New York has enacted legislation entitled “The SUNY Tax-free Areas to Revitalize and Transform UPstate NY (START-UP NY)” which is intended to generate economic growth by offering businesses to partner with world-class higher education institutions in the SUNY and CUNY systems and operate tax free in designated New York state tax-free communities. Participating companies in START-UP NY will not pay business, corporate, sales or property taxes for 10 years. Employees in participating companies will not be required to pay income taxes for the first five years, and will only be required to pay taxes for the next five years if their income exceeds $200,000 for a single filer or $300,000 for joint filers.

The 64 SUNY campuses, of which 55 are upstate, will be tax-free communities under this program. The tax-free area can include vacant land and vacant space on the CUNY campus and any business incubator with a bona fide affiliation to the campus, university or college.

In addition, approximately 100 upstate private colleges and universities are permitted to dedicate up to 3 million square feet of space in which tenants will receive START-UP NY tax free benefits. The tax free zone for these private colleges can include vacant land and vacant space on- or off-campus, as well as any business incubator with a bona fide affiliation t6 the campus, university or college.

The START-UP NY program board may also designate up to 200,000 square feet of vacant land or vacant building space in each of 20 strategic state assets on vacant State-owned land, in closed State-owned buildings or on state-owned strategically located property slated for closure as tax-free areas in affiliation with a college or university.

In order for businesses to be eligible for the 10-year program, the business must be:

  • A start-up company, or
  • Relocating to New York state from another state, or
  • An existing New York state company which is expanding within New York State.

Businesses participating in the program will need to be aligned with or further the academic mission of the campus, college or university sponsoring the tax-free community. The business must also provide positive community and economic benefits such as creating new jobs for community members.

A number of types of companies will be prohibited from participating, including retail and wholesale businesses and restaurants. In New York City, Nassau, Suffolk and Westchester counties, the businesses must also be either a high-tech company or a new start-up company.

Eligibility for the program ends December 31, 2020, at which time the Empire State Development will prepare an evaluation of the effectiveness of the program to determine whether eligibility into the program should be extended.

START-UP NY also includes strong provisions to protect against fraud. In the case of a business that acted fraudulently, the business would: (I) be immediately terminated from such program; (2) be subject to applicable criminal penalties, including the felony crime of offering a false instrument for filing in the first degree; and (3) be required to pay back all tax benefits that the company and its employees have received.