11 ms·

Start-up NY: 100% Tax-Free for 10 Years?

131 points by jbarrec 13y ago

matthewbadeau 13y ago
(Because it's not on the front page)"START-UP NY is a groundbreaking new initiative from Governor Andrew M. Cuomo that will provide major incentives for businesses to relocate, start up or significantly expand in New York State through affiliations with public and private universities, colleges and community colleges. Businesses will have the opportunity to operate state and local tax-free on or near academic campuses, and their employees will pay no state or local personal income taxes. In addition, businesses may qualify for additional incentives." Wow. As a former resident of NYS, this is incredible. Income tax in the state is really high and this seems like a good way to spark development.
mathattack 13y ago
Wow! Does this in include NYC?
- matthewbadeau 13y ago
  It looks like it does so long as you pair up with a CUNY school. It looks like the New York City region goes up to Westchester county
ChrisNorstrom 13y ago
Clever, both financially and psychologically. If you plan on leaving after 10 years consider this, after a decade you will have built your entire logistics, business partnerships, network, staff, and support system in NYC. Moving out will be very difficult. You won't want to.
- Aco- 13y ago
  and this is bad, why?
  - aragot 13y ago
    Chris Norstrom isn't experssing an opinion, he's analyzing the talent of NY in attracting startups and making sure they stay there. HN isn't a tribune for opinions but a tribune for learning and deconstructing how the (tech) world evolves. Unfortunately on the internet, everyone thinks everyone is interested in sharing layman opinions or political POVs, but we already have Facebook for that.
- anonymouscowar1 13y ago
  Then you can just create a new, younger start-up and acquire the older one. Taxes fixed at 0. Is NY trying to race to the bottom?
- yapcguy 13y ago
  After 10 years, it's somebody else's problem - you should be on a beach sipping a cool drink!
- jusben1369 13y ago
  I suspect most people understand the hook and motive of NY for doing this.
PaulHoule 13y ago
As a New Yorker, I think this sucks. We already pay high taxes and if somebody gets a tax break that means all the rest of us will pay even more.
- raheemm 13y ago
  Better the tax breaks go to startups and new businesses than to bureaucracies and large corps.
  - greenyoda 13y ago
    There currently seems to be no shortage of startups in NYC, even without these tax breaks. And if a company only comes to NY because of the tax breaks, they might leave when the tax breaks expire.
    - cpfohl 13y ago
      I had the same thought until I realized that Human capital is a lot harder to move than buildings. Yes, it's possible to move a company away from a city, but 10 years is a long time. Long enough that a company would lose a ton of employees by moving out of state.
  - PKop 13y ago
    What about your average, everyday, not new, small business? If low taxes are good all of the sudden, why not lower them for everybody?
- jrockway 13y ago
  Make taxes higher, I say. I hope to one day have a New York City entirely funded by its full-time residents, so we can stop pretending to care about tourists.
  - greenyoda 13y ago
    A huge percentage of full-time residents work in the tourist industry (e.g., hotels, theaters, museums, etc.). And a lot of NYC business sectors would be much smaller without the tourist population, like restaurants and retail stores. Without the tourists, there would be a lot of unemployed New Yorkers.
bmmayer1 13y ago
I wonder what the trade-off is. I mean, business income taxes are generally a bad idea anyway, and it's great to see a state make a move toward eliminating them, but they would also need a way to offset lost revenue. Higher taxes on 10+ year businesses?
- m_ke 13y ago
  To qualify you need to start your business in the janitors closet at one of the amazing SUNY universities, which are conveniently located in the middle of nowhere.
  - greenyoda 13y ago
    There are also locations listed at CUNY (City University of New York) in NYC.
- PKop 13y ago
  Perhaps they plan to make it up in volume, presumably from the increase in business / economic activity that will occur from businesses starting up / moving to NY
jrockway 13y ago
Don't start your startup in New York or San Francisco. Rents here are twice what they are in more reasonable parts of the country, and you get absolutely nothing in exchange except maybe a slightly-less-shallow talent pool. (Oh, and cockroaches. Lots of cockroaches.) Your employees will be paid twice as well, and your offices will be twice as nice... for free... if you locate yourself outside the expensive parts of the country.
- pragone 13y ago
  I just want to point out that there are large portions of New York that are not New York City
  - mbillie1 13y ago
    Exactly. Having grown up in between Albany and Saratoga, I'd be excited to see some more tech culture evolve there. I'm not tremendously optimistic, but if Atlanta can do it, why not Albany? (Atlanta being a similarly car-travel-intensive, sprawling pseudo-urban region)
  - tedunangst 13y ago
    Pedantically, the name of the city is just New York. Given the context ("or San Francisco"), I think it's clear he didn't mean to include Buffalo. "New York or California" would have meant the entire state.
    - richardfontana 13y ago
      New York (city) native here. Usage of "New York City" for disambiguation by Americans, at least, became increasingly common beginning as far back as the late 19th century. But by the time I was a teenager (1980s) I would say that using "New York City" was ordinarily a reverse shibboleth for not being from New York, all the more so to write "NYC". (Where "New York City" tended to be used was governmental contexts, although "City of New York" is the more proper name of the municipality.) At the same time, the older generation, such as my parents, used "New York" (or "the city") to mean approximately "Manhattan", a holdover from what the city was before the consolidation with what are now the remaining boroughs. That always seemed old-fashioned to me. I believe you can still see some old subway signs that use "New York" to mean "Manhattan". (Incidentally New York is also the name of the county that is almost but not quite coterminous with the borough of Manhattan.) When I was growing up, the state was more or less never referred to as simply "New York" by people in the New York the city. It was "New York State", most of which was "Upstate New York" (though that couldn't refer to Long Island, and it was never quite clear where 'Upstate' began). The reverse shibboleth quality of "New York City"/"NYC" is probably dying out, may be already dead. Nonetheless I find it annoying.
