Bill Text: NY A05136 | 2019-2020 | General Assembly | Introduced
Bill Title: Authorizes the trading of existing but unused research and development credits and existing but unused net operating loss deductions to existing corporations and partnerships in return for private assistance; enacts the "Small New York Based High-Technology Business Investment Tax Credit Act".
Spectrum: Partisan Bill (Democrat 2-0)
Status: (Introduced - Dead) 2020-01-08 - referred to ways and means [A05136 Detail]
Download: New_York-2019-A05136-Introduced.html
STATE OF NEW YORK ________________________________________________________________________ 5136 2019-2020 Regular Sessions IN ASSEMBLY February 7, 2019 ___________ Introduced by M. of A. SCHIMMINGER, MAGNARELLI -- read once and referred to the Committee on Ways and Means AN ACT to amend the tax law, in relation to providing for direct private assistance to emerging technology companies through the trading of their existing but unused research and development credits and their existing but unused net operating loss deductions to existing corpo- rations and partnerships in return for private assistance The People of the State of New York, represented in Senate and Assem- bly, do enact as follows: 1 Section 1. Short title. This act shall be known and may be cited as 2 the "Small New York Based High-Technology Business Investment Tax Credit 3 Act". 4 § 2. The tax law is amended by adding a new section 212 to read as 5 follows: 6 § 212. Corporation business tax benefit certificate transfer program. 7 1. (a) The department shall establish a corporation business tax benefit 8 certificate transfer program to allow new or expanding emerging technol- 9 ogy and biotechnology companies in this state having unused amounts of 10 research and development tax credits otherwise allowable pursuant to 11 subparagraph (i) of paragraph (b) of subdivision one of section two 12 hundred ten-B of this article, which cannot be applied for the credit's 13 tax year, and unused net operating loss carryovers pursuant to section 14 two hundred eight of this article to surrender those tax benefits for 15 use by other corporations established under the business corporation law 16 and subject to the provisions of this article in exchange for private 17 financial assistance to be provided those taxpayers or expanding emerg- 18 ing technology and biotechnology companies. Such taxpayers shall be 19 provided with a corporation business tax benefit certificate to be 20 developed by the commissioner. 21 (b) The commissioner, in cooperation with the commissioner of economic 22 development, shall review and approve applications by new or expanding EXPLANATION--Matter in italics (underscored) is new; matter in brackets [] is old law to be omitted. LBD03906-01-9A. 5136 2 1 emerging technology and biotechnology companies in this state having 2 unused but otherwise allowable carryovers of research and development 3 tax credits and otherwise allowable net operating loss carryovers pursu- 4 ant to subparagraph (i) of paragraph (b) of subdivision one of section 5 two hundred ten-B of this article and section two hundred eight, respec- 6 tively, to surrender those tax benefits in exchange for private finan- 7 cial assistance to be made to a corporation filing pursuant to this 8 article, which has obtained a corporation business tax benefit certif- 9 icate in an amount equal to at least seventy-five percent of the amount 10 of the surrendered tax benefits. 11 (c) The commissioner shall calculate the value of the net operating 12 loss carryover for purposes of the benefit certificate equal to the 13 amount of the carryover times the applicable business allocation 14 percentage and tax rate of the emerging technology or biotechnology 15 company. 16 (d) The commissioner, in cooperation with the commissioner of economic 17 development, shall review and approve applications by taxpayers pursuant 18 to the provisions of this article to acquire surrendered tax benefits 19 approved pursuant to paragraph (b) of this subdivision, which shall be 20 issued in the form of corporation business tax benefit transfer certif- 21 icates, in exchange for private financial assistance to be made by the 22 taxpayer in an amount equal to at least seventy-five percent of the 23 amount of the surrendered tax benefit of an emerging technology or 24 biotechnology company in the state. The private financial assistance 25 shall assist in funding expenses incurred in connection with the opera- 26 tion of a new or expanding emerging technology or biotechnology company 27 in the state, including but not limited to the expenses of fixed assets, 28 such as the construction and acquisition and development of real estate, 29 materials, start-up, tenant fit-out, working capital, salaries, 30 research, and development expenditures. 