Application for the COVID-19 Capital Costs Tax Credit Program is Open
Berdon State and Local Tax Team
11.10.22 | Client Alert
On April 28, 2022, New York State enacted the 2022-2023 Budget Bill, which included the COVID-19 Capital Costs Tax Credit Program (the “Program”). The Program provides a refundable tax credit (“Credit”) for small businesses that incurred qualifying COVID-19-related capital costs. A business entity is a sole proprietor, partnership, limited liability company, or a corporation (C-Corp or S-Corp) with its own federal employer identification number (FEIN) or, in the case of a sole proprietor, a social security number. For additional details on qualifying capital costs, please see Berdon Client Alert April 28, 2022.
To qualify for the Credit, business entities must:
- be independently owned and operated and have 100 or fewer full-time equivalent employees and annual gross receipts of $2.5 million or fewer in tax year 2021,
- operate at a location within New York State,
- be in substantial compliance with New York State health laws and directives and not owe past-due state taxes or local property taxes, and have incurred qualified COVID-19 expenses of at least $2,000 between January 1, 2021, and December 31, 2022, and paid no later than March 31, 2023. The credit amount is 50% of the applicant’s qualifying costs up to $50,000 in expenses (the maximum credit allowed is $25,000). Businesses that received federal assistance from the Payroll Protection Program (PPP), the Economic Injury Disaster Loan Program (EIDL), and the Restaurant Revitalization Fund (RRF) are eligible to participate in the Program.
In addition, businesses that received assistance from the New York Forward Loan Program or the New York COVID-19 Pandemic Small Business Recovery Grant Program are eligible to participate. However, businesses that participated in the COVID-19 Pandemic Small Business Recovery Grant Program will need to attest that no qualified COVID-19 capital costs incurred between January 1, 2021, and March 31, 2021, were included in this Program if such costs were previously paid for with proceeds from the New York State COVID-19 Small Business Recovery Grant Program.
Application for the Program is now open. Qualified businesses that pass the eligibility test will submit a completed application to the Empire State Development Agency (“ESD”), including documentation to show proof of qualified expenses. If approved, businesses will be issued a tax credit certificate. Certificates issued in 2022 and 2023 should be filed with the 2022 and 2023 New York tax returns, respectively.
The ESD will issue a maximum of $250 million of Credits, and applications will be accepted until March 31, 2023. Credits will be awarded on a first-come, first-served basis until program funds are depleted. We, therefore, encourage businesses to apply to the Program as soon as possible.