The 2005-06 State Budget enacted a new, refundable credit for qualified emerging technology companies, based on qualifying expenditures in research and development and training. The credit is equal to the sum of the following three components:

1. Research and Development Property (210.12-G(c))

Research and development property acquired by the taxpayer by purchase and placed in service during the taxable year is eligible for an 18% credit rate. Qualified property is the same as that eligible for the ITC (but it can only be used for one credit, i.e., no double-dipping), although the base is expanded to specifically include property used for testing or inspection, or costs associated with quality control, research, development, fees for use of facilities or processes for such activities, or production or distribution of materials and products resulting from the research.

• Specifically references R&D property eligible for the ITC under section 210.12;
• For this particular credit, also includes:
  • Cost or other basis for federal income tax purposes for property used in the testing or inspection of materials and products;
  • Costs or expenses associated with quality control of the research and development,
  • Fees for use of sophisticated technology facilities and processes,
  • Fees for the production or eventual commercial distribution of materials and products resulting from the activities of an eligible taxpayer as long as such activities fall under the activities listed in the definition of "emerging technologies."
• The costs, expenses and other amounts for which a credit is allowed and claimed under this provision cannot be used in the calculation of any other credit.

2. Research Expenses (210.12-G(d))

Qualified research expenses paid or incurred by the taxpayer in the taxable year, and certain other costs, are eligible for a 9% credit rate. Qualified research expenses include expenses associated with in-house research and processes, and costs associated with the dissemination of research and development results and the patent process.

• "Qualified Research Expenses" is defined to mean:
  • expenses associated with in-house research and processes, and
  • costs associated with the dissemination of the results of the products that directly result from such research and development activities.
  • EXCLUDES advertising or promotion through media.
• Other eligible costs include:
  • Costs associated with the preparation of patent applications;
  • Patent application filing fees;
  • Patent research fees;
  • Patent examination fees;
  • Patent post allowance fees;
  • Patent maintenance fees; and
  • Grant application expenses and fees.
  • EXCLUDES expenses for litigation or the challenge of another entity's intellectual property rights, or for contract expenses involving outside paid consultants.

  3. High-technology Training Expenditures (210.12-G(e))

  A taxpayer may take a credit equal to 100% of "qualified high technology training expenditures" paid or incurred by the taxpayer, up to $4,000 per employee per taxable year. Training includes courses related to the activities of the QETC completed at a post-secondary college or university located in New York State. Training expenses include such costs as tuition and fees, software and textbooks.

  • Qualified High-Technology Training includes:
    • A course or courses taken and satisfactorily completed by an employee of the taxpayer at an accredited, degree granting post-secondary college or university in New York State that (A) directly relates to the emerging technology activities as defined in the Public Authorities Law, and (B) is intended to upgrade, retrain or improve the productivity or theoretical awareness of the employee.
  • Qualified High-Technology Training Expenditures include:
    • Expenses for tuition and mandatory fees
    • Software required by the institution
    • Fees for textbooks or other literature required by the institution offering the course/courses, minus applicable scholarships and tuition or fee waivers not granted by the taxpayer or any affiliates of the taxpayer, that are paid or reimbursed by the taxpayer.
    • EXCLUDES:
      • Room and board,
      • Computer hardware or software not specifically assigned for such course(s);
      • Late charges, fines or membership dues, and similar expenses.
        • SPECIFICALLY EXCLUDES (i.e., makes ineligible) expenses for in-house or shared training outside of a New York Sate higher education institution or the use of consultants outside of credit granting courses, whether such consultants function inside of such higher education institution or not.
    • ELIGIBILITY: For such qualified expenditures to be eligible for the credit, the employee for whom the expenditures are disbursed is continuously employed by the taxpayer in a full-time, full-year position primarily located at a qualified site during the period of such coursework and lasting through at least 180 days after the satisfactory completion of the qualifying coursework.
    • RELOCATION FROM INCUBATOR: If a taxpayer relocates from an academic business incubator facility partnered with an accredited post-secondary education institution located within New York State, which provides space an business support services to taxpayers, to another site, this credit will be allowed for all expenditures referenced above paid or incurred in the two preceding taxable years that the taxpayer was located in the incubator facility for employees of the taxpayer who also relocate from the incubator facility to the New York site and are employed and primarily located by the taxpayer in New York.
    WHO QUALIFIES?

    An "eligible taxpayer" shall:

    • have no more than 100 full-time employees, of which at least 75% are employed in New York State;
    • have a ratio of research and development funds to net sales (as referred to in Public Authorities Law section 3102-e) which equals or exceeds 6% during its authorized taxable year; and
    • have gross revenues, along with the gross revenues of its affiliates and related members, not exceeding $20 million for the taxable year immediately preceding the year the taxpayer claims this credit.
    An eligible taxpayer may claim these credits for four consecutive taxable years, except, if a taxpayer is located in an academic incubator facility and relocates within New York State to a nonacademic incubator site, then the taxpayer (1) may make a revocable election to defer the credit to the first taxable year beginning after such relocation, and (2) shall be eligible for the credit for 5 consecutive taxable years.

    The credit is capped at $250,000 per eligible taxpayer per year. The credit can reduce tax to the higher of the AMT or fixed dollar minimum (for corporate taxpayers). Unused credits are refundable. The credit is available for tax years beginning on/after January 1, 2005 and before January 1, 2012. (Tax Law sections 210-G; 606(nn)).