Location:
ECONOMIC DEVELOPMENT; TAXATION;

OLR Research Report


DELAWARE, MARYLAND, AND NEW YORK BUSINESS DEVELOPMENT TAX INCENTIVES

By: Rute Pinho, Principal Analyst

Heather Poole, Legislative Analyst II

John Rappa, Chief Analyst


ISSUE
Summarize Delaware's, Maryland's, and New York's business development tax incentives.

The selected states generally offer tax incentives for the same purposes, but differ with respect to the applicable taxes (corporation business or personal income tax), the incentive types (e.g., tax credits or exemptions), amounts (fixed amount or a percent of a cost), and eligibility (manufacturers in economically distressed areas building or expanding facilities).

We grouped each of the selected states' credits by the following purposes:

1. stimulating fixed capital investments,

2. creating jobs,

3. stimulating research and development,

4. promoting energy conservation,

5. stimulating growth in economically distressed areas, and,

6. leveraging private venture capital.

Attachment 1 compares the selected states' incentives based on these purposes. As the attachment shows, most of each state's incentives are geared toward supporting strategic industries or stimulating economic growth in distressed areas. Most of these incentives require businesses to create a specified number of jobs or spend a minimum amount building or expanding a facility. The Startup New York Program is unique because it offers tax incentives to businesses and their employees. It exempts businesses locating or expanding in or near a college or university from paying corporate income, sales, and property taxes and exempts employees of those businesses from paying personal income taxes.

The selected states also provide incentives to specific types of businesses that create jobs statewide. Delaware additionally provides incentives to headquarter management companies and any business that persuades its suppliers and customers to relocate to Delaware.

Delaware and Maryland provide incentives for fixed capital investments, but only in distressed areas or for strategic industries. New York's fixed capital incentives are available statewide and for strategic industries. Its statewide incentives include three different credits for brownfield cleanup costs and for property taxes.

The selected states provide tax credits for research and development expenses, although New York's are limited to strategic businesses or those doing research and development in distressed areas. Delaware provides credits to businesses manufacturing clean energy devices and Maryland provides credits to those building energy-efficient buildings. Only New York offers tax incentives for venture capital investments, but limits these to emerging technology companies.

Attachments 2-4 summarize each state's tax incentive programs, specifying the incentive type and amount, applicable taxes, and eligible businesses and activities.

Attachment 1: Selected States Business Development Tax Credits by Purpose

Purpose

Delaware

Maryland

New York

Stimulating Fixed Capital

Incentives limited to targeted businesses or businesses in targeted areas; see below

Incentives limited to businesses in targeted area;, see below

Brownfield Redevelopment Tax Credit

Environmental Remediation Insurance Credit

Remediated Brownfield Credit for Property Taxes

Investment Tax Credit

Creating Jobs

New Economy Jobs Program

Headquarters Management Corporation Tax Credit

Business Finder's Fee Tax Credit

Businesses That Create New Jobs Tax Credit

Job Creation Tax Credit

Employment Incentive Tax Credit

Employment Incentives Tax Credit for the Financial Services Industry

Empire State Jobs Retention Program Credit

Qualified Emerging Technology Company Employment Credit

Qualified Emerging Technology Company Facilities, Operations, and Training Credit

Stimulating Research and Development

R & D Tax Credits

R & D Tax Credits

Research and development tax credits are included in certain targeted industry and targeted area programs; see below

Promoting Energy Conservation

Clean Energy Technology Device Manufacturers Tax Credit

None

Green Building Tax Credit

Supporting Strategic Industries

Job Creation Tax Credit

Kent County Property Tax Abatements

Newark Property Tax Exemptions

Cellulosic Ethanol Technology Research and Development Tax Credits

Biotechnology Investment Incentive Credit

Cybersecurity Investment Incentive Tax Credit

Film Production Activity Tax Credit

Wineries and Vineyard Tax Credits

Excelsior Jobs Program

Biofuel Production Credit

Commercial Production Credit

Empire State Music and Theatrical Production Tax Credit

Film Production Credit

Film Post-Production Credit

Manufacturer Property Tax Credit

Investment Tax Credit for Financial Services Industry

Qualified Emerging Technology Company* Facilities, Operations, and Training Credit

