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New York State Tax Credits for Agricultural Activities

New York State Tax Credits for Agricultural ActivitiesNew York farmers often overlook credits that can result in significant savings at tax time.

People from around the world identify New York with bright lights, Wall Street, and the arts and culture of the “city that never sleeps.” But outside of the urban population centers, the state of New York is one of the leading agricultural producers in the U.S. A recent study from Cornell University pegs the contribution of agriculture to the New York economy at $63.8 billion per year.

With numbers like that at stake, it should come as no surprise that New York is willing to offer a variety of tax incentives to support the success of this important segment of its economy.

To provide you with an overview of tax credits available in New York that could support agricultural activities, we’ve developed a Tax Alert summarized in this blog post.

The Alert covers several applicable New York state tax credits. Some of them identify specific types of agribusinesses, but others are more widely available credits that can help other types of businesses as well. Here’s a quick look at some of the provisions we discuss:

  • New York State Tax Credits for Agricultural Activities Farm workforce retention credit: Operations that employ “eligible farm employees” may claim a tax credit equal to a fixed dollar amount for each of those eligible employees. There are some gross income limitations on the farmer, but the fixed dollar amounts are $250 per employee in tax year 2017 and $300 per employee in tax year 2018.
  • Real property credit for qualified New York manufacturers: A credit is available equal to 20% of eligible taxes paid on real property owned or leased for manufacturing. “Manufacturing activities” include farming, agriculture, horticulture, floriculture, viticulture, and commercial fishing.”
  • Farmers’ school tax credit: Farmers can claim a refundable New York State income tax credit for the school district property taxes paid on qualified agricultural property.
  • Investment tax credit: Farmers who invest in tangible property that is predominantly used in agricultural activities in New York State, such as buildings and structural components, may qualify for an investment tax credit.
  • Employment incentive credit: Farmers who claim the investment tax credit may be eligible to claim the employment incentive credit for each of the following two years.
  • Small business subtraction modification: A farm business operating as a sole proprietorship, partnership, S corporation, or joint venture may qualify to subtract 5% of farm income included in federal adjusted gross income. The business must employ at least one person and not exceed $250,000 in net income.
  • Minimum wage reimbursement credit: From 2014-2018, employers can claim a refundable tax credit by employing students in New York State, ages 16-19, who are paid the state’s minimum wage.
  • Fuel tax refund: Diesel and gasoline used for on-road purposes are subject to fuel taxes. Those same fuels used for off-road purposes qualify for a refund of those taxes. Careful tracking of fuel used exclusively off-road in farm production can generate a significant refund at the end of the year. New York State also provides a refund for state excise tax, petroleum business tax, and sales tax to farmers who purchased gasoline or diesel fuel and paid these taxes.
  • Research and experimentation tax credit: A federal credit is available for taxpayers, including farmers, who conduct “qualified research activities” within the U.S. The definition of “qualified research activities” gets a little technical. Suffice to say that experiments and research you do to improve your harvest lifecycle, reduce or reuse waste, and minimize or eliminate crop damage for disease may qualify for this credit.

Earning Your Trust

As you can tell from the list above, only a few of these agriculatural tax credits mention farms and farmers by name. There are many savings opportunities available in the tax code, but they don’t always announce themselves to potential beneficiaries.

Freed Maxick CPAs, P.C. is Western and Upstate New York’s largest public accounting firm and a Top 100 firm in the United States. Freed Maxick’s reputation and experience with agricultural business consulting and tax issues has made us a go-to firm for businesses and individuals from all over the U.S. and Canada and around the world.

The Agribusiness Tax Experts at Freed Maxick can help you lower your taxes.

If you would like to better understand just how many credits and deductions are available for your agricultural operation, please download our free alert or contact Freed Maxick via phone at 716.847.2651 or via form, here.

