New START-UP NY legislation provides important roles for business incubators

New York State’s new START-UP NY legislation, a program proposed by Gov. Andrew Cuomo to create tax-free zones on certain public and private university campuses statewide, passed the Legislature and was signed into law by the Governor, including important additional provisions pertaining to incubators added by the state Senate:

  • incubators will also be tax-free zones provided they demonstrate, to the satisfaction of the Commissioner of Economic Development, a bona fide affiliation with a university campus approved for participation in the tax-free zone program;
  • Graduates of incubators thus designated may enter the new tax-free zones as if they were new businesses, bypassing a requirement that otherwise restricts entrants to the tax-free zones; 
  • Existing incubator tenants may be eligible for tax-free treatment under certain circumstances, if they are adding new jobs in a new corporate vehicle.

Under this program, approved companies in approved START-UP NY zones pay no business, sales or property tax for 10 years, and their employees pay no personal income tax for the first five years and none up to a scaled threshhold in the succeeding five years. Companies approved for tax-free status must work in industry sectors aligned with the academic mission of the partnered campus. Under accountability rules built into the legislation, approved companies must generally be adding new jobs or moving into the state, and not simply moving from one part of the state to another, and so the exception for incubator graduates moving into their affiliated campus’s tax-free zone is quite an important recognition of their growth potential. For more information, please see the Governor’s end of session report, attached.

These benefits for incubators are separate from the Innovation Hot Spot and New York State Incubator programs included in the budget agreement and previously described here.

We thank the state’s elected officials in both branches, both chambers and all parties for their strong support of business incubation in the legislative session just concluded and look forward to working with all interested parties on successful implementation of these aggressive economic-development programs. 

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