Retail Enterprises Rehabilitation Tax Credit

Beer Production Credit

Stimulating Economic Growth in Distressed Areas

Wilmington City and County Property Tax

Wilmington Head Tax Abatement

Dover Property Tax Exemptions

Sussex County Business Incentive Program

Enterprise Zone Tax Credits

Heath Enterprise Zone Tax Hiring Tax Credit

One Maryland Economic Development Tax Credit

Startup New York

Tax-Free New York Area Elimination Credit

Sales and Use Tax Credit or Refund

Economic Transformation and Facility Redevelopment Program

Leveraging Private Venture Capital

None

None

Qualified Emerging Technology Company Capital Tax Credit




Attachment 2: Delaware Business Development Tax Incentive Programs

Job Creation

Program Name

Incentive Type and Amount

Applicable Taxes

Eligible Companies and Activities

New Economy Job Program

Up to 65%, 10-year refundable credit for creating new jobs

Base credit depends on the number of jobs created and annual salaries

Additional credits for new jobs created in targeted areas (10%) or in a remediated brownfield (5%)

Withholding

Any business meeting job creation criteria

Headquarters Management Corporation Credit

Five-year, $400 per new employee, up to 50% of the tax in excess of the minimum $5,000 tax

Headquarters Management Corporation

Headquarter management companies with at least five employees

Business Finder's Fee Tax Credit

Three-year, $500 per job tax credit

Corporation Business

Credit is available to (1) any Delaware business persuading a supplier, customer, or other business to relocate to the state and (2) the relocating business

Research and Development

Program Name

Incentive Type and Amount

Applicable Taxes

Eligible Companies and Activities

Research and Development Tax Credit Program

10% credit for increase in R&D spending over prior year (for multistate businesses, 50% of R&D spending apportioned to Delaware), up to 50% of annual tax liability

Above amounts increase to 20% and 100%, respectively, for small businesses (annual gross revenues under $20 million)

$5 million annual program cap

Corporation Business

Any business whose R&D expenses exceed prior year's R&D expenses

Energy and Environmental Protection

Program Name

Incentive Type and Amount

Applicable Taxes

Eligible Companies and Activities

Clean Energy Technology Device Manufacturers' Tax Credit

Tax credit based on number of jobs created and amount invested in eligible facility:

for businesses creating jobs and investing in new facilities, $750 per job plus $750 for each $100,000 invested

for businesses investing at least $1 million in facility without meeting job criteria, 75% of the above credit amount

Corporation Business

Manufacturers:

operating facilities making fuel cells or solar power, wind power, or geothermal devices and

meeting job creation or investment criteria

Attachment 2 (Cont.)

Targeted Industry

Program Name

Incentive Type and Amount

Applicable Taxes

Eligible Companies and Activities

New Business Facility Corporation Income Tax Credit

Tax credit for creating jobs and investing in eligible facility:

for businesses hiring five to 49 new employees and investing at least $200,000, credit equals $500 per new employee plus $500 per each $100,000 invested

for businesses hiring 50 or more new employees and investing at least $750,000, credit equals $500 per new employee plus $500 per each $100,000 invested

Total per business credit capped at 50% tax liability

Corporation Business

Personal Income

Gross Receipts

Public Utility

Businesses in 10 specified sectors that:

create at least five jobs

invest at least $200,000 in facility

meet other criteria

New Industrial, Manufacturing, Warehousing, or Commercial Construction—City of Newark

Property tax exemptions against the increase in the assessed value of newly constructed or improved property depending on the use

10-year exemption starting at 100% in first year and decreasing by 10% in 999each subsequent year for newly constructed industrial, manufacturing, or warehousing facilities

Partial exemptions for newly constructed or improved commercial property

Property

Businesses constructing or improving property for specified eligible uses

Kent County Property Tax Abatement for Industries

10-year abatement starting at 100% in the first year and decreasing by 10% in each of the subsequent years

Property

Manufacturers, wholesalers, banks, insurance company home offices and operating units, or any combination of these businesses that:

invests at least $500,000 constructing or expanding a facility and

hires at least four new permanent full-time employees

Any business or industry that:

Invests at least $1 million constructing or expanding a facility and

Hiries at least 12 new permanent full-time employees

Attachment 2 (Cont.)