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Corporate Tax Reform Update

On March 31, 2014, New York State enacted comprehensive corporate franchise tax reform with the passage of the 2014-2015 NY budget legislation. This legislation includes new rate structures, new rules for banks, changes the economic nexus rules, changes the rules on combined reporting, revises the net operating loss provisions, and changes sourcing of income and apportionment.  

The changes take effect over multiple years and this legislation will result in planning for the most advantageous entity structure for N.Y. State purposes for both existing and new businesses. 

Unfortunately, these changes will negatively impact utilization of non-refundable N.Y. State income tax credits by qualified NY manufacturers. 

Check out our educational alert, providing an overview of the corporate franchise tax reform. 

If you have additional questions, or need assistance with N.Y. State entity structuring to maximize utilization of tax incentives under the new corporate tax regime, CONTACT US today.

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On Your Mark- Get Set- Start Up NY!

The Start Up NY Program, per the legislation, is ready for its long awaited unveiling. The program will help foster entrepreneurialism and job creation on a large scale through tax free communities across New York State; with concentrated focus in Upstate NY.

The goal of this program is to bring businesses and jobs to the New York State region, helping to foster growth and innovation.  Participating tax free communities include college campuses and Universities.

SUNY community college and 4-year college/University can establish a tax-free community using:

  • Vacant land on the SUNY campus (for every campus outside of New York City)

  • Vacant space in buildings on the SUNY campus (for every campus outside of NYC)

  • Any business incubator with a bona fide affiliation to the campus, university or college, and

  • Up to 200,000 square feet within one mile of a campus (for every campus north or west of Westchester County).

Private Colleges/Universities: The program also provides 3 million square feet of tax-free areas primarily dedicated to private colleges and universities on land north of Westchester County, to be allocated by the START-UP NY Program Board (consisting of three members with significant academic based entrepreneurship experience) in a manner that ensures regional balance and balance among eligible rural, urban and suburban areas in the State.

  • For private colleges and Universities north of Westchester County, the tax-free areas can include vacant land and vacant space on- or off-campus, as well as any business incubator with a bona fide affiliation to the campus, university or college.

  • Of these 3 million square feet, 75,000 square feet will be allocated for each of the following: Nassau County, Suffolk County, Westchester County, and the boroughs of Brooklyn, the Bronx, Manhattan, Queens and Staten Island. Private colleges and universities in New York City and Westchester, Suffolk and Nassau Counties, as well as SUNY and CUNY campuses not specifically designated, may apply to sponsor these tax-free areas. Once the 75,000 square foot cap is reached in these counties and boroughs, the board may designate up to an additional 75,000 square feet in each. Therefore, a potential of 150,000 square feet of space will be available in these counties and boroughs.

20 State Properties: In addition, the 3-member board can also designate up to 20 strategic State assets as tax-free communities. These must be State-owned vacant land, State-owned vacant facilities or State-owned facilities that are in the process of closing and becoming vacant. Each will be affiliated with a SUNY, CUNY or independent college or university to attract new employers and new jobs and transform the site into a regional economic engine.

In order for a business to be eligible and locate within a START-UP NY tax-free community, a business will need to be aligned with or further the academic mission of the campus, college or university sponsoring the tax-free community. Businesses participating in the program will need to have positive community and economic benefits; create and maintain net new jobs in order to participate, be a company from out of state that is relocating to NYS, or the expansion of an already existing NYS company- as long as it can demonstrate that it is creating new jobs and not simply moving “existing” jobs.

In addition, New York State start-ups "created" from New York State incubators will be eligible to enter tax-free communities and be eligible for the benefits under the program

Participating companies in this program will not pay any business, corporate, sales and/or property taxes for 10 years. Employees with participating companies will not pay income taxes for the first five years, after which they will pay partial income tax based on wage income for the remaining five years. 