chrislgrigg 13y ago
Got excited, then saw that your business must operate from university-affiliated property. Those of us already established in NYC and working from shared spaces, home, etc. are ineligible. Might still be worth it (I don't have the experience to say) but it's not for everyone. http://startup-ny.com/faq/#b-9 http://startup-ny.com/faq/#b-9
- _delirium 13y ago
  In addition, it has to be at a university that's applied for a "tax-exempt area" (the university has to make the application). This is still interesting, but not a blanket no-tax-for-startups program. It's closer to something like the way some countries set up industrial parks or Special Economic Zones or Free Trade Zones with special tax incentives. Except, any university in the state of NY can apply to turn itself into such a zone, rather than it only being a specific port or industrial park.
logicallee 13y ago
um...silicon valley already has this covered: you only pay taxes on revenues. (badam CHING).
- gnicholas 13y ago
  profits, actually. But yes, "pre-revenue" companies have little to worry about in terms of corporate-level income taxes. Of course, if one of these pre-revenue startups gets gobbled up a la Instagram, then the founders and investors end up with large personal income tax bills—which are not affected by the NY policy. And yes, I realize your original comment was a joke, but it does raise a relevant point about the impact (or lack thereof) of the NY policy.
  - rdl 13y ago
    SF and WA State have essentially a gross receipts tax, so there's some tax on revenue :(
- gaadd33 13y ago
  Don't employees in SV still have to pay state taxes on their salaries?
robomartin 13y ago
It's really interesting, funny and ironic that in a liberal, pro-tax-the-hell-out-of-everyone, government-knows-best state the best tool they can think of to entice businesses to set roots in the state is the elimination of income tax. Friggin hilarious. I almost got happy thinking that they started to understand but quickly realized it's a bait-and-switch. They are going to shaft these businesses one way or the other eventually and most-certainly after the ten year mark passes.
eli 13y ago
Startups in DC are exempt from many taxes for 5 years (and no capital gains on holdings older than 5 years). Makes sense that states would be competing for entrepreneurs.
suyash 13y ago
What about Income Tax and Payroll Tax? That is more important for employees.
- gnicholas 13y ago
  The bulk of these are federal, and therefore unaffected by state & local policies. Agreed that they are much larger costs than state & local taxes for many/most startups.
- _delirium 13y ago
  From the FAQ: Employees hired for and whose jobs are certified as net new jobs in a tax-free area will pay no state or local income taxes for the first five years. For the second five years, employees will pay no taxes on income up to $200,000 for individuals, $250,000 for a head of household and $300,000 for taxpayers filing a joint return. There is an annual cap per business on the number of employees that qualify for this exemption and an annual cap statewide of 10,000 net new jobs (i.e., there will be a maximum of 10,000 tax-free jobs after year one, 20,000 tax-free jobs after year two, etc.)
curiousDog 13y ago
Could these be great money-laundering opportunities as well ;)? Establish a chain of start-ups, convert black money to white, tax free!
javajosh 13y ago
Isn't this why people incorporate in Delaware? I don't really see the point of this.
- seehafer 13y ago
  People incorporate Delaware because of Delaware's well-codified, well-understood corporate law, that simplifies things like investments, M&A and the like. Incorporating in Delaware doesn't exempt you from NYC income tax if you do all your business in NYC.
  - javajosh 13y ago
    That's embarrassing. But then again, I'm CA incorporated so I guess I never really understood the legal implications of extra-state incorporation. Thanks for clearing that up!
deleted 13y ago
[deleted]
gnicholas 13y ago
Not sure this is anywhere as good as it sounds. Most startups aren't profitable for several years (if ever), so income tax would not be an issue during this period. Even after there is income, there would be loss carry-forwards that would have soaked up income taxes from the first couple of profitable years. So this probably doesn't produce much benefit for much/most of the 10 years. Eliminating sales tax isn't that big a benefit either: SASS, social, or other popular startup types would not pay much of this anyway (on purchases of desks, computers, etc?). Property tax benefits could be sizable, though many bootstrapped startups don't have this for a couple of years anyway. Cutting franchise taxes provides a small benefit that would probably help all startups. As others have pointed out, the non-tax costs of being in an expensive city like NYC are substantial. And don't forget, NY isn't waiving personal income taxes—so if your startup does hit a homerun, they'll take their pound of flesh on the back end. For some startups (like the rare one with high anticipated sales tax costs), this program might be enough to tip the scales in favor of locating in NY. For most startups, however, state/local tax cuts in the first 10 years are just not that big a deal. As the saying goes: don't let the tax tail wag the dog. Looking at the policy from a macro perspective, it looks a lot like what Swiss cantons do to negotiate tax breaks for a limited time based on anticipated future tax revenues and job creation. Also seems a lot like what Ireland has done to build up its tech sector (and been chastised for of late: see Apple, Google, etc.). So it could be produce benefits (for NY), but it would of course pull talent from other regions, thereby reducing the net benefit.
- dworin 13y ago
  I didn't think they were waiving personal income taxes either, but it actually looks like they are: What is the Personal Income Tax exemption for employees? Employees of businesses in START-UP NY will pay no income taxes on their wages for the first five years. For the second five years, employees will pay no taxes on income up to $200,000 of wages for individuals, $250,000 for a head of household and $300,000 for taxpayers filing a joint return. (http://startup-ny.com/faq/#b-11 http://startup-ny.com/faq/#b-11)
  - gnicholas 13y ago
    Good catch, thanks! Of course, this still doesn't cover capital gains, dividends, or other income...
dworin 13y ago
The hidden fine print is that you have to affiliate with a university and support that university's mission. I wonder how loose they'll be in interpreting that support. Does "providing internships to students every summer" count, or will it need to be more substantial?
