Chinatown and Nassau County open Empire Zones for business.
The Empire Zone program offers businesses within designated zones and businesses engaged in specific economic development activities at any location in the State of New York an opportunity to access tax incentives for two of the most pertinent elements for regional economic development: direct capital investments and increases in employment.
The scope of these incentives is so great as to allow these companies the opportunity to operate on what could amount to a New York State "tax-free" basis for up to ten years. Since qualifying companies can only be credited for capital or personnel investments after the zone is established, the benefits are predicated on future growth in the zone communities. This seems like a sure fire success for both the municipalities and businesses involved, but it requires some economic development savvy for businesses to realize the true potential of the program.
As with the preexisting zones, those in Chinatown and Nassau County are comprised of contiguous geographical areas. In Chinatown, the zone's borders are wedged between the East River, Houston Street, Broadway and the ramp to the Brooklyn Bridge.
Nassau County has seven distinct zones of various shapes and sizes to cover neighborhoods in Bethpage, Inwood, Elmont, New Cassel, Glen Cove, Hempstead, West Hempstead, Uniondale, Roosevelt, South Uniondale and Freeport.
In general, the Empire Zones program has been a win-win for municipal governments and business. By qualifying for the zone benefits, companies have the opportunity to receive sales tax exemptions, real property tax credits, tax reduction credits, wage tax credits and utility savings, among other benefits. In addition to helping companies already operating in the zones, these benefits have also enticed businesses to relocate or branch out into these areas.
Developers and owners should pay particular attention to these programs, because some of the benefits can be utilized by the tenant and, as such, can be used as an inducement to bring tenants to the property.
The dilemma is this: few qualifying companies take full advantage of the benefits available to them.
Maximizing Empire Zone benefits requires in-depth knowledge of the details of the program and the application process, in addition to an understanding of the tax implications. Some companies are located in Empire Zones but have not have received Empire Zone certification and, as such, have not qualified for a single benefit.
Yet others have taken the second step to become certified as Qualified Empire Zone Enterprises (QEZEs) but have either failed to take advantage of the full complement of benefits or have pursued benefits which are incongruous with their overall tax plan.
In very extreme cases, companies have unwittingly pursued benefits which were detrimental to their tax strategy and thus negatively affected their returns.
These few exceptions should by no means discourage companies from pursuing Empire Zone benefits. With the proper preparation and planning, there is absolutely no risk from participating in the program.
The extent to which businesses stand to gain is only limited by their knowledge of the program's nuances and tax planning.
BY MARC WIEDER, CPA ANCHIN, BLOCK & ANCHIN LLP
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|Title Annotation:||INSIDERS OUTLOOK; Empire Zone urban development program|
|Publication:||Real Estate Weekly|
|Date:||Sep 20, 2006|
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