Targeted Areas

Program Name

Incentive Type and Amount

Applicable Taxes

Eligible Companies and Activities

New Business Facility Corporation Income Tax Credit in Targeted Areas

Tax credits:

$750 for qualified facilities, including commercial and retail, in targeted areas, including Wilmington and three specified counties and

$900 for such facilities on brownfields in these areas

Corporation Business

See statewide New Business Facility Corporation Income Tax Credit program above

Real Property Tax Exemption Program—City of Wilmington

Five- or 10-year property tax abatements

Property

Commercial property owners:

Five-year, 100% abatement for new construction and qualified improvements to existing property

Additional five-year abatement for improvements made to property in targeted areas, starting at 80% and reduced by 20% in each subsequent year

Residential property owners:

Five-year, 100% abatement for new construction or qualified improvements in :

designated “at risk” or “deteriorating areas”

central business district

10-year abatement on the increase in the tax assessment resulting from rehabilitating vacant property:

85% for rental and

100% for owner-occupied homes

Real Property Tax Exemption Program—City of Wilmington

Five or 10-year property tax abatement

Property

Commercial businesses

constructing new buildings in historic district (five-year abatement)

renovating designated historic property or property located anywhere in the historic district (10-year abatement for developers)

Head Tax—City of Wilmington

Five-year tax abatement

Municipal Head ($15 per month per employee over five employees)

Any business that:

adds or transfers at least 50 new jobs to city or

increases payroll subject to city's earned income tax by over $3 million

Attachment 2 (Cont.)

Targeted Areas

Program Name

Incentive Type and Amount

Applicable Taxes

Eligible Companies and Activities

New Construction and Renovations—New Castle County

10-year, sliding scale county property tax exemption based on the increase in the assessed value of improved property

County and school district property taxes levied in Wilmington

Wilmington commercial and industrial businesses that:

construct or renovate facilities and

apply for exemption within 30 days after receiving notice of the assessment increase

Sussex County Business Incentive Program

Maximum $800 per job incentive package consisting of:

10-year, sliding scale property tax exemptions and

permit fee reductions

Property

New or expanding businesses creating at least 10 new jobs and making capital investments

Attachment 3: Maryland Business Development Tax Incentive Programs

Job Creation

Program Name

Incentive Type and Amount

Applicable Taxes

Eligible Companies and Activities

Businesses that Create New Jobs Credit

Property tax credit starts at 52% in the first and second tax years and decreases to 0% in the 7th year

Business tax credits are calculated as a percentage of the local property tax liability on the new or expanded portion of the facility

Enhanced credit available for qualifying large projects

Corporate Income

Personal Income

Insurance premiums

Property

Maryland businesses creating at least 25 new jobs (10 in smaller counties) and establishing or expanding qualifying business facilities in the state

Business must have been granted a local property tax credit for creating the new jobs to qualify for the credit

Job Creation Tax Credit

Credit amount depends on business' location:

in a revitalization area: $1,500 per new employee or 5% of wages paid to those employees

in other areas: $1,000 per new employee or 2.5% of wages paid to those employees

Total credits earned by one company capped at $1 million per year

Corporate income

Personal income

Insurance premiums

Public service company franchise

Businesses creating at least 60 new qualified jobs, 30 high-paying qualified jobs, or 25 qualified jobs in a designated area

Research and Development

Program Name

Incentive Type and Amount

Applicable Taxes

Eligible Companies and Activities

R&D Tax Credits

Basic credit: 3% of the lesser of qualified R&D expenses or a specified base amount

Growth R&D credit: 10% of qualified R&D expenses that exceed a specified base amount

Total credits for all businesses capped at $9 million a year

Corporate income

Personal income

Qualifying businesses investing in R&D in Maryland

Attachment 3 (Cont.)

Targeted Industry

Program Name

Incentive Type and Amount

Applicable Taxes

Eligible Companies and Activities

Biotechnology Investment Incentive Credit

50% of an eligible investment, up to $250,000

Corporate Income

Personal Income

Qualified investors contributing at least $25,000 in cash or cash-equivalent to a qualified Maryland biotechnology company

Cellulosic Ethanol Technology Research And Development Tax Credit

10% of qualified expenses paid or incurred during the tax year

Corporate income

Personal income

Businesses incurring qualified R&D expenses for cellulosic ethanol technology

Cybersecurity Investment Incentive Credit

33% of the investment, up to $250,000

Corporate income

Personal income

Businesses investing at least $25,000 in a qualified cybersecurity company

Film Production Activity Tax Credit

25% of qualifying expenditures (27% for a television series)

Aggregate credits capped at $7.5 million

Corporate income

Personal income

Film production entities incurring at least $500,000 in costs in the state in connection with a film production activity

Wineries And Vineyards Tax Credit

Up to 25% of the qualified capital expenses; aggregate credits capped at $500,000 per year