- gametheoretic 13y ago
  The following is not sarcastic: be more cynical. What would you want, if you were a university president? Startup branding. They want you to walk around talking about how SUNY-whatever is where the startup culture is at.
  - gohrt 13y ago
    a href="http://i-lab.harvard.edu/experiential-learning/startup-scramble" http://i-lab.harvard.edu/experiential-learning/startup-scram... Whatever do you mean? /a
- Spooky23 13y ago
  It's more substantial. Each state university school is earmarked for specific areas, and candidate companies are selected based on fit with each schools mission. The idea is to build more integrated links with the universities. It's intended to help drive benefits similar to the successful model used by the SUNY College of Nanoscale Science and Engineering to partner with the semiconductor industry. Note that this is really designed to benefit NY outside of NYC.
skizm 13y ago
Can I freelance for 10 years tax free in NY if I incorporate?
- cpfohl 13y ago
  Yes, if you're: at a university. Oh, and if you support the University's mission. Oh, and if the University decides to allow it. Did you read the article? It wouldn't be New York State if there weren't 173 rules and regulations that had to be met before you were eligible.
  - ajiang 13y ago
    Ok, not really helpful. You can't. The point of this program is to bring jobs to New york. You need to develop a forecast of new jobs your startup would bring to New York, which gets reported and reviewed on a regular basis. The penalties for not meeting those forecasts would be determined by your sponsoring university, which can include losing your tax free status for a year or getting kicked out of the program. The regulations around this program aren't particularly onerous from reading the regulations document. You need to establish an understanding with a sponsoring university that your company will both benefit the community, the school's academic mission, and bring new jobs to New York. There are some reporting requirements, but that seems like a paltry ask compared to ~40-50% tax savings on profit and no income tax.
vishaldpatel 13y ago
Guessing that none of these tax-free zones will be in New York City.
ajiang 13y ago
Read through the regulations, here's the gist: -- New initiative to establish tax-free zones near and on university campuses -- Businesses in those zones will operate 100% tax free for 10 years – no income, business, corporate, state, local, sales, property taxes nor franchise fees -- Employees can be eligible to pay no income taxes as well -- Business have to be either new startups OR expansion of existing businesses that will bring new jobs to New York state -- Some industries are prohibited from participating -- Types of companies targeted are in high-tech – generally engaged in the “design, development, and introduction of new biotech, IT, advanced materials, process engineering, electronic technology, and/or innovative manufacturing process”
crazygringo 13y ago
This is pretty awesome, and it seems to apply to New York City too: - In New York City, Long Island and Westchester County, businesses must be start-ups or one of a number of broadly defined “high technology” businesses. But this looks like a major caveat: - Participation in START-UP NY does not necessarily require that your business be on or next to a campus, but it must be located on property affiliated with a university. That's a very "interesting" requirement. I wonder how it will work in practice? What does it mean for a property to be "affiliated"? Edit: here are the 3 NYC locations: http://startup-ny.com/properties/new-york-city-properties/ http://startup-ny.com/properties/new-york-city-properties/
- carterschonwald 13y ago
  agreed! I'm a bit confused about the "need to work in a university provisioned space". Theres so many ways i'd rather interact with / collaborate with folks at universities than use their office space. Though If that meant I could have zero pay wells for papers I need to look up occasionally, that could be tempting!
- jpwright 13y ago
  Those 3 locations (all at SUNY Downstate Medical Center in Brooklyn) are "representative of the types of properties that may be available following submission of an application by the relevant university/college and approval by ESD and/or the Start-Up Approval Board". So, you could work with any university in NYC, not just SUNY Downstate (although the campus is a really nice spot for startups as well!) NYU Poly operates incubators at Jay St/MetroTech in Brooklyn and Varick St in Manhattan. Columbia has a biotech incubator (AUDOBON) in Washington Heights. Cornell has 22k ft^2 in Google's building in Chelsea. All of those sounds like they would qualify (if you could get the right people on board)
  - skyebook 13y ago
    I'm curious if SUNY gets what it wants and is allowed to close LICH whether they'd hang on to some of the space and try to get research into the area.. That's a huge tract of land (and I'd like to see it not sit completely vacant for a few years) NYU-Poly has another incubator spot further up Jay St in DUMBO as well, looks like a nice space from the 15 minutes I've spent inside.
notastartup 13y ago
Okay but the rents must be cheaper than Vancouver, BC right? Taxation must be lower too? I signed up and planning to move there IF this is not one of those 'too good to be true' deal that ends up in snow flakes. The tax rates in BC is insane both as an employee and employer. The cost of hiring an employee because of taxation and other social welfare benefits in an attempt to become more 'Netherlandly' forces down salary for software engineers and designers. What makes it worse the scarcity of such jobs forces engineers to compete with each other on the non-paid overtime one can work to become 'invaluable'. Plenty of software sweatshops here in BC, where a nurse or a manager at mcdonalds find more stability and higher pay (when you count the unpaid overtime). Not to mention that up to 40% of any money you make goes to federal government and the BC government still trying to pay off the loans from holding the winter olympics. Not to mention the special taxes on rent, food, bars, everything. If the door opens, I'm going to be the first in line to get to NY if the tax thing turns out to be true. I hear New Yorkers are mean and cold, that's totally fine with me, I'd rather have someone admit they are an asshole and not hide behind it, rather than try to deny it to keep some false image as the 'warmest part of Canada and the whole world' thing. I've been part of this hypocrisy too long.
