As part of the 2022-23 NYS Budget NYS included a new $250 million program called the “COVID-19 Capital Costs Tax Credit Program” designed to assist small businesses who incurred costs as part their response to the COVID-19 Pandemic. Details of this program were finally made clearer on June 28, 2022.
NYS has released an FAQ (located here) and a pre-screening eligibility tool for the program (located here).
In order to be eligible for the program, a small business must have less than 100 full-time equivalents, must be “independently owned and operated” (which is largely aimed at keeping publicly traded companies from accessing relief), and have gross-receipts (as calculated on the applicable tax return) of less than $2,500,000 for the fiscal year including December 31, 2021 – which would be for nearly all pass through entities such as LLCs taxed as partnerships, S Corporations, and Schedule C sole proprietors. Additionally, the minimum amount of incurred expenditures must be $2,000. As this is in the form of a tax-credit, tax-exempt entities (non-profits) are not eligible for this program. Unlike other relief programs (such as PPP Loans and Employee Retention Tax Credits) each independent business is considered a separate entity under a separate EIN and able to apply, meaning businesses will not have to aggregate.
The credit is for a maximum of $25,000 per entity and is 50% of the expenses incurred – therefore the credit maximizes at $50,000 of incurred expenses from January 1, 2021 to December 31, 2022. General categories of expenses eligible for the credit would include:
- Supplies to disinfect or protect against COVID-19 transmission
- Costs associated with expanding, or defining space to accommodate social distancing
- HVAC equipment
- Expenses related to increased outdoor activity and outdoor space expansions
- Machinery and equipment to facilitate contactless sales
A more detailed list is available in the above linked NYS FAQ. The tax credit would be for the year issued (meaning credits issued in 2022 would be claimed in 2022, regardless of when the expense was incurred). Any prior Federal fundings (such as PPP or EIDLs) will not disqualify an applicant; however, prior NYS grants that were used for the eligible costs cannot be counted again.
The program will be administered by Empire State Development (ESD) and will be in the form of a tax credit issued by ESD that is attached to the relevant tax return(s). As a certificate from ESD is required to claim the credit the only way to unlock this benefit is via the application process. Businesses that believe they are eligible will have to undergo a 2-step application process:
1. Fill out the eligibility screening tool (above)
2. Once the full application is available (fall is the prediction from NYS) they will need to fill out the full application and provide proof of expenses. The application will be emailed to eligible participants only after meeting the criteria in the pre-screening tool.
NYS has indicated that the application must include a detail of expenses with support for any expenditures over $1,000 (such as a receipt or credit card statement) and NYS will request a sampling of additional expenses under $1,000.
The program has limited funding of the approved $250 million and credits will be issued on a first come, first serve basis. Eligible businesses should apply with the pre-screening tool as soon as possible in order to receive the application as soon as it is released and if approved via the screening tool should start gathering the documentation and proof of expenses incurred. At this time no other details have been given as to what else may be required, but businesses should have copies of the 2021 tax return available as well as that is likely to be a requested item or would include relevant information. Like many of these programs, it is possible that this is subject to change and we will keep you informed of any future changes.
Edward McWilliams, CPA
Partner
Ed is a Partner in the firm’s tax and business advisory practice focusing on providing services to middle market private companies across different industries as well as to early stage startups. Ed has over a decade of experience providing tax and business consulting services to these companies of different sizes and across different industries, bringing a broad and diverse knowledge base and strategic solutions to the many complex issues that businesses face.
Stacie Jobanputra
Senior Office Operations Coordinator
Stacie is the Lead Office Administrator and handles all inter-office communication for our Tax & Business Advisory, Internal & External Audit, and the Education Audit & Consulting teams. She has a history of exemplary performance in her previous administrative positions in various industries and continues to improve upon the firm’s operations. Stacie excels at ensuring a quality work product and delivering excellent client service and office support.