Corporate income

Personal income

Businesses establishing or making capital improvements to wineries or vineyards

Enterprise Zone Tax Credits

$1,000 for each qualified new employee ($1,500 in focus areas)

Three-year credit for economically disadvantaged employees ranging from $1,000 to $3,000 ($1,500 to $4,500 in focus areas)

10-year property tax credit: 80% over the first five years and decreasing by 10% in each subsequent year

Corporate income

Personal income

Property

Businesses locating in targeted development areas and hiring qualified new employees

Larger credit available to businesses hiring economically disadvantaged employees

Health Enterprise Zone Hiring Tax Credit

$5,000 per employee per year, up to $10,000 refundable credit

Corporate income

Personal income

Employers locating in designated zones and hiring one or more qualified employees over a 24-month period

One Maryland Economic Development Tax Credit

Tax credits for starting or expanding in economically distressed counties:

Start-up credit: lesser of 100% of eligible start-up costs (up to $500,000) or $10,000 for each qualified employee

Project costs tax credit: lesser of 100% of eligible project development costs (up to $5 million) or the project's state income tax liability for the tax year

Corporate income

Personal income

Insurance premiums

Businesses creating or expanding facilities used for manufacturing, transportation, filmmaking, biotechnology, central office administration, business services, or other specified purposes.

Attachment 4: New York Business Development Tax Incentive Programs

Fixed Capital Investments

Program Name

Incentive Type and Amount

Applicable Taxes

Eligible Companies and Activities

Brownfield Redevelopment Tax Credit

Credit based on clean up and redevelopment costs, level remediation, site location, and applicable tax

Agricultural co-operative corporation franchise tax

Business corporation franchise tax

Insurance corporation franchise tax

Personal Income Tax

Transportation and Transmission Company Tax on Capital Stock

Transportation and Transmission Company Franchise Tax on Interstate Gross Earnings

Businesses accepted into Environmental Conservation Department's brownfield cleanup program that execute a cleanup agreement and receive a certificate of compliance

Investment Tax Credit (ITC)

Credit varies based on tax, amount invested in facility, and its use:

Business corporation franchise tax:

9% R&D facilities

5% for other types of facilities for investments up to $350 million, 4% for investments over that amount

Personal Income Tax:

7% R&D facilities

4% for other qualifying property

Credit is refundable for new businesses

Business corporation franchise tax

Personal Income Tax

Businesses investing in facilities and tangible personal property used for these purpose:

Manufacturing

Processing

Assembling

Agriculture

Refining

Mining

Extracting

Farming

Horticulture

Viticulture

Commercial fishing

Film production

Waste treatment and pollution control

R&D

Attachment 4 (Cont.)

Fixed Capital Investments

Program Name

Incentive Type and Amount

Applicable Taxes

Eligible Companies and Activities

Investment Tax Credit for the Financial Services Industry

Same as ITC

Business Corporation Franchise Tax

Insurance corporation franchise tax

Security brokers and dealers investing in facilities or equipment used for financial security activity

Remediated Brownfield Credit for Property Taxes

Amount is determined by a calculation that takes into account property taxes paid, number of employees, and the benefit period

Credit is limited to the product of $10,000 and the average number of employees employed by the developer

Agricultural co-operative corporation franchise tax

Business corporation franchise tax

Insurance corporation franchise tax

Personal Income Tax

Transportation and Transmission Company Tax on Capital Stock

Transportation and Transmission Company Franchise Tax on Interstate Gross Earnings

A developer who employs 25 or more people and either:

executed a brownfield cleanup agreement and has a certificate of compliance (COC) or

purchased a property for which a COC has been issued, as long as the purchase occurred within 7 years after issuance of the COC

Retail Enterprises Rehabilitation Tax Credit

Credit equals 5% of qualified expenses up to $350 million, and 4% on the excess of $350 million

Business Corporation Franchise Tax Credit

Personal Income Tax

Registered sales tax vendor that engages at least 50% in retail, with qualified rehabilitation expenses

Attachment 4 (Cont.)

