Bill Text: NY S03077 | 2017-2018 | 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 1-0)
Status: (Introduced - Dead) 2018-01-03 - REFERRED TO INVESTIGATIONS AND GOVERNMENT OPERATIONS [S03077 Detail]
Download: New_York-2017-S03077-Introduced.html
STATE OF NEW YORK ________________________________________________________________________ 3077 2017-2018 Regular Sessions IN SENATE January 19, 2017 ___________ Introduced by Sen. PARKER -- read twice and ordered printed, and when printed to be committed to the Committee on Investigations and Govern- ment Operations 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. EXPLANATION--Matter in italics (underscored) is new; matter in brackets [] is old law to be omitted. LBD05819-01-7S. 3077 2 1 (b) The commissioner, in cooperation with the commissioner of economic 2 development, shall review and approve applications by new or expanding 3 emerging technology and biotechnology companies in this state having 4 unused but otherwise allowable carryovers of research and development 5 tax credits and otherwise allowable net operating loss carryovers pursu- 6 ant to subparagraph (i) of paragraph (b) of subdivision one of section 7 two hundred ten-B of this article and section two hundred eight, respec- 8 tively, to surrender those tax benefits in exchange for private finan- 9 cial assistance to be made to a corporation filing pursuant to this 10 article, which has obtained a corporation business tax benefit certif- 11 icate in an amount equal to at least seventy-five percent of the amount 12 of the surrendered tax benefits. 13 (c) The commissioner shall calculate the value of the net operating 14 loss carryover for purposes of the benefit certificate equal to the 15 amount of the carryover times the applicable business allocation 16 percentage and tax rate of the emerging technology or biotechnology 17 company. 18 (d) The commissioner, in cooperation with the commissioner of economic 19 development, shall review and approve applications by taxpayers pursuant 20 to the provisions of this article to acquire surrendered tax benefits 21 approved pursuant to paragraph (b) of this subdivision, which shall be 22 issued in the form of corporation business tax benefit transfer certif- 23 icates, in exchange for private financial assistance to be made by the 24 taxpayer in an amount equal to at least seventy-five percent of the 25 amount of the surrendered tax benefit of an emerging technology or 26 biotechnology company in the state. The private financial assistance 27 shall assist in funding expenses incurred in connection with the opera- 28 tion of a new or expanding emerging technology or biotechnology company 29 in the state, including but not limited to the expenses of fixed assets, 30 such as the construction and acquisition and development of real estate, 31 materials, start-up, tenant fit-out, working capital, salaries, 32 research, and development expenditures. 33 (e) The commissioner shall coordinate the applications, in conjunction 34 with the department of economic development, for surrender and acquisi- 35 tion of unused but otherwise allowable tax benefits pursuant to this 36 section in a manner that can best stimulate and encourage the extension 37 of private financial assistance to new and expanding emerging technology 38 and biotechnology companies in this state into a written agreement with 39 such company concerning the terms and conditions of the private finan- 40 cial assistance made in exchange for the certificate. The written agree- 41 ment may contain terms concerning the maintenance by the new or expand- 42 ing emerging technology or biotechnology company of a headquarters or a 43 base of operation in this state. 44 2. (a) A taxpayer that has acquired a corporation business tax benefit 45 certificate pursuant to the provisions of paragraph (b) of this subdivi- 46 sion that includes the right to a net operating loss carryover deduction 47 shall attach that certificate to any return the taxpayer is required to 48 file and shall otherwise apply the net operating loss carryover 49 deduction as evidenced by the certificate according to the provisions of 50 paragraph (b) of subdivision one of this section and any rules or regu- 51 lations the commissioner may adopt to carry out the provisions of this 52 section. 