- thekevan 13y ago
  New York is not synonymous with New York City. There's a whole other state outside of NYC. In fact, many of us don't even like the city.
  - notastartup 13y ago
    Mind blown. I'm one of those ignorant Canadians that they constantly try to keep in the woods and deny the existence.
    - thekevan 13y ago
      I live in Rochester, NY. When I moved to Washington DC, two friends who grew up just outside of DC always said I was a "New Yawker" in a NY City accent. With DC being 4 hours from NYC, I said then they must be as well because since I grew up 7 hours drive from the city and they grew up only 4 hours drive from the city. Western NY, where I am from, is in the Finger Lakes region. It is full of rolling hills and long lakes. There are several cities here but many, many more pastoral small towns, much like New England. The "tall" part of NYS is home to Adirondacks region which is full of east coast sized mountains and small rustic towns, plus lots of wilderness areas. Adirondack park could actually fit Glacier, Yosemite, the Great Smoky Mountains, Yellowstone and the Grand Canyon Nationals parks all inside its borders. (Although that is a bit of a misnomer--there are towns, roads, businesses and homes technically inside the park's boundaries. Some of those parks listed have nothing but parkland inside of them.) I should say that between Buffalo, Syracuse and Rochester, I snobbishly say that I always refer to Rochester as nowhere near as boring as Syracuse or as depressing as Buffalo. I never even went to NYC until I was 26 and by then I had been to England several times, 8 or 9 US states and 6 or 7 other major US cities. Editorials time: I don't like NYC. Many of the people are extremely egotistical about their city, it's loud but not in a good way, crowded, dirty as hell and there are lots of shady areas. Granted it has a lot to offer but I feel the good/bad ratio is much worse than other cities. Washington DC for example is damn near as powerful and culturally rich yet isn't anywhere as bad to look at or dangerous. Also, don't worry, plenty of people here in Rochester think Canada is pretty much Toronto and tundra, with some weird area near New England that wants to be France again. They technically know Canada goes all the way to the west coast, but but they don't really think about it.
meddlepal 13y ago
I wonder, if, and how MA and Boston might respond? NYC is probably a bigger competitor than San Francisco is for getting start-ups in the region only because of proximity.
gojomo 13y ago
I love startups and hate high taxes, but programs like this are bad. The rewards go to firms most able to jump through confusing and often quite arbitrary eligibility hoops, or race to collect benefits before they are capped. (In some cases, the firms' skill in doing so is because they helped draft the program or otherwise have connections to the governing authorities.) Jurisdictions get into bidding wars for the new/relocating firms able to qualify... but continue to subject older/less-politically-connected firms to growth-stunting tax levels. So it's creating incentives to move/restructure/game-the-rules, and an uneven playing field between sources of growth, and advantaging lawyers and policy-arbitrageurs above other more customer-focused innovators. Just make a fair, welcoming environment for all employers, new and old, big and small, novice and expert, insider and outsider.
pbreit 13y ago
This is why I hate being a democrat ( I know republicans do the same thing but I think hard to argue they have a stronger overall position of lower taxes for everyone). This kind of stuff is embarrassing. It seems like a secondary but big reason taxes are so high is so that politicos can hand out stupid breaks like this to arbitrary groups. Plus the fairly obvious admission that taxes diminish business growth. I would say that tax breaks are not compelling to startups since they play almost no role. But the employee income tax waiver might be significant.
wiradikusuma 13y ago
Let say the person is not a US citizen. They recently incorporated (C-Corp or LLC) in a different state (e.g. Delaware). They're a one/two-person tech startup until forseeable future (e.g. building SaaS on the side). Are they eligible for this? (They might not be physically in US)
mikekij 13y ago
As a startup CEO, I don't really care about income taxes. Most tech startups get acquired or fail before profitability. I care about personal capital gains tax. Give me a personal capital gains tax exemption and I'm in. I love Hudson.
- lsc 13y ago
  >As a startup CEO, I don't really care about income taxes. Most tech startups get acquired or fail before profitability. I care about personal capital gains tax. Give me a personal capital gains tax exemption and I'm in. I love Hudson. only if you are rich enough that you don't have to pay yourself. The rest of us have gotta pay income taxes on all the money we take out to live on until we sell out. Really, it doesn't matter if that money comes from revenue, if you are bootstrapping like I am, or from investors, if you are funded. You've gotta pay income taxes on the money you take out. Personally? I'd rather have higher capital gains than income taxes. I've gotta pay income taxes while I'm poor; I won't have to pay capital gains until I sell the company, and at that point, hopefully, I'll be rich and have a much lower marginal value for each additional dollar.
  - mikekij 13y ago
    I didn't get the impression that this tax break was on personal income tax, but corporate income tax. So you would only get a corporate income tax break if your company has a profit. I was recently in the situation where I had to pay a ton of capital gains tax on an acquisition, even though my company never really had a profit, and therefore paid no corporate income tax. But I agree. Not having to pay personal income tax would be sweet. You need to go to NH or TX for that.
    - melvinram 13y ago
      It's both.
davidw 13y ago
Why not just take the same money, and reduce taxes for all businesses, rather than favoring this, that or the other sector. Italy does this a lot: incentives for biotech startups founded by Sardinian women under 35, or German speaking Italians over 50 with shoe companies, or whatever other silly thing some politician decides is a good idea. It creates incentives for people who are adept at navigating the bureaucracy and finding where the government money is directed, rather than simply getting on with business.
- tolmasky 13y ago
  Because tax breaks are the products politicians sell: http://youtu.be/TruCIPy79w8 http://youtu.be/TruCIPy79w8 (relevant portion about 5:28 in but it's all worth watching)

