Monday, May 10, 2010

Governor’s Proposed 50% Deferral of Empire Zone Tax Credits


http://gslaw.com/resources/pdf/Governors%20Proposal%20to%20Deferr%20Tax%20Credits.pdf

Earlier this week the Governor released a “fact sheet” for a proposal to generate
$620M in “additional savings actions” (gap fillers) designed to supplement the Governor’s
Executive Budget. One of the proposed “gap fillers” would defer 50% of businessrelated
tax credits for three tax years, 2010, 2011, and 2012. The proposal would affect
credits that “would otherwise be used or refunded” in those years, which would include
credits earned in prior years and carried forward into tax years 2010-2012, as well as
credits generated (earned) in those tax years. In all, thirty-three tax credits would be
subject to this provision. It is important to note that this is a proposed bill and has not
been acted upon by the legislature.

The tax credits available under the Empire Zones Program are included in the list of
deferred credits (Tax Reduction Credit, Real Property Tax Credit, Empire Zone Investment
Tax Credit, the Empire Zone Employment Incentive Credit and the Empire Zone
Wage Tax Credit). With respect to these credits, the deferred portion of the credits
would be allowed (i.e., could be claimed) in taxable years beginning in 2013 and ending
with taxable years beginning in 2015.

Taxpayers would be required to make quarterly estimated tax payments
(beginning June 15th for most taxpayers) as if the credit deferral had been in
effect for the taxpayer’s entire taxable year. Therefore, taxpayers claiming Empire
Zone tax credits should closely monitor this proposed bill to be prepared for making
such estimated payments.

In its current form, the proposal is not detailed in its treatment of the various credits,
how it will be applied to various types of taxpayers, or when the deferred credits could
be claimed (leaving much of the detail to regulatory action by the Commissioner of Taxation
& Finance). It would be advisable for Empire Zone Enterprises to track any progress
the bill makes in the legislature.

This alert was prepared by our Economic Development Incentives Practice Group.
Please contact Tim Lynn at (315) 701-6426 or tim@gslaw.com if you would like further
information or if you have any questions regarding this Alert.