53 (b) A new or expanding emerging technology or biotechnology company 54 that has surrendered an unused net operating loss carryover pursuant to 55 the provisions of section two hundred eight of this article shall not be 56 allowed a net operating loss carryover deduction based upon the right toS. 3077 3 1 such a deduction, as evidenced by such corporation business tax benefit 2 certificate, and shall attach a copy of the certificate to any return 3 the taxpayer is required to file. 4 3. (a) A taxpayer that has acquired a corporation business tax benefit 5 certificate pursuant to subdivision one of this section that includes 6 the right to a research and development tax credit carryover pursuant to 7 subparagraph (i) of paragraph (b) of subdivision one of section two 8 hundred ten-B of this article shall attach that certificate to any 9 return the taxpayer is required to file and shall otherwise apply the 10 credit carryover, as evidenced by the certificate, according to the 11 provisions of paragraph (b) of subdivision one of this section and any 12 rules or regulations the commissioner may adopt to carry out the 13 provisions of this section. 14 (b) A new or expanding technology or biotechnology company that has 15 surrendered an unused research and development tax credit carryover 16 shall not be allowed a research and development tax credit carryover 17 based upon the right to such a credit carryover, as evidenced by the 18 corporation business tax benefit certificate, and shall attach a copy of 19 the certificate to any return the taxpayer is required to file. 20 4. For the purposes of this section, the following terms have the 21 following meanings: 22 (a) "Advanced computing" means a technology used in the designing and 23 developing of computing hardware and software, including innovations in 24 designing the full spectrum of hardware from hand-held calculators to 25 super computers, and peripheral equipment. 26 (b) "Advanced materials" means materials with engineered properties 27 created through the development of specialized processing and synthesis 28 technology, including ceramics, high value-added metals, electronic 29 materials, composites, polymers, and biomaterials. 30 (c) "Biotechnology" means the continually expanding body of fundamen- 31 tal knowledge about the function of biological systems from the macro 32 level to the molecular and subatomic levels, as well as novel products, 33 services, technologies, and sub-technologies developed as a result of 34 insights gained from research advances which add to that body of funda- 35 mental knowledge. 36 (d) "Control", with respect to a corporation, means ownership, direct- 37 ly or indirectly, of stock possessing eighty percent or more of the 38 total combined voting power of all classes of the stock of the corpo- 39 ration entitled to vote; and "control", with respect to a trust, means 40 ownership, directly or indirectly, of eighty percent or more of the 41 beneficial interest in the principal or income of the trust. The owner- 42 ship of stock in a corporation, of a capital or profits interest in a 43 partnership or association, or of a beneficial interest in a trust shall 44 be determined in accordance with the rules for constructive ownership of 45 stock provided in subsection (c) of section 267 of the federal Internal 46 Revenue Code of 1986, 26 U.S.C. §267, other than paragraph (3) of 47 subsection (c) of such section. 48 (e) "Controlled group" means one or more chains of corporations 49 connected through stock ownership with a common parent corporation if 50 stock possessing at least eighty percent of the voting power of all 51 classes of stock of each of the corporations is owned directly or indi- 52 rectly by one or more of the corporations and the common parent owns 53 directly stock possessing at least eighty percent of the voting power of 54 all classes of stock of at least one of the other corporations. 55 (f) "Electronic device technology" means a technology involving micro- 56 electronics, semiconductors, electronic equipment, and instrumentation,S. 3077 4 1 radio frequency, microwave, and millimeter electronics, and optical and 2 optic-electrical devices, or data and digital communications and imaging 3 devices. 4 (g) "Environmental technology" means assessment and prevention of 5 threats or damage to human health or the environment, environmental 6 cleanup, or the development of alternative energy sources. 7 (h) "Medical device technology" means a technology involving any 8 medical equipment or product (other than a pharmaceutical product) that 9 has therapeutic value, diagnostic value, or both, and is regulated by 10 the federal Food and Drug Administration. 11 (i) "Partnership" means a syndicate, group, pool, joint venture, or 12 other unincorporated organization through or by means of which any busi- 13 ness, financial operation, or venture is carried on, and which is not a 14 trust or estate, a corporation, or a sole proprietorship. 15 (j) "Pilot scale manufacturing" means design, construction, and test- 16 ing of preproduction prototypes and models in the fields of advanced 17 computing, advanced materials, biotechnology, electronic device technol- 18 ogy, environmental technology, and medical device technology, other than 19 for commercial sale, excluding sales of prototypes or sales for market 20 testing, if total gross receipts from such sales of the product, 21 service, or process do not exceed one million dollars. 