131 points by jbarrec 13y ago

(Because it's not on the front page)"START-UP NY is a groundbreaking new initiative from Governor Andrew M. Cuomo that will provide major incentives for businesses to relocate, start up or significantly expand in New York State through affiliations with public and private universities, colleges and community colleges. Businesses will have the opportunity to operate state and local tax-free on or near academic campuses, and their employees will pay no state or local personal income taxes. In addition, businesses may qualify for additional incentives." Wow. As a former resident of NYS, this is incredible. Income tax in the state is really high and this seems like a good way to spark development.

mathattack 13y ago

Wow! Does this in include NYC?

matthewbadeau 13y ago
It looks like it does so long as you pair up with a CUNY school. It looks like the New York City region goes up to Westchester county

ChrisNorstrom 13y ago

Clever, both financially and psychologically. If you plan on leaving after 10 years consider this, after a decade you will have built your entire logistics, business partnerships, network, staff, and support system in NYC. Moving out will be very difficult. You won't want to.

Aco- 13y ago
and this is bad, why?
- aragot 13y ago
  Chris Norstrom isn't experssing an opinion, he's analyzing the talent of NY in attracting startups and making sure they stay there. HN isn't a tribune for opinions but a tribune for learning and deconstructing how the (tech) world evolves. Unfortunately on the internet, everyone thinks everyone is interested in sharing layman opinions or political POVs, but we already have Facebook for that.
anonymouscowar1 13y ago
Then you can just create a new, younger start-up and acquire the older one. Taxes fixed at 0. Is NY trying to race to the bottom?
yapcguy 13y ago
After 10 years, it's somebody else's problem - you should be on a beach sipping a cool drink!
jusben1369 13y ago
I suspect most people understand the hook and motive of NY for doing this.

PaulHoule 13y ago

As a New Yorker, I think this sucks. We already pay high taxes and if somebody gets a tax break that means all the rest of us will pay even more.

raheemm 13y ago
Better the tax breaks go to startups and new businesses than to bureaucracies and large corps.
- greenyoda 13y ago
  There currently seems to be no shortage of startups in NYC, even without these tax breaks. And if a company only comes to NY because of the tax breaks, they might leave when the tax breaks expire.
  - cpfohl 13y ago
    I had the same thought until I realized that Human capital is a lot harder to move than buildings. Yes, it's possible to move a company away from a city, but 10 years is a long time. Long enough that a company would lose a ton of employees by moving out of state.
- PKop 13y ago
  What about your average, everyday, not new, small business? If low taxes are good all of the sudden, why not lower them for everybody?
jrockway 13y ago
Make taxes higher, I say. I hope to one day have a New York City entirely funded by its full-time residents, so we can stop pretending to care about tourists.
- greenyoda 13y ago
  A huge percentage of full-time residents work in the tourist industry (e.g., hotels, theaters, museums, etc.). And a lot of NYC business sectors would be much smaller without the tourist population, like restaurants and retail stores. Without the tourists, there would be a lot of unemployed New Yorkers.

bmmayer1 13y ago

I wonder what the trade-off is. I mean, business income taxes are generally a bad idea anyway, and it's great to see a state make a move toward eliminating them, but they would also need a way to offset lost revenue. Higher taxes on 10+ year businesses?

m_ke 13y ago
To qualify you need to start your business in the janitors closet at one of the amazing SUNY universities, which are conveniently located in the middle of nowhere.
- greenyoda 13y ago
  There are also locations listed at CUNY (City University of New York) in NYC.
PKop 13y ago
Perhaps they plan to make it up in volume, presumably from the increase in business / economic activity that will occur from businesses starting up / moving to NY

jrockway 13y ago

Don't start your startup in New York or San Francisco. Rents here are twice what they are in more reasonable parts of the country, and you get absolutely nothing in exchange except maybe a slightly-less-shallow talent pool. (Oh, and cockroaches. Lots of cockroaches.) Your employees will be paid twice as well, and your offices will be twice as nice... for free... if you locate yourself outside the expensive parts of the country.

pragone 13y ago
I just want to point out that there are large portions of New York that are not New York City
- mbillie1 13y ago
  Exactly. Having grown up in between Albany and Saratoga, I'd be excited to see some more tech culture evolve there. I'm not tremendously optimistic, but if Atlanta can do it, why not Albany? (Atlanta being a similarly car-travel-intensive, sprawling pseudo-urban region)
- tedunangst 13y ago
  Pedantically, the name of the city is just New York. Given the context ("or San Francisco"), I think it's clear he didn't mean to include Buffalo. "New York or California" would have meant the entire state.
  - richardfontana 13y ago
    New York (city) native here. Usage of "New York City" for disambiguation by Americans, at least, became increasingly common beginning as far back as the late 19th century. But by the time I was a teenager (1980s) I would say that using "New York City" was ordinarily a reverse shibboleth for not being from New York, all the more so to write "NYC". (Where "New York City" tended to be used was governmental contexts, although "City of New York" is the more proper name of the municipality.) At the same time, the older generation, such as my parents, used "New York" (or "the city") to mean approximately "Manhattan", a holdover from what the city was before the consolidation with what are now the remaining boroughs. That always seemed old-fashioned to me. I believe you can still see some old subway signs that use "New York" to mean "Manhattan". (Incidentally New York is also the name of the county that is almost but not quite coterminous with the borough of Manhattan.) When I was growing up, the state was more or less never referred to as simply "New York" by people in the New York the city. It was "New York State", most of which was "Upstate New York" (though that couldn't refer to Long Island, and it was never quite clear where 'Upstate' began). The reverse shibboleth quality of "New York City"/"NYC" is probably dying out, may be already dead. Nonetheless I find it annoying.

