Business advocates and economic development officials said a sweeping tax credits deferral included in the recently adopted state budget sends a message to businesses that New York can”™t be trusted in its dealings with the private sector.
A last-ditch lobbying effort in the state Senate by business groups failed to block a revenue-raising provision that puts a three-year deferral on cumulative business tax credits that exceed $2 million. Business taxpayers will be allowed to use up to $2 million in credits in the 2010-2012 tax years, while credits over that amount will be deferred until 2013 and later.
The state Legislature expects the deferrals will yield $200 million in state revenue this year and $1 billion in both 2011 and 2012. The state will pay no interest on the value of the deferred credits.
The deferrals apply to more than 30 incentive programs offered to businesses and include the investment tax credits, Empire Zone credits, Power for Jobs credits, brownfield credits and affordable-housing credits regularly tapped by developers and other companies in Westchester and the Hudson Valley region. The state”™s film production credit is the only major business incentive program not affected, according to budget analysts at the Business Council of New York State.
“It amounts to over a $2 billion interest-free loan by businesses to the state,” said Brian T. McMahon, executive director at the nonprofit New York State Economic Development Council in Albany. “That”™s the bottom line.”
McMahon in late July rallied council members to oppose the measure”™s passage in the state Senate. Though their effort had a good response from senators, he said, “I think the Legislature was more interested in completing the budget than completing a good one.”
McMahon said some companies that relied on the tax credits in their business planning could be forced to lay off workers. “It”™s going to impact many businesses very dramatically, but the greater impact is what it tells the outside business world about New York”™s willingness and ability to be a trusted partner in economic development. It sends out a horrible message to the global business community that you can”™t trust New York,” he said.
The deferral also harms efforts by economic development officials across the state, McMahon said. “This provision is great for business in New Jersey and Pennsylvania, not so great for business in New York,” he said. “This will have a very dramatic impact on our ability to recruit businesses to invest and employ workers in New York state.”
Ronald Hicks, president and CEO of the Rockland Economic Development Corp., said the deferral will not directly affect companies served by his agency, though its message “resonates” throughout the business community. “The message is that New York state can”™t keep a promise,” he said. “They can”™t balance their books. They have no idea how to manage the finances of this state.”
At The Business Council of Westchester, Paul Vitale, vice president for government and community relations, called the tax credits deferral “one of the most onerous things” in the late-adopted budget. “It”™s really unconscionable,” he said.
“The lack of any meaningful economic development or job creation incentives was the most telling in this budget,” Vitale said.
