Are R&D Tax Credits Available in New York?

Yes. The state of New York provides the Excelsior Jobs Program which offers several refundable credits including the Research and Development (R&D) Tax Credit. Below is a summary of New York's Excelsior Research and Development Tax Credit:

  • Taxpayers can claim up to 50% of their federal R&D credit that relate to R&D expenditures in New York State.
  • The credit is capped at 6% of qualified research expenditures conducted in the state or 8% for qualified green projects
  • The definition of qualified research expenditures is the same as the federal section 41 definition.
  • The credit can only be claimed if the business has received a certificate of the tax credit from the Empire State Development (ESD).
  • Excess R&D Tax Credit is refundable and credit may only be claimed by eligible businesses over a 10-year period. Eligibility:
    • Scientific Research and Development firms create at least 5 net new jobs.
    • Software Development firms creating at least 5 net new jobs.
    • Financial services (customer service) back office operations creating at least 25 net new jobs.
    • Agriculture firms creating at least 5 net new jobs.
    • Manufacturing firms creating at least 5 net new jobs.
    • Back office firms creating at least 25 net new jobs.
    • Distribution firms create at least 50 net new jobs.
    • Music Production firms creating at least 5 net new jobs.
    • Entertainment Companies creating at least 100 net new jobs.
    • Other firms creating at least 150 net new jobs and investing at least $3 million.
    • Firms in strategic industries, other than Music Production and Entertainment, make significant capital investments that have at least 25 employees; manufacturing firms that retain at least 5 employees are also eligible to apply for participation in the Program.
  • Credit could be claimed on a timely filed return only. Consolidated Funding Application must be submitted to the appropriate local ESD (Empire State Development) regional office and the R&D Credit can be claimed upon issuance of the approval certificate.
  • To receive a certificate of tax credit for subsequent taxable years, the participant must submit a performance report demonstrating that it continues to satisfy the applicable eligibility requirements within 30 days of the end of its taxable year.
  • Taxpayers who are not eligible, or choose not to participate in the Excelsior Jobs Program, may be eligible to participate in the Life Sciences Research and Development Tax Credit Program.

What are the Potential Benefits of this Tax Credit?

There are several benefits to realizing the R&D tax credit. These benefits can include the following:

  • Receive up to 12-16 cents of federal and state R&D tax credits for every qualified dollar
  • Create a dollar-for-dollar reduction in your federal and state income tax liability
  • Increase earnings-per-share
  • Reduce your effective tax rate
  • Improve cash flow
  • Carry forward the credit up to 20 years
  • Perform look back studies to recognize unclaimed credits for open tax years (generally 3 or 4 years)
  • Utilize the federal R&D tax credit against payroll tax (applicable to certain startup companies)

New York R&D Tax Credit Case Study

A pharmaceutical company in New York had never before claimed the R&D credit. This project involved a multiyear study covering the years 2017 thru 2020.

The Company qualified for the federal R&D Tax Credit of $361,666 and an additional $42,000 of state R&D Tax Credit in New York.

FEDERAL
NEW YORK
Year
Total QREs
Credit
Total QREs
Credit
2020
$1,400,000
$141,166
$1,400,000
$42,000
2019
1,000,000
98,000
NA
NA
2018
750,000
73,500
NA
NA
2017
500,000
49,000
NA
NA
Total $3,650,000 $361,666 $1,400,000 $42,000

You can read more about this New York tax credit case study here.