chrislgrigg 13y ago

Got excited, then saw that your business must operate from university-affiliated property. Those of us already established in NYC and working from shared spaces, home, etc. are ineligible. Might still be worth it (I don't have the experience to say) but it's not for everyone. http://startup-ny.com/faq/#b-9 http://startup-ny.com/faq/#b-9

_delirium 13y ago
In addition, it has to be at a university that's applied for a "tax-exempt area" (the university has to make the application). This is still interesting, but not a blanket no-tax-for-startups program. It's closer to something like the way some countries set up industrial parks or Special Economic Zones or Free Trade Zones with special tax incentives. Except, any university in the state of NY can apply to turn itself into such a zone, rather than it only being a specific port or industrial park.

logicallee 13y ago

um...silicon valley already has this covered: you only pay taxes on revenues. (badam CHING).

gnicholas 13y ago
profits, actually. But yes, "pre-revenue" companies have little to worry about in terms of corporate-level income taxes. Of course, if one of these pre-revenue startups gets gobbled up a la Instagram, then the founders and investors end up with large personal income tax bills—which are not affected by the NY policy. And yes, I realize your original comment was a joke, but it does raise a relevant point about the impact (or lack thereof) of the NY policy.
- rdl 13y ago
  SF and WA State have essentially a gross receipts tax, so there's some tax on revenue :(
gaadd33 13y ago
Don't employees in SV still have to pay state taxes on their salaries?

robomartin 13y ago

It's really interesting, funny and ironic that in a liberal, pro-tax-the-hell-out-of-everyone, government-knows-best state the best tool they can think of to entice businesses to set roots in the state is the elimination of income tax. Friggin hilarious. I almost got happy thinking that they started to understand but quickly realized it's a bait-and-switch. They are going to shaft these businesses one way or the other eventually and most-certainly after the ten year mark passes.

eli 13y ago

Startups in DC are exempt from many taxes for 5 years (and no capital gains on holdings older than 5 years). Makes sense that states would be competing for entrepreneurs.

suyash 13y ago

What about Income Tax and Payroll Tax? That is more important for employees.

gnicholas 13y ago
The bulk of these are federal, and therefore unaffected by state & local policies. Agreed that they are much larger costs than state & local taxes for many/most startups.
_delirium 13y ago
From the FAQ: Employees hired for and whose jobs are certified as net new jobs in a tax-free area will pay no state or local income taxes for the first five years. For the second five years, employees will pay no taxes on income up to $200,000 for individuals, $250,000 for a head of household and $300,000 for taxpayers filing a joint return. There is an annual cap per business on the number of employees that qualify for this exemption and an annual cap statewide of 10,000 net new jobs (i.e., there will be a maximum of 10,000 tax-free jobs after year one, 20,000 tax-free jobs after year two, etc.)

curiousDog 13y ago

Could these be great money-laundering opportunities as well ;)? Establish a chain of start-ups, convert black money to white, tax free!

javajosh 13y ago

Isn't this why people incorporate in Delaware? I don't really see the point of this.

seehafer 13y ago
People incorporate Delaware because of Delaware's well-codified, well-understood corporate law, that simplifies things like investments, M&A and the like. Incorporating in Delaware doesn't exempt you from NYC income tax if you do all your business in NYC.
- javajosh 13y ago
  That's embarrassing. But then again, I'm CA incorporated so I guess I never really understood the legal implications of extra-state incorporation. Thanks for clearing that up!

deleted 13y ago

[deleted]

gnicholas 13y ago

Not sure this is anywhere as good as it sounds. Most startups aren't profitable for several years (if ever), so income tax would not be an issue during this period. Even after there is income, there would be loss carry-forwards that would have soaked up income taxes from the first couple of profitable years. So this probably doesn't produce much benefit for much/most of the 10 years. Eliminating sales tax isn't that big a benefit either: SASS, social, or other popular startup types would not pay much of this anyway (on purchases of desks, computers, etc?). Property tax benefits could be sizable, though many bootstrapped startups don't have this for a couple of years anyway. Cutting franchise taxes provides a small benefit that would probably help all startups. As others have pointed out, the non-tax costs of being in an expensive city like NYC are substantial. And don't forget, NY isn't waiving personal income taxes—so if your startup does hit a homerun, they'll take their pound of flesh on the back end. For some startups (like the rare one with high anticipated sales tax costs), this program might be enough to tip the scales in favor of locating in NY. For most startups, however, state/local tax cuts in the first 10 years are just not that big a deal. As the saying goes: don't let the tax tail wag the dog. Looking at the policy from a macro perspective, it looks a lot like what Swiss cantons do to negotiate tax breaks for a limited time based on anticipated future tax revenues and job creation. Also seems a lot like what Ireland has done to build up its tech sector (and been chastised for of late: see Apple, Google, etc.). So it could be produce benefits (for NY), but it would of course pull talent from other regions, thereby reducing the net benefit.

dworin 13y ago
I didn't think they were waiving personal income taxes either, but it actually looks like they are: What is the Personal Income Tax exemption for employees? Employees of businesses in START-UP NY will pay no income taxes on their wages for the first five years. For the second five years, employees will pay no taxes on income up to $200,000 of wages for individuals, $250,000 for a head of household and $300,000 for taxpayers filing a joint return. (http://startup-ny.com/faq/#b-11 http://startup-ny.com/faq/#b-11)
- gnicholas 13y ago
  Good catch, thanks! Of course, this still doesn't cover capital gains, dividends, or other income...