31 (e) The commissioner shall coordinate the applications, in conjunction 32 with the department of economic development, for surrender and acquisi- 33 tion of unused but otherwise allowable tax benefits pursuant to this 34 section in a manner that can best stimulate and encourage the extension 35 of private financial assistance to new and expanding emerging technology 36 and biotechnology companies in this state into a written agreement with 37 such company concerning the terms and conditions of the private finan- 38 cial assistance made in exchange for the certificate. The written agree- 39 ment may contain terms concerning the maintenance by the new or expand- 40 ing emerging technology or biotechnology company of a headquarters or a 41 base of operation in this state. 42 2. (a) A taxpayer that has acquired a corporation business tax benefit 43 certificate pursuant to the provisions of paragraph (b) of this subdivi- 44 sion that includes the right to a net operating loss carryover deduction 45 shall attach that certificate to any return the taxpayer is required to 46 file and shall otherwise apply the net operating loss carryover 47 deduction as evidenced by the certificate according to the provisions of 48 paragraph (b) of subdivision one of this section and any rules or regu- 49 lations the commissioner may adopt to carry out the provisions of this 50 section. 51 (b) A new or expanding emerging technology or biotechnology company 52 that has surrendered an unused net operating loss carryover pursuant to 53 the provisions of section two hundred eight of this article shall not be 54 allowed a net operating loss carryover deduction based upon the right to 55 such a deduction, as evidenced by such corporation business tax benefitA. 5136 3 1 certificate, and shall attach a copy of the certificate to any return 2 the taxpayer is required to file. 3 3. (a) A taxpayer that has acquired a corporation business tax benefit 4 certificate pursuant to subdivision one of this section that includes 5 the right to a research and development tax credit carryover pursuant to 6 subparagraph (i) of paragraph (b) of subdivision one of section two 7 hundred ten-B of this article shall attach that certificate to any 8 return the taxpayer is required to file and shall otherwise apply the 9 credit carryover, as evidenced by the certificate, according to the 10 provisions of paragraph (b) of subdivision one of this section and any 11 rules or regulations the commissioner may adopt to carry out the 12 provisions of this section. 13 (b) A new or expanding technology or biotechnology company that has 14 surrendered an unused research and development tax credit carryover 15 shall not be allowed a research and development tax credit carryover 16 based upon the right to such a credit carryover, as evidenced by the 17 corporation business tax benefit certificate, and shall attach a copy of 18 the certificate to any return the taxpayer is required to file. 19 4. For the purposes of this section, the following terms have the 20 following meanings: 21 (a) "Advanced computing" means a technology used in the designing and 22 developing of computing hardware and software, including innovations in 23 designing the full spectrum of hardware from hand-held calculators to 24 super computers, and peripheral equipment. 25 (b) "Advanced materials" means materials with engineered properties 26 created through the development of specialized processing and synthesis 27 technology, including ceramics, high value-added metals, electronic 28 materials, composites, polymers, and biomaterials. 29 (c) "Biotechnology" means the continually expanding body of fundamen- 30 tal knowledge about the function of biological systems from the macro 31 level to the molecular and subatomic levels, as well as novel products, 32 services, technologies, and sub-technologies developed as a result of 33 insights gained from research advances which add to that body of funda- 34 mental knowledge. 35 (d) "Control", with respect to a corporation, means ownership, direct- 36 ly or indirectly, of stock possessing eighty percent or more of the 37 total combined voting power of all classes of the stock of the corpo- 38 ration entitled to vote; and "control", with respect to a trust, means 39 ownership, directly or indirectly, of eighty percent or more of the 40 beneficial interest in the principal or income of the trust. The owner- 41 ship of stock in a corporation, of a capital or profits interest in a 42 partnership or association, or of a beneficial interest in a trust shall 43 be determined in accordance with the rules for constructive ownership of 44 stock provided in subsection (c) of section 267 of the federal Internal 45 Revenue Code of 1986, 26 U.S.C. §267, other than paragraph (3) of 46 subsection (c) of such section. 47 (e) "Controlled group" means one or more chains of corporations 48 connected through stock ownership with a common parent corporation if 49 stock possessing at least eighty percent of the voting power of all 50 classes of stock of each of the corporations is owned directly or indi- 51 rectly by one or more of the corporations and the common parent owns 52 directly stock possessing at least eighty percent of the voting power of 53 all classes of stock of at least one of the other corporations. 54 (f) "Electronic device technology" means a technology involving micro- 55 electronics, semiconductors, electronic equipment, and instrumentation, 56 radio frequency, microwave, and millimeter electronics, and optical andA. 5136 4 1 optic-electrical devices, or data and digital communications and imaging 2 devices. 