Job Creation

Program Name

Incentive Type and Amount

Applicable Taxes

Eligible Companies and Activities

Employment Incentive Tax Credit

Credit equal to 1.5% to 3% of investment in eligible facility based on the percentage increase in employees

Refundable for new businesses

Business Corporation Franchise Tax

Personal Income Tax

Businesses investing in ITC-eligible facilities that increase employment over prior year

Employment Incentive Tax Credit for the Financial Services Industry

Credit equal to 1.5% to 3% of investment in eligible facility based on the percentage increase in employees

Refundable for new businesses

Business Corporation Franchise Tax

Insurance Corporation Franchise Tax

Security brokers and dealers investing in facilities or equipment used for financial security activity that increase employment over prior year

Empire State Jobs Retention Program Credit

Credit equal to 6.85% of gross wages paid to employees in business affected by event triggering gubernatorially declared emergency

Business Corporation Franchise Tax

Insurance Corporation Franchise Tax

Personal Income Tax

Business in strategic industry:

located in a county in which an emergency has been declared by the governor,

demonstrating substantial physical damage and economic harm resulting from such event, and

employing at least 100 people in such a county and retaining or exceeding that number of jobs

Strategic industries:

Manufacturing

High technology, biotechnology, and clean technology

Financial services data centers or customer back office operations

Distribution

Software development

Back office

Agriculture

Qualified Emerging Technology Company* (QETC) Employment Credit

Credit equals the average number of full-time employees, minus base year employment, multiplied by $1,000

Business corporation franchise tax

Personal income tax

QETCs that increase their average number of full-time employees in NYS

Attachment 4 (Cont.)

Job Creation

Program Name

Incentive Type and Amount

Applicable Taxes

Eligible Companies and Activities

QETC Facilities, Operations, and Training Credit

Credit equals:

18% of research and development property costs incurred in connection with emerging technology activities,

9% of qualified research expenses incurred during the tax year, and

100% of qualified high-technology training expenses (up to $4,000 per employee per year)

Business corporation franchise tax

Personal income tax

QETCs that have (1) 100 or fewer full-time employees, with at least 75% of them employed in NYS, (2) a ratio of research and development funds to net sales that exceeds 6%, and (3) gross revenues that do not exceed $20 million

Energy and Environmental Protection

Program Name

Incentive Type and Amount

Applicable Taxes

Eligible Companies and Activities

Environmental Remediation Insurance Credit

The credit equal to lesser of:

50% of the eligible premiums paid by the taxpayer on or after brownfield cleanup agreement execution date or

$30,000

Agricultural Co-Operative Corporation Franchise Tax

Business Corporation Franchise Tax

Insurance Corporation Franchise Tax

Personal Income Tax

Transportation and Transmission Company Tax on Capital Stock

Transportation and Transmission Company Franchise Tax on Interstate Gross Earnings

Businesses that execute a brownfield cleanup agreement and have a certificate of compliance for the site on which certified insurance premiums were paid

Attachment 4 (Cont.)

Energy and Environmental Protection

Program Name

Incentive Type and Amount

Applicable Taxes

Eligible Companies and Activities

Green Building Credit

Credit is equal to the sum of the cost of the eligible building components

Agricultural Co-Operative Corporation Franchise Tax

Business Corporation Franchise Tax

Insurance Corporation Franchise Tax

Personal Income Tax

Transportation and Transmission Company Tax on Capital Stock

Transportation and Transmission Company Franchise Tax on Interstate Gross Earnings

Businesses that have expenses and purchases relating to the construction and maintenance of buildings that meet energy efficiency standards

Targeted Industry

Program Name

Incentive Type and Amount

Applicable Taxes

Eligible Companies and Activities

Excelsior Jobs Program

Tax credits packaged with financial assistance:

Jobs Credit: 6.85% of new job wages

Investment Credit: 2% of qualified investments

Research and Development: 50% of federal credit, up to 3% of New York R&D expenditures

Property Tax Credit: determined on case-by-case basis

Business Franchise Corporation Tax

Personal Income Tax

Insurance Corporation Franchise Tax

Businesses in the following targeted industries that create jobs or make significant capital investments:

Biotechnology

Pharmaceuticals

High Technology

Clean Technology

Green Technology

Financial Services

Agriculture

Manufacturing

Attachment 4 (Cont.)

Targeted Industry

Program Name

Incentive Type and Amount

Applicable Taxes

Eligible Companies and Activities

Biofuel Production Credit

Credit equal to $0.15 per gallon of biofuel produced after the production of the first 40,000 gallons per year.

Credit limited to $2.5 million per entity per year up to four years

Business Corporation Franchise Tax

Personal Income Tax

Businesses that produce biofuel at an in-state biofuel plant

Commercial Production Credit

For companies that:

increase their commercial production in NY, the credit is 20% of the incremental growth in costs from the previous year, up to $300,000

produce commercials downstate, the credit equals 5% of production costs above $500,000

produce commercials upstate, the credit equals 5% of production