR SOLE PROPRIETOR, OR ANY RELATED PERSON AS 48 DEFINED IN SECTION 465 (B)(3)(C) OF THE INTERNAL REVENUE CODE. 49 (C) "QUALIFIED SEED INVESTMENT" IS A QUALIFIED INVESTMENT IN A START- 50 UP COMPANY OR A COMPANY THAT MAY NOT YET HAVE FULLY ESTABLISHED COMMER- 51 CIAL OPERATIONS TO ENABLE SUCH COMPANY TO CONDUCT RESEARCH TO PROVE A 52 CONCEPT. 53 (D) "QUALIFIED FUND INVESTMENT" IS THE AMOUNT OF COMMITTED CAPITAL A 54 LIMITED PARTNER HAS ACTUALLY TRANSFERRED TO A VENTURE CAPITAL FUND, 55 PROVIDED THAT SUCH FUND WAS ESTABLISHED SOLELY TO MAKE QUALIFIED INVEST- 56 MENTS. A. 3974 4 1 (E) "QUALIFIED SEED FUND INVESTMENT" IS THE AMOUNT OF COMMITTED CAPI- 2 TAL A LIMITED PARTNER HAS ACTUALLY TRANSFERRED TO A SEED CAPITAL FUND, 3 AS DETERMINED BY THE EMPIRE STATE DEVELOPMENT CORPORATION, PROVIDED THAT 4 SUCH FUND WAS ESTABLISHED SOLELY TO MAKE SEED CAPITAL INVESTMENTS, AS 5 DETERMINED BY THE EMPIRE STATE DEVELOPMENT CORPORATION. 6 S 4. Paragraph 3 of subsection (r) of section 606 of the tax law is 7 REPEALED, paragraph 2 of subsection (r), as added by section 2 of part I 8 of chapter 407 of the laws of 1999, is renumbered paragraph 3 and 9 amended to read as follows: 10 (3) (A) If the amount of the credit and carryovers of such credit 11 allowed under this subsection for any taxable year shall exceed the 12 taxpayer's tax for such year, any amount of credit or carryovers of such 13 credit thus not deductible in such taxable year may be carried over to 14 the following year or years and may be deducted from the tax for such 15 year or years. In addition, the amount of such credit, and carryovers of 16 such credit to the taxable year, deducted from the tax otherwise due may 17 not, in the aggregate, exceed fifty percent of the tax imposed under 18 section six hundred one computed without regard to any credit provided 19 for by this section. 20 (B) In the case of a husband or wife who is required to file a sepa- 21 rate return, the limitations provided for in [subparagraph (c)] SUBPARA- 22 GRAPHS (A), (C) AND (D) of paragraph [one] TWO of this subsection shall 23 be [seventy-five] ONE HUNDRED FIFTY thousand dollars in lieu of [one 24 hundred fifty] THREE HUNDRED thousand dollars, and [one hundred fifty] 25 THE LIMITATIONS PROVIDED FOR IN SUBPARAGRAPH (B) OF PARAGRAPH TWO OF 26 THIS SUBSECTION SHALL BE THREE HUNDRED thousand dollars in lieu of 27 [three] SIX hundred thousand dollars, unless the spouse of the taxpayer 28 has no credit allowable under this subsection for the taxable year of 29 such spouse which ends within or with the taxpayer's taxable year. 30 (C) In the case of an estate or trust, the limitations provided for in 31 paragraph [one] TWO of this subsection shall be reduced to an amount 32 which bears the same ratio to [one hundred fifty] THREE HUNDRED thousand 33 dollars and an amount which bears the same ratio to [three] SIX hundred 34 thousand dollars as the portion of the income of the estate or trust 35 which is not allocated to beneficiaries bears to the total income of the 36 estate or trust. 37 S 5. Subsection (r) of section 606 of the tax law is amended by adding 38 a new paragraph 2 to read as follows: 39 (2) A TAXPAYER SHALL BE ALLOWED A CREDIT AGAINST THE TAX IMPOSED BY 40 THIS ARTICLE. THE AMOUNT OF THE CREDIT SHALL BE EQUAL TO THE SUM OF THE 41 AMOUNTS SPECIFIED IN SUBPARAGRAPHS (A), (B), (C) AND (D) OF THIS PARA- 42 GRAPH. 