Refundable NY State Tax Credit is Windfall for Small Companies

 

Qualified emerging technology companies, or QETCs, that are located in New York state and that have products or services that are classified as “emerging technology” are eligible to receive a tax credit for tax years 2006 through 2011.

Emerging technology is broadly defined and includes new media, communications, IT, engineering, advanced materials, biotech and electronics. Even companies in AMT or companies with NOL can qualify for the New York state R&D credit as long as they have product sales under $10 million and gross revenue under $20 million. Eligible companies must have no more than 100 full-time employees, with at least 75 percent of those based in New York, and R&D spending must total more than six percent of net sales.

A QETC may claim the credit for four consecutive years. Any portion of the credit that cannot be applied to the current tax year may be applied to the next year or fully refunded up to $250,000 per year.

The credit is broken down into three components. An 18 percent R&D credit can be applied to the cost for purchase or lease of property to be used for R&D activities, such as technology facilities and equipment.

A nine percent credit can be applied to expenses associated with in-house research and the distribution of company R&D results including researcher salaries. This credit may also be applied to costs related to the patent and grant applications process.

One hundred percent of qualified high-technology training expenses can be applied with a cap of $4,000 per employee per year. With credits averaging nine percent, companies are seeing refundable credits of $150,000-$200,000 over the four-year period. With 2011 approaching, now is the time to evaluate whether your company meets the requirements to claim the credit. Only a qualified firm with a history of working with QETCs can maximize your benefit.

SourceCorp Professional Services, founded in 1983, has a dedicated team of professionals that provide both federal and state R&D tax credit calculations and consulting.