dworin 13y ago

The hidden fine print is that you have to affiliate with a university and support that university's mission. I wonder how loose they'll be in interpreting that support. Does "providing internships to students every summer" count, or will it need to be more substantial?

gametheoretic 13y ago
The following is not sarcastic: be more cynical. What would you want, if you were a university president? Startup branding. They want you to walk around talking about how SUNY-whatever is where the startup culture is at.
- gohrt 13y ago
  a href="http://i-lab.harvard.edu/experiential-learning/startup-scramble" http://i-lab.harvard.edu/experiential-learning/startup-scram... Whatever do you mean? /a
Spooky23 13y ago
It's more substantial. Each state university school is earmarked for specific areas, and candidate companies are selected based on fit with each schools mission. The idea is to build more integrated links with the universities. It's intended to help drive benefits similar to the successful model used by the SUNY College of Nanoscale Science and Engineering to partner with the semiconductor industry. Note that this is really designed to benefit NY outside of NYC.

skizm 13y ago

Can I freelance for 10 years tax free in NY if I incorporate?

cpfohl 13y ago
Yes, if you're: at a university. Oh, and if you support the University's mission. Oh, and if the University decides to allow it. Did you read the article? It wouldn't be New York State if there weren't 173 rules and regulations that had to be met before you were eligible.
- ajiang 13y ago
  Ok, not really helpful. You can't. The point of this program is to bring jobs to New york. You need to develop a forecast of new jobs your startup would bring to New York, which gets reported and reviewed on a regular basis. The penalties for not meeting those forecasts would be determined by your sponsoring university, which can include losing your tax free status for a year or getting kicked out of the program. The regulations around this program aren't particularly onerous from reading the regulations document. You need to establish an understanding with a sponsoring university that your company will both benefit the community, the school's academic mission, and bring new jobs to New York. There are some reporting requirements, but that seems like a paltry ask compared to ~40-50% tax savings on profit and no income tax.

vishaldpatel 13y ago

Guessing that none of these tax-free zones will be in New York City.

ajiang 13y ago

Read through the regulations, here's the gist: -- New initiative to establish tax-free zones near and on university campuses -- Businesses in those zones will operate 100% tax free for 10 years – no income, business, corporate, state, local, sales, property taxes nor franchise fees -- Employees can be eligible to pay no income taxes as well -- Business have to be either new startups OR expansion of existing businesses that will bring new jobs to New York state -- Some industries are prohibited from participating -- Types of companies targeted are in high-tech – generally engaged in the “design, development, and introduction of new biotech, IT, advanced materials, process engineering, electronic technology, and/or innovative manufacturing process”

crazygringo 13y ago

This is pretty awesome, and it seems to apply to New York City too: - In New York City, Long Island and Westchester County, businesses must be start-ups or one of a number of broadly defined “high technology” businesses. But this looks like a major caveat: - Participation in START-UP NY does not necessarily require that your business be on or next to a campus, but it must be located on property affiliated with a university. That's a very "interesting" requirement. I wonder how it will work in practice? What does it mean for a property to be "affiliated"? Edit: here are the 3 NYC locations: http://startup-ny.com/properties/new-york-city-properties/ http://startup-ny.com/properties/new-york-city-properties/

carterschonwald 13y ago
agreed! I'm a bit confused about the "need to work in a university provisioned space". Theres so many ways i'd rather interact with / collaborate with folks at universities than use their office space. Though If that meant I could have zero pay wells for papers I need to look up occasionally, that could be tempting!
jpwright 13y ago
Those 3 locations (all at SUNY Downstate Medical Center in Brooklyn) are "representative of the types of properties that may be available following submission of an application by the relevant university/college and approval by ESD and/or the Start-Up Approval Board". So, you could work with any university in NYC, not just SUNY Downstate (although the campus is a really nice spot for startups as well!) NYU Poly operates incubators at Jay St/MetroTech in Brooklyn and Varick St in Manhattan. Columbia has a biotech incubator (AUDOBON) in Washington Heights. Cornell has 22k ft^2 in Google's building in Chelsea. All of those sounds like they would qualify (if you could get the right people on board)
- skyebook 13y ago
  I'm curious if SUNY gets what it wants and is allowed to close LICH whether they'd hang on to some of the space and try to get research into the area.. That's a huge tract of land (and I'd like to see it not sit completely vacant for a few years) NYU-Poly has another incubator spot further up Jay St in DUMBO as well, looks like a nice space from the 15 minutes I've spent inside.

notastartup 13y ago

Okay but the rents must be cheaper than Vancouver, BC right? Taxation must be lower too? I signed up and planning to move there IF this is not one of those 'too good to be true' deal that ends up in snow flakes. The tax rates in BC is insane both as an employee and employer. The cost of hiring an employee because of taxation and other social welfare benefits in an attempt to become more 'Netherlandly' forces down salary for software engineers and designers. What makes it worse the scarcity of such jobs forces engineers to compete with each other on the non-paid overtime one can work to become 'invaluable'. Plenty of software sweatshops here in BC, where a nurse or a manager at mcdonalds find more stability and higher pay (when you count the unpaid overtime). Not to mention that up to 40% of any money you make goes to federal government and the BC government still trying to pay off the loans from holding the winter olympics. Not to mention the special taxes on rent, food, bars, everything. If the door opens, I'm going to be the first in line to get to NY if the tax thing turns out to be true. I hear New Yorkers are mean and cold, that's totally fine with me, I'd rather have someone admit they are an asshole and not hide behind it, rather than try to deny it to keep some false image as the 'warmest part of Canada and the whole world' thing. I've been part of this hypocrisy too long.