22 (k) "Qualified investment" means the non-refundable investment at risk 23 in a small New York-based high technology business by a taxpayer that is 24 not a related person of the small New York based high-technology busi- 25 ness, the transfer of which is in connection with a transaction in 26 exchange for stock, interest in partnerships or joint ventures, licenses 27 (exclusive or non-exclusive), right to use technology, marketing rights, 28 warrants, options, or any item similar to those included in this para- 29 graph, including but not limited to options or rights to acquire any of 30 the items included in this paragraph. 31 (l) "Qualified research expenses" means qualified research expenses, 32 as defined in section 41 of the federal Internal Revenue Code of 1986, 33 26 U.S.C. § 41, as in effect on June thirtieth, nineteen hundred nine- 34 ty-two, in the fields of environmental technology or medical device 35 technology. 36 (m) "Related person" means: 37 (1) a corporation, partnership, association, or trust by the taxpayer; 38 (2) an individual, corporation, partnership, association, or trust 39 that is in the control of the taxpayer; 40 (3) a corporation, partnership, association, or trust controlled by an 41 individual, corporation, partnership, association, or trust that is in 42 the control of the taxpayer; or 43 (4) a member of the same controlled group as a taxpayer. 44 (n) "Small New York based high-technology business" means a corpo- 45 ration doing business employing or owning capital or property, or main- 46 taining an office, in this state that has qualified research expenses 47 paid or incurred for research conducted in this state or conducts pilot 48 scale manufacturing in this state, and has fewer than two hundred twen- 49 ty-five employees, of whom seventy-five percent are New York-based 50 employees filling a position or job in this state. 51 (o) "Tax year" means the fiscal or calendar accounting year of a 52 taxpayer. 53 § 3. The tax law is amended by adding a new section 606-a to read as 54 follows: 55 § 606-a. Noncorporation tax benefit certificate transfer program. (a) 56 (1) The department shall establish a corporation business tax benefitS. 3077 5 1 certificate transfer program to allow new or expanding emerging technol- 2 ogy and biotechnology companies in this state having unused amounts of 3 research and development tax credits otherwise allowable pursuant to 4 subparagraph (A) of paragraph two of subsection (a) of section six 5 hundred six of this article, which cannot be applied for the credit's 6 tax year, and unused net operating loss carryover pursuant to subsection 7 (b) of section six hundred seventeen and subsection (b) of section six 8 hundred thirty-three of this article to surrender such tax benefits for 9 use by other entities subject to the provisions of this article in 10 exchange for private financial assistance to be provided such taxpayers 11 or expanding emerging technology and biotechnology companies. Such 12 taxpayers shall be provided with a noncorporation business tax benefit 13 certificate to be developed by the commissioner. 14 (2) The commissioner, in cooperation with the commissioner of the 15 department of economic development, shall review and approve applica- 16 tions by new or expanding technology and biotechnology companies in this 17 state having unused but otherwise allowable carryover of research and 18 development tax credits and otherwise allowable net operating loss 19 carryovers pursuant to either subparagraph (A) of paragraph two of 20 subsection (a) of section six hundred six or subsection (b) of section 21 six hundred seventeen or subsection (b) of section six hundred thirty- 22 three of this article, respectively, to surrender those tax benefits in 23 exchange for private financial assistance to be made to a taxpayer 24 filing pursuant to this article who has obtained a noncorporation busi- 25 ness tax benefit certificate in an amount equal to at least seventy-five 26 percent of the amount of the surrendered tax benefits. 27 (3) The commissioner shall calculate the value of the net operating 28 loss carryover for purposes of the benefit certificate equal to the 29 amount of the carryover times the applicable business allocation 30 percentage and tax rate of the emerging technology or biotechnology 31 company. 