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.
                                                                   LBD03906-01-9

        A. 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 benefit

        A. 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  and

        A. 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 shall

        A. 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; or

        A. 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.