Unfortunately, New York also collects more tax revenue (per capita), requires two tax returns for New York City residents and instead of one research & development tax credit implementation like the IRS, New York has multiple credits for specific research and development activities.
With so many New York (state and city) tax credit programs, it’s easy to miss out, especially if you are a new business! New life sciences companies performing research and development in New York State need to be aware of a new New York tax credit program: New York’s Life Sciences Research and Development Tax Credit.
Here’s what new life sciences companies operating in New York need to know:
The total benefit cannot exceed $1,500,000 per taxpayer. In the case of a pass-through entity, the $500,000 limit will be applied at the entity level, not the individual partner or shareholder level. If a qualified company employs ten or more people, the amount of the credit is equal to 15% of qualified research and development expenditures (incurred within New York State) for the taxable year. If a qualified company employs less than ten people, the credit is equal to 20% of qualified research and development expenditures.
Qualified research and development expenses mirror those allowed for federal tax purposes, including wages paid, supplies consumed and rights paid for the use of computers in the conduct of qualified research. There is one exception to what is allowed for federal tax purposes; the New York State credit does not include contract research expenses, which are allowed under Internal Revenue Code Section 41(b).
The credit is available for up to three years, but it cannot be claimed for years beginning on or after January 1, 2028. New York budgeted $10,000,000 annually to the program, allocating among taxpayers based on their application date. Swift action is key to securing credit allocations.
As mentioned, there is an application process, and certification must be obtained before claiming this credit. Please do not hesitate to contact a member of Withum’s Life Sciences Group to assist with the application process as well as the R&D credit calculation and support.