Potential Refunds for NYS Technology Company Tax Credits

The New York State Department of Taxation and Finance provides two state income tax credits for “qualified emerging technology companies” (“QETCs”): the QETC Employment Credit and the QETC Capital Tax Credit.

To claim either credit, a New York State taxpayer must be a QETC with $10 million or less in sales. A QETC includes an entity whose primary products or services include:

• Advanced materials and processing technologies
• Engineering, production and defense
• Electronic and photonic devices and components
• Information and communications technologies
• Biotechnologies and nanotechnologies
• Remanufacturing technologies

QETC Employment Credit

The QETC Employment Credit provides an incentive for taxpayers that increase their incremental employment in New York State over a base period amount. The base period is generally a business’ average New York State employees over the three prior years.

The Employment Credit can be claimed by corporations, individuals who are partners or S corporation shareholders of a QETC and sole proprietors, among others. If a taxpayer satisfies the QETC requirements, then a $1,000 tax credit is allowed for each additional New York State employee over the base period. Any unused portion of the credit can be refunded or applied as an overpayment to the following year.

QETC Capital Tax Credit

The QETC Capital Tax Credit was created to stimulate investment in QETCs. The credit is available to many types of investors, similar to the Employment Credit. A QETC must be certified as such by New York State for investors to obtain this credit. 

In order for a QETC to gain certification, a taxpayer must file an Application for Certification of a Qualified Emerging Technology Company annually at least 30 days prior to the beginning date of the year for which QETC certification is requested. The credit is based on the amount invested in a certified QETC. A 10% tax credit is allowed for investors who agree to hold their QETC investments for at least four years, and a 20% credit is allowed for investors who agree to hold their investments for at least nine years. The maximum allowable credit is $150,000 for four year investments and $300,000 for nine year investments.