32 (4) The commissioner, in cooperation with the commissioner of the 33 department of economic development, shall review and approve applica- 34 tions by taxpayers subject to the provisions of this article to acquire 35 surrendered tax benefits approved pursuant to paragraph two of this 36 subsection, which shall be issued in the form of noncorporation business 37 tax benefit transfer certificates, in exchange for private financial 38 assistance to be made by the taxpayer in an amount equal to at least 39 seventy-five percent of the amount of the surrendered tax benefit of an 40 emerging technology or biotechnology company in the state. The private 41 financial assistance shall assist in funding expenses incurred in 42 connection with the operation of a new or expanding emerging technology 43 or biotechnology company in the state, including but not limited to the 44 expenses of fixed assets, such as the construction and acquisition and 45 development of real estate, materials, start-up, tenant fit-out, working 46 capital, salaries, research, and development expenditures. 47 (5) The commissioner shall coordinate the applications, in conjunction 48 with the department of economic development, for surrender and acquisi- 49 tion of unused but otherwise allowable tax benefits pursuant to this 50 section in a manner that can best stimulate and encourage the extension 51 of private financial assistance to new and expanding emerging technology 52 and biotechnology companies in this state into a written agreement with 53 such company concerning the terms and conditions of the private finan- 54 cial assistance made in exchange for the certificate. The written agree- 55 ment may contain terms concerning the maintenance by the new or expand-S. 3077 6 1 ing emerging technology or biotechnology company of a headquarters or a 2 base of operation in this state. 3 (b)(1) A taxpayer that has acquired a noncorporation business tax 4 benefit certificate pursuant to the provisions of paragraph two of 5 subsection (a) of this section that includes the right to a net operat- 6 ing loss carryover deduction shall attach that certificate to any return 7 the taxpayer is required to file and shall otherwise apply the net oper- 8 ating loss carryover deduction, as evidenced by the certificate, accord- 9 ing to the provisions of paragraph two of subsection (a) of this section 10 and any rules or regulations the commissioner may adopt to carry out the 11 provisions of this section. 12 (2) A new or expanding emerging technology or biotechnology company 13 that has surrendered an unused net operating loss carryover pursuant to 14 the provisions of subsection (b) of section six hundred seventeen and 15 subsection (b) of section six hundred thirty-three of this article shall 16 not be allowed a net operating loss carryover deduction based upon the 17 right to such a deduction, as evidenced by such noncorporation business 18 tax benefit certificate, and shall attach a copy of the certificate to 19 any return the taxpayer is required to file. 20 (c) (1) A taxpayer that has acquired a noncorporation business tax 21 benefit certificate pursuant to subsection (a) of this section that 22 includes the right to a research and development tax credit carryover 23 shall attach that certificate to any return the taxpayer is required to 24 file and shall otherwise apply the credit carryover, as evidenced by the 25 certificate, according to the provisions of paragraph two of subsection 26 (a) of this section and any rules or regulations the commissioner may 27 adopt to carry out the provisions of this section. 28 (2) A new or expanding emerging technology or biotechnology company 29 that has surrendered an unused research and development tax credit 30 carryover shall not be allowed a research and development tax credit 31 carryover based upon the right to such a credit carryover, as evidenced 32 by the noncorporation business tax benefit certificate, and shall attach 33 a copy of the certificate to any return the taxpayer is required to 34 file. 35 (d) For the purposes of this section, the following terms shall have 36 the following meanings: 37 (1) "Advanced computing" means a technology used in designing and 38 developing computing hardware and software, including innovations in 39 designing the full spectrum of hardware from hand-held calculators to 40 super computers, and peripheral equipment. 41 (2) "Advanced materials" means materials with engineered properties 42 created through the development of specialized processing and synthesis 43 technology, including ceramics, high value-added metals, electronic 44 materials, composites, polymers, and biomaterials. 45 (3) "Biotechnology" means the continually expanding body of fundamen- 46 tal knowledge about the function of biological systems from the macro 47 level to the molecular and subatomic levels, as well as novel products, 48 services, technologies, and sub-technologies developed as a result of 49 insights gained from research advances which add to that body of funda- 50 mental knowledge. 