3 (g) "Environmental technology" means assessment and prevention of 4 threats or damage to human health or the environment, environmental 5 cleanup, or the development of alternative energy sources. 6 (h) "Medical device technology" means a technology involving any 7 medical equipment or product (other than a pharmaceutical product) that 8 has therapeutic value, diagnostic value, or both, and is regulated by 9 the federal Food and Drug Administration. 10 (i) "Partnership" means a syndicate, group, pool, joint venture, or 11 other unincorporated organization through or by means of which any busi- 12 ness, financial operation, or venture is carried on, and which is not a 13 trust or estate, a corporation, or a sole proprietorship. 14 (j) "Pilot scale manufacturing" means design, construction, and test- 15 ing of preproduction prototypes and models in the fields of advanced 16 computing, advanced materials, biotechnology, electronic device technol- 17 ogy, environmental technology, and medical device technology, other than 18 for commercial sale, excluding sales of prototypes or sales for market 19 testing, if total gross receipts from such sales of the product, 20 service, or process do not exceed one million dollars. 21 (k) "Qualified investment" means the non-refundable investment at risk 22 in a small New York-based high technology business by a taxpayer that is 23 not a related person of the small New York based high-technology busi- 24 ness, the transfer of which is in connection with a transaction in 25 exchange for stock, interest in partnerships or joint ventures, licenses 26 (exclusive or non-exclusive), right to use technology, marketing rights, 27 warrants, options, or any item similar to those included in this para- 28 graph, including but not limited to options or rights to acquire any of 29 the items included in this paragraph. 30 (l) "Qualified research expenses" means qualified research expenses, 31 as defined in section 41 of the federal Internal Revenue Code of 1986, 32 26 U.S.C. § 41, as in effect on June thirtieth, nineteen hundred nine- 33 ty-two, in the fields of environmental technology or medical device 34 technology. 35 (m) "Related person" means: 36 (1) a corporation, partnership, association, or trust by the taxpayer; 37 (2) an individual, corporation, partnership, association, or trust 38 that is in the control of the taxpayer; 39 (3) a corporation, partnership, association, or trust controlled by an 40 individual, corporation, partnership, association, or trust that is in 41 the control of the taxpayer; or 42 (4) a member of the same controlled group as a taxpayer. 43 (n) "Small New York based high-technology business" means a corpo- 44 ration doing business employing or owning capital or property, or main- 45 taining an office, in this state that has qualified research expenses 46 paid or incurred for research conducted in this state or conducts pilot 47 scale manufacturing in this state, and has fewer than two hundred twen- 48 ty-five employees, of whom seventy-five percent are New York-based 49 employees filling a position or job in this state. 50 (o) "Tax year" means the fiscal or calendar accounting year of a 51 taxpayer. 52 § 3. The tax law is amended by adding a new section 606-a to read as 53 follows: 54 § 606-a. Noncorporation tax benefit certificate transfer program. (a) 55 (1) The department shall establish a corporation business tax benefit 56 certificate transfer program to allow new or expanding emerging technol-A. 5136 5 1 ogy and biotechnology companies in this state having unused amounts of 2 research and development tax credits otherwise allowable pursuant to 3 subparagraph (A) of paragraph two of subsection (a) of section six 4 hundred six of this article, which cannot be applied for the credit's 5 tax year, and unused net operating loss carryover pursuant to subsection 6 (b) of section six hundred seventeen and subsection (b) of section six 7 hundred thirty-three of this article to surrender such tax benefits for 8 use by other entities subject to the provisions of this article in 9 exchange for private financial assistance to be provided such taxpayers 10 or expanding emerging technology and biotechnology companies. Such 11 taxpayers shall be provided with a noncorporation business tax benefit 12 certificate to be developed by the commissioner. 13 (2) The commissioner, in cooperation with the commissioner of the 14 department of economic development, shall review and approve applica- 15 tions by new or expanding technology and biotechnology companies in this 16 state having unused but otherwise allowable carryover of research and 17 development tax credits and otherwise allowable net operating loss 18 carryovers pursuant to either subparagraph (A) of paragraph two of 19 subsection (a) of section six hundred six or subsection (b) of section 20 six hundred seventeen or subsection (b) of section six hundred thirty- 21 three of this article, respectively, to surrender those tax benefits in 22 exchange for private financial assistance to be made to a taxpayer 23 filing pursuant to this article who has obtained a noncorporation busi- 24 ness tax benefit certificate in an amount equal to at least seventy-five 25 percent of the amount of the surrendered tax benefits. 