43 (A) TWENTY PERCENT OF A QUALIFIED INVESTMENT, PROVIDED THAT TEN 44 PERCENT OF THE QUALIFIED INVESTMENT CAN BE TAKEN AS A CREDIT IN THE 45 TAXABLE YEAR IN WHICH THE INVESTMENT WAS MADE AND FIVE PERCENT OF THE 46 QUALIFIED INVESTMENT CAN BE TAKEN AS A CREDIT IN EACH OF THE NEXT TWO 47 TAXABLE YEARS, AND FURTHER PROVIDED THAT SUCH INVESTMENT IS NOT SOLD, 48 TRANSFERRED OR OTHERWISE RECOVERED BY THE TAXPAYER DURING THE TAXABLE 49 YEAR THE INVESTMENT WAS MADE OR WITHIN TWENTY-FOUR MONTHS FROM THE CLOSE 50 OF THE TAXABLE YEAR IN WHICH THE CREDIT WAS FIRST CLAIMED. THE TOTAL 51 AMOUNT OF CREDITS ALLOWABLE TO A TAXPAYER UNDER THIS SUBPARAGRAPH FOR 52 ALL YEARS IS THREE HUNDRED THOUSAND DOLLARS. 53 (B) FORTY PERCENT OF A QUALIFIED SEED INVESTMENT, PROVIDED THAT TWENTY 54 PERCENT OF THE QUALIFIED SEED INVESTMENT CAN BE TAKEN AS A CREDIT IN THE 55 TAXABLE YEAR IN WHICH THE INVESTMENT WAS MADE AND TEN PERCENT OF THE 56 QUALIFIED SEED INVESTMENT CAN BE TAKEN AS A CREDIT IN EACH OF THE NEXT A. 3974 5 1 TWO TAXABLE YEARS, AND FURTHER PROVIDED THAT SUCH INVESTMENT IS NOT 2 SOLD, TRANSFERRED OR OTHERWISE RECOVERED BY THE TAXPAYER DURING THE 3 TAXABLE YEAR THE INVESTMENT WAS MADE OR WITHIN TWENTY-FOUR MONTHS FROM 4 THE CLOSE OF THE TAXABLE YEAR IN WHICH THE CREDIT WAS FIRST CLAIMED. THE 5 TOTAL AMOUNT OF CREDITS ALLOWABLE TO A TAXPAYER UNDER THIS SUBPARAGRAPH 6 FOR ALL YEARS IS SIX HUNDRED THOUSAND DOLLARS. 7 (C) TWENTY PERCENT OF A QUALIFIED FUND INVESTMENT, PROVIDED THAT TEN 8 PERCENT OF THE QUALIFIED FUND INVESTMENT CAN BE TAKEN AS A CREDIT IN THE 9 TAXABLE YEAR IN WHICH THE INVESTMENT WAS MADE AND FIVE PERCENT OF THE 10 QUALIFIED FUND INVESTMENT CAN BE TAKEN AS A CREDIT IN EACH OF THE NEXT 11 TWO TAXABLE YEARS, AND FURTHER PROVIDED THAT SUCH INVESTMENT IS NOT 12 SOLD, TRANSFERRED OR OTHERWISE RECOVERED BY THE TAXPAYER DURING THE 13 TAXABLE YEAR THE INVESTMENT WAS MADE OR WITHIN TWENTY-FOUR MONTHS FROM 14 THE CLOSE OF THE TAXABLE YEAR IN WHICH THE CREDIT WAS FIRST CLAIMED. THE 15 TOTAL AMOUNT OF CREDITS ALLOWABLE TO A TAXPAYER UNDER THIS SUBPARAGRAPH 16 FOR ALL YEARS IS THREE HUNDRED THOUSAND DOLLARS. 17 (D) TWENTY PERCENT OF A QUALIFIED SEED FUND INVESTMENT, PROVIDED THAT 18 TEN PERCENT OF THE QUALIFIED SEED FUND INVESTMENT CAN BE TAKEN AS CREDIT 19 IN THE TAXABLE YEAR IN WHICH THE INVESTMENT WAS MADE AND FIVE PERCENT OF 20 THE QUALIFIED SEED FUND INVESTMENT CAN BE TAKEN AS A CREDIT IN EACH OF 21 THE NEXT TWO TAXABLE YEARS, AND FURTHER PROVIDED THAT SUCH INVESTMENT IS 22 NOT SOLD, TRANSFERRED OR OTHERWISE RECOVERED BY THE TAXPAYER DURING THE 23 TAXABLE YEAR THE INVESTMENT WAS MADE OR WITHIN TWENTY-FOUR MONTHS FROM 24 THE CLOSE OF THE TAXABLE YEAR IN WHICH THE CREDIT WAS FIRST CLAIMED. THE 25 TOTAL AMOUNT OF CREDITS ALLOWABLE TO A TAXPAYER UNDER THIS SUBPARAGRAPH 26 FOR ALL YEARS IS THREE HUNDRED THOUSAND DOLLARS. 27 S 6. This act shall take effect immediately and shall apply to taxable 28 years beginning on and after January 1, 2011 and shall remain in effect 29 until December 31, 2016, when upon such date the provisions of this act 30 shall expire and be deemed repealed.