This program will also impact the Excelsior Jobs Program, a state initiative that provides tax credits to businesses. Changes to the program include reducing, by half, the job creation requirements for businesses receiving tax credits through the Excelsior Jobs program; amended as follows:

  • Manufacturing – 10 net new jobs (originally 25)

  • Agriculture – 5 net new jobs (originally 10)

  • Financial service data center or financial services customer back office operation – 50 net new jobs (originally 100)

  • Scientific research and development – 5 net new jobs (originally 10)

  • Software development – 5 net new jobs (originally 10)

  • Back office operations – 50 net new jobs (originally 150)

  • Distribution center – 75 net new jobs (originally 150)  - this category was previously combined with back office

  • Targeted industry that retains 25 full-time jobs (originally 50) or a manufacturer retaining at least 10 full-time jobs (new provision) with a cost benefit ratio of 10:1.

In addition, a pro-rated reduction in the tax credit was created in the event that the minimum job threshold is achieved and new job creation is within 75% of the net new job creation goal.

For more information on the Excelsior Jobs Program, please visit our Excelsior Jobs page.

When it comes to taxes, Freed Maxick CPAs is different than most accounting firms in Western New York. What matters to you matters to us; giving you the most up to date information and legislative changes that may affect you and help you respond in a timely way. We serve all 50 states. Contact us today.

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Amendments to New York’s Royalty Expense Add Back Statute

NY Royalty ExpenseAs the first legislative quarter for 2013 comes to an end and the second quarter begins, elected officials across the country are considering a large number of state income and franchise tax law changes. Some proposals have been audacious, recommending significant tax reform (e.g., eliminating the corporate and individual income taxes), while others stay true to the current tax policies and play around the edges (e.g., eliminating tax breaks).

One of the amendments to the current tax policies in New York State applies to corporate franchise tax, bank franchise tax, tax on unrelated business income, personal income, and insurance tax. Royalty income (sometimes called running royalties) are usage-based payments made by one party (the "licensee") to another (the "licensor") for the right to ongoing use of an asset, sometimes an intellectual property. Royalties are typically agreed upon as a percentage of gross or net revenues derived from the use of an asset or a fixed price per unit sold of an item of such, but there are also other modes and metrics of compensation. A royalty interest is the right to collect a stream of future royalty payments. 

Changes to New York’s royalty income add-back and exclusion provisions, which apply to taxable years beginning on or after January 1st 2013, eliminate the exclusion of royalty income received, if the related member that made the royalty payment was required to add back the payment to its income. Further, the bill creates new exceptions:

  • The royalty payment was paid, accrued or incurred by a taxpayer that is organized under the laws of a foreign country that has a tax treaty with the US. The taxpayer was subject to tax in the foreign country on a tax base that included the royalty payment paid, accrued or incurred by the taxpayer; the effective tax rate equals that imposed by New York; and the royalty payment was paid, accrued or incurred pursuant to a transaction that was undertaken for a valid business purpose and using terms that reflect an arm’s length relationship.

  • If the taxpayer was subject to tax on or measured by its net income in New York or another state; the tax base for the tax included the royalty payment paid, accrued or incurred by the taxpayer; and the aggregate effective tax rate (a nominal rate multiplied by the recipients apportionment percentage) applied to the related member in those jurisdictions is not less than 80% of the applicable New York statutory rate.

  • If the taxpayer was subject to tax in New York, another state or foreign nation on a tax base that included the royalty payment paid, accrued or incurred by the taxpayer; the related member during that same taxable year directly or indirectly paid, accrued or incurred such portion to an unrelated third party; and the transaction giving rise to the royalty payment between the taxpayer and related member was undertaken for a valid business purpose.

The new legislation is forth coming, applying to tax years beginning January 1st, 2013 and all applicable taxes related to this, filed thereafter.

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When it comes to taxes, Freed Maxick CPAs is different than most accounting firms in Western New York. What matters to you, matters to us; giving you the most up to date alerts to any changes that may affect you and help you respond in a timely way. We serve all 50 states. Contact us to today.

 

 

 

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