September 24, 2012
Clarification of Qualifications for Qualified Emerging Technology Company (QETC) Tax Credits
By Diane Giordano, Partner, Tax & Business
On September 14, 2012, NYS issued a memorandum (TSB-M-12(9) C,(8)I, which clarifies the qualifications needed to claim Qualified Emerging Technology Company (QETC) tax credits.
The Qualified Emerging Technology Company credit program was originally introduced in NYS in 1998. The credit program made available three tax credits for companies that are qualified emerging technology companies (QETCs):
- the QETC Employment Credit;
- the QETC Facilities, Operations, and Training Credit; and
- the QETC Capital Tax Credit.
These credits are available for businesses that engage in qualifying activities, which include increasing employment, purchasing assets, spending for research and development, or providing training to their employees; or for investing in QETCs.
For purposes of these credits, a business must be classified as a “qualified emerging technology company.” Many businesses claimed these credits in the past and were not qualified to do so. In an effort to clarify those companies that may be eligible, this memorandum was issued to clarify terms.
This memorandum clarifies that a business must be engaged in creating or developing emerging technologies as defined by NYS law. For purposes of this definition, the emerging technology must meet a primary products or services test in order to claim the credits.
NYS law (the PAL) defines a qualified emerging technology company as “a company located in New York State:
- whose primary products or services are classified as emerging technologies and whose total
annual product sales are $10 million or less [the primary products or services test]; or
- a company which has research and development activities in New York State (subject to certain ratio to sales limitations.)
- the business must have 100 or fewer full-time employees, of which at least 75% are employed in New York State;
- the business and all its affiliated companies and related members must have gross revenues of $20 million or less for the immediately preceding tax year; and
- Alternative ratios are available for companies whose only activities are R&D activities with no sales.
The above summarizes the Memorandum. Should you need additional information related to the credit program see: http://www.tax.ny.gov/forms/form_number_order_dtf_ifta.htm#qetc, or contact you Marcum State and Local Tax Advisor.