51 (4) "Control", with respect to a corporation, means ownership, direct- 52 ly or indirectly, of stock possessing eighty percent or more of the 53 total combined voting power of all classes of the stock of the corpo- 54 ration entitled to vote; and "control", with respect to a trust, means 55 ownership, directly or indirectly, of eighty percent or more of the 56 beneficial interest in the principal or income of the trust. The owner-S. 3077 7 1 ship of stock in a corporation, of a capital or profits interest in a 2 partnership or association, or of a beneficial interest in a trust shall 3 be determined in accordance with the rules for constructive ownership of 4 stock provided in subsection (c) of section 267 of the federal Internal 5 Revenue Code of 1986, 26 U.S.C. § 267, other than paragraph (3) of 6 subsection (c) of such section. 7 (5) "Controlled group" means one or more chains of corporations 8 connected through stock ownership with a common parent corporation if 9 stock possessing at least eighty percent of the voting power of all 10 classes of stock of each of the corporations is owned directly or indi- 11 rectly by one or more of the corporations and the common parent owns 12 directly stock possessing at least eighty percent of the voting power of 13 all classes of stock of at least one of the other corporations. 14 (6) "Electronic device technology" means a technology involving micro- 15 electronics, semiconductors, electronic equipment, and instrumentation, 16 radio frequency, microwave, and millimeter electronics, and optical and 17 optic-electrical devices, or data and digital communications and imaging 18 devices. 19 (7) "Environmental technology" means assessment and prevention of 20 threats or damage to human health or the environment, environmental 21 cleanup, or the development of alternative energy sources. 22 (8) "Medical device technology" means a technology involving any 23 medical equipment or product (other than a pharmaceutical product) that 24 has therapeutic value, diagnostic value, or both, and is regulated by 25 the federal Food and Drug Administration. 26 (9) "Partnership" means a syndicate, group, pool, joint venture or 27 other unincorporated organization through or by means of which any busi- 28 ness, financial operation, or venture is carried on, and which is not a 29 trust or estate, a corporation, or a sole proprietorship. 30 (10) "Pilot scale manufacturing" means design, construction, and test- 31 ing of preproduction prototypes and models in the fields of advanced 32 computing, advanced materials, biotechnology, electronic device technol- 33 ogy, environmental technology, and medical device technology, other than 34 for commercial sale, excluding sales of prototypes or sales for market 35 testing, if total gross receipts from such sales of the product, 36 service, or process do not exceed one million dollars. 37 (11) "Qualified investment" means the non-refundable investment at 38 risk in a small New York-based high technology business by a taxpayer 39 that is not a related person of the small New York based high-technology 40 business, the transfer of which is in connection with a transaction in 41 exchange for stock, interest in partnerships or joint ventures, licenses 42 (exclusive or non-exclusive), rights to use technology, marketing 43 rights, warrants, options, or rights to acquire any of the items similar 44 to those included in this paragraph, including but not limited to 45 options or rights to acquire any of the items included in this para- 46 graph. 47 (12) "Qualified research expenses" means qualified research expenses, 48 as defined in section 41 of the federal Internal Revenue Code of 1986, 49 26 U.S.C. § 41, as in effect on June thirtieth, nineteen hundred nine- 50 ty-two, in the fields of environmental technology or medical device 51 technology. 52 (13) "Related person" means: 53 (A) a corporation, partnership, association, or trust by the taxpayer; 54 (B) an individual, corporation, partnership, association, or trust 55 that is in the control of the taxpayer;S. 3077 8 1 (C) a corporation, partnership, association, or trust controlled by an 2 individual, corporation, partnership, association, or trust that is in 3 the control of the taxpayer; or 4 (D) a member of the same controlled group as the taxpayer. 5 (14) "Small New York based high-technology business" means a corpo- 6 ration doing business employing or owning capital or property, or main- 7 taining an office, in this state that has qualified research expenses 8 paid or incurred for research conducted in this state or conducts pilot 9 scale manufacturing in this state, and has fewer than two hundred twen- 10 ty-five employees, of whom seventy-five percent are New York-based 11 employees filling a position or job in this state. 12 (15) "Tax year" means the fiscal or calendar accounting year of a 13 taxpayer. 14 § 4. This act shall take effect immediately and shall apply to taxable 15 years which commence on or after January 1, 2018.