26 (3) The commissioner shall calculate the value of the net operating 27 loss carryover for purposes of the benefit certificate equal to the 28 amount of the carryover times the applicable business allocation 29 percentage and tax rate of the emerging technology or biotechnology 30 company. 31 (4) The commissioner, in cooperation with the commissioner of the 32 department of economic development, shall review and approve applica- 33 tions by taxpayers subject to the provisions of this article to acquire 34 surrendered tax benefits approved pursuant to paragraph two of this 35 subsection, which shall be issued in the form of noncorporation business 36 tax benefit transfer certificates, in exchange for private financial 37 assistance to be made by the taxpayer in an amount equal to at least 38 seventy-five percent of the amount of the surrendered tax benefit of an 39 emerging technology or biotechnology company in the state. The private 40 financial assistance shall assist in funding expenses incurred in 41 connection with the operation of a new or expanding emerging technology 42 or biotechnology company in the state, including but not limited to the 43 expenses of fixed assets, such as the construction and acquisition and 44 development of real estate, materials, start-up, tenant fit-out, working 45 capital, salaries, research, and development expenditures. 46 (5) The commissioner shall coordinate the applications, in conjunction 47 with the department of economic development, for surrender and acquisi- 48 tion of unused but otherwise allowable tax benefits pursuant to this 49 section in a manner that can best stimulate and encourage the extension 50 of private financial assistance to new and expanding emerging technology 51 and biotechnology companies in this state into a written agreement with 52 such company concerning the terms and conditions of the private finan- 53 cial assistance made in exchange for the certificate. The written agree- 54 ment may contain terms concerning the maintenance by the new or expand- 55 ing emerging technology or biotechnology company of a headquarters or a 56 base of operation in this state.A. 5136 6 1 (b)(1) A taxpayer that has acquired a noncorporation business tax 2 benefit certificate pursuant to the provisions of paragraph two of 3 subsection (a) of this section that includes the right to a net operat- 4 ing loss carryover deduction shall attach that certificate to any return 5 the taxpayer is required to file and shall otherwise apply the net oper- 6 ating loss carryover deduction, as evidenced by the certificate, accord- 7 ing to the provisions of paragraph two of subsection (a) of this section 8 and any rules or regulations the commissioner may adopt to carry out the 9 provisions of this section. 10 (2) A new or expanding emerging technology or biotechnology company 11 that has surrendered an unused net operating loss carryover pursuant to 12 the provisions of subsection (b) of section six hundred seventeen and 13 subsection (b) of section six hundred thirty-three of this article shall 14 not be allowed a net operating loss carryover deduction based upon the 15 right to such a deduction, as evidenced by such noncorporation business 16 tax benefit certificate, and shall attach a copy of the certificate to 17 any return the taxpayer is required to file. 18 (c) (1) A taxpayer that has acquired a noncorporation business tax 19 benefit certificate pursuant to subsection (a) of this section that 20 includes the right to a research and development tax credit carryover 21 shall attach that certificate to any return the taxpayer is required to 22 file and shall otherwise apply the credit carryover, as evidenced by the 23 certificate, according to the provisions of paragraph two of subsection 24 (a) of this section and any rules or regulations the commissioner may 25 adopt to carry out the provisions of this section. 26 (2) A new or expanding emerging technology or biotechnology company 27 that has surrendered an unused research and development tax credit 28 carryover shall not be allowed a research and development tax credit 29 carryover based upon the right to such a credit carryover, as evidenced 30 by the noncorporation business tax benefit certificate, and shall attach 31 a copy of the certificate to any return the taxpayer is required to 32 file. 33 (d) For the purposes of this section, the following terms shall have 34 the following meanings: 35 (1) "Advanced computing" means a technology used in designing and 36 developing computing hardware and software, including innovations in 37 designing the full spectrum of hardware from hand-held calculators to 38 super computers, and peripheral equipment. 39 (2) "Advanced materials" means materials with engineered properties 40 created through the development of specialized processing and synthesis 41 technology, including ceramics, high value-added metals, electronic 42 materials, composites, polymers, and biomaterials. 