thekevan 13y ago
New York is not synonymous with New York City. There's a whole other state outside of NYC. In fact, many of us don't even like the city.
- notastartup 13y ago
  Mind blown. I'm one of those ignorant Canadians that they constantly try to keep in the woods and deny the existence.
  - thekevan 13y ago
    I live in Rochester, NY. When I moved to Washington DC, two friends who grew up just outside of DC always said I was a "New Yawker" in a NY City accent. With DC being 4 hours from NYC, I said then they must be as well because since I grew up 7 hours drive from the city and they grew up only 4 hours drive from the city. Western NY, where I am from, is in the Finger Lakes region. It is full of rolling hills and long lakes. There are several cities here but many, many more pastoral small towns, much like New England. The "tall" part of NYS is home to Adirondacks region which is full of east coast sized mountains and small rustic towns, plus lots of wilderness areas. Adirondack park could actually fit Glacier, Yosemite, the Great Smoky Mountains, Yellowstone and the Grand Canyon Nationals parks all inside its borders. (Although that is a bit of a misnomer--there are towns, roads, businesses and homes technically inside the park's boundaries. Some of those parks listed have nothing but parkland inside of them.) I should say that between Buffalo, Syracuse and Rochester, I snobbishly say that I always refer to Rochester as nowhere near as boring as Syracuse or as depressing as Buffalo. I never even went to NYC until I was 26 and by then I had been to England several times, 8 or 9 US states and 6 or 7 other major US cities. Editorials time: I don't like NYC. Many of the people are extremely egotistical about their city, it's loud but not in a good way, crowded, dirty as hell and there are lots of shady areas. Granted it has a lot to offer but I feel the good/bad ratio is much worse than other cities. Washington DC for example is damn near as powerful and culturally rich yet isn't anywhere as bad to look at or dangerous. Also, don't worry, plenty of people here in Rochester think Canada is pretty much Toronto and tundra, with some weird area near New England that wants to be France again. They technically know Canada goes all the way to the west coast, but but they don't really think about it.

meddlepal 13y ago

I wonder, if, and how MA and Boston might respond? NYC is probably a bigger competitor than San Francisco is for getting start-ups in the region only because of proximity.

gojomo 13y ago

I love startups and hate high taxes, but programs like this are bad. The rewards go to firms most able to jump through confusing and often quite arbitrary eligibility hoops, or race to collect benefits before they are capped. (In some cases, the firms' skill in doing so is because they helped draft the program or otherwise have connections to the governing authorities.) Jurisdictions get into bidding wars for the new/relocating firms able to qualify... but continue to subject older/less-politically-connected firms to growth-stunting tax levels. So it's creating incentives to move/restructure/game-the-rules, and an uneven playing field between sources of growth, and advantaging lawyers and policy-arbitrageurs above other more customer-focused innovators. Just make a fair, welcoming environment for all employers, new and old, big and small, novice and expert, insider and outsider.

pbreit 13y ago

This is why I hate being a democrat ( I know republicans do the same thing but I think hard to argue they have a stronger overall position of lower taxes for everyone). This kind of stuff is embarrassing. It seems like a secondary but big reason taxes are so high is so that politicos can hand out stupid breaks like this to arbitrary groups. Plus the fairly obvious admission that taxes diminish business growth. I would say that tax breaks are not compelling to startups since they play almost no role. But the employee income tax waiver might be significant.

wiradikusuma 13y ago

Let say the person is not a US citizen. They recently incorporated (C-Corp or LLC) in a different state (e.g. Delaware). They're a one/two-person tech startup until forseeable future (e.g. building SaaS on the side). Are they eligible for this? (They might not be physically in US)

mikekij 13y ago

As a startup CEO, I don't really care about income taxes. Most tech startups get acquired or fail before profitability. I care about personal capital gains tax. Give me a personal capital gains tax exemption and I'm in. I love Hudson.

lsc 13y ago
>As a startup CEO, I don't really care about income taxes. Most tech startups get acquired or fail before profitability. I care about personal capital gains tax. Give me a personal capital gains tax exemption and I'm in. I love Hudson. only if you are rich enough that you don't have to pay yourself. The rest of us have gotta pay income taxes on all the money we take out to live on until we sell out. Really, it doesn't matter if that money comes from revenue, if you are bootstrapping like I am, or from investors, if you are funded. You've gotta pay income taxes on the money you take out. Personally? I'd rather have higher capital gains than income taxes. I've gotta pay income taxes while I'm poor; I won't have to pay capital gains until I sell the company, and at that point, hopefully, I'll be rich and have a much lower marginal value for each additional dollar.
- mikekij 13y ago
  I didn't get the impression that this tax break was on personal income tax, but corporate income tax. So you would only get a corporate income tax break if your company has a profit. I was recently in the situation where I had to pay a ton of capital gains tax on an acquisition, even though my company never really had a profit, and therefore paid no corporate income tax. But I agree. Not having to pay personal income tax would be sweet. You need to go to NH or TX for that.
  - melvinram 13y ago
    It's both.

davidw 13y ago

Why not just take the same money, and reduce taxes for all businesses, rather than favoring this, that or the other sector. Italy does this a lot: incentives for biotech startups founded by Sardinian women under 35, or German speaking Italians over 50 with shoe companies, or whatever other silly thing some politician decides is a good idea. It creates incentives for people who are adept at navigating the bureaucracy and finding where the government money is directed, rather than simply getting on with business.

tolmasky 13y ago
Because tax breaks are the products politicians sell: http://youtu.be/TruCIPy79w8 http://youtu.be/TruCIPy79w8 (relevant portion about 5:28 in but it's all worth watching)