43 (3) "Biotechnology" means the continually expanding body of fundamen- 44 tal knowledge about the function of biological systems from the macro 45 level to the molecular and subatomic levels, as well as novel products, 46 services, technologies, and sub-technologies developed as a result of 47 insights gained from research advances which add to that body of funda- 48 mental knowledge. 49 (4) "Control", with respect to a corporation, means ownership, direct- 50 ly or indirectly, of stock possessing eighty percent or more of the 51 total combined voting power of all classes of the stock of the corpo- 52 ration entitled to vote; and "control", with respect to a trust, means 53 ownership, directly or indirectly, of eighty percent or more of the 54 beneficial interest in the principal or income of the trust. The owner- 55 ship of stock in a corporation, of a capital or profits interest in a 56 partnership or association, or of a beneficial interest in a trust shallA. 5136 7 1 be determined in accordance with the rules for constructive ownership of 2 stock provided in subsection (c) of section 267 of the federal Internal 3 Revenue Code of 1986, 26 U.S.C. § 267, other than paragraph (3) of 4 subsection (c) of such section. 5 (5) "Controlled group" means one or more chains of corporations 6 connected through stock ownership with a common parent corporation if 7 stock possessing at least eighty percent of the voting power of all 8 classes of stock of each of the corporations is owned directly or indi- 9 rectly by one or more of the corporations and the common parent owns 10 directly stock possessing at least eighty percent of the voting power of 11 all classes of stock of at least one of the other corporations. 12 (6) "Electronic device technology" means a technology involving micro- 13 electronics, semiconductors, electronic equipment, and instrumentation, 14 radio frequency, microwave, and millimeter electronics, and optical and 15 optic-electrical devices, or data and digital communications and imaging 16 devices. 17 (7) "Environmental technology" means assessment and prevention of 18 threats or damage to human health or the environment, environmental 19 cleanup, or the development of alternative energy sources. 20 (8) "Medical device technology" means a technology involving any 21 medical equipment or product (other than a pharmaceutical product) that 22 has therapeutic value, diagnostic value, or both, and is regulated by 23 the federal Food and Drug Administration. 24 (9) "Partnership" means a syndicate, group, pool, joint venture or 25 other unincorporated organization through or by means of which any busi- 26 ness, financial operation, or venture is carried on, and which is not a 27 trust or estate, a corporation, or a sole proprietorship. 28 (10) "Pilot scale manufacturing" means design, construction, and test- 29 ing of preproduction prototypes and models in the fields of advanced 30 computing, advanced materials, biotechnology, electronic device technol- 31 ogy, environmental technology, and medical device technology, other than 32 for commercial sale, excluding sales of prototypes or sales for market 33 testing, if total gross receipts from such sales of the product, 34 service, or process do not exceed one million dollars. 35 (11) "Qualified investment" means the non-refundable investment at 36 risk in a small New York-based high technology business by a taxpayer 37 that is not a related person of the small New York based high-technology 38 business, the transfer of which is in connection with a transaction in 39 exchange for stock, interest in partnerships or joint ventures, licenses 40 (exclusive or non-exclusive), rights to use technology, marketing 41 rights, warrants, options, or rights to acquire any of the items similar 42 to those included in this paragraph, including but not limited to 43 options or rights to acquire any of the items included in this para- 44 graph. 45 (12) "Qualified research expenses" means qualified research expenses, 46 as defined in section 41 of the federal Internal Revenue Code of 1986, 47 26 U.S.C. § 41, as in effect on June thirtieth, nineteen hundred nine- 48 ty-two, in the fields of environmental technology or medical device 49 technology. 50 (13) "Related person" means: 51 (A) a corporation, partnership, association, or trust by the taxpayer; 52 (B) an individual, corporation, partnership, association, or trust 53 that is in the control of the taxpayer; 54 (C) a corporation, partnership, association, or trust controlled by an 55 individual, corporation, partnership, association, or trust that is in 56 the control of the taxpayer; orA. 5136 8 1 (D) a member of the same controlled group as the taxpayer. 2 (14) "Small New York based high-technology business" means a corpo- 3 ration doing business employing or owning capital or property, or main- 4 taining an office, in this state that has qualified research expenses 5 paid or incurred for research conducted in this state or conducts pilot 6 scale manufacturing in this state, and has fewer than two hundred twen- 7 ty-five employees, of whom seventy-five percent are New York-based 8 employees filling a position or job in this state. 9 (15) "Tax year" means the fiscal or calendar accounting year of a 10 taxpayer. 11 § 4. This act shall take effect immediately and shall apply to taxable 12 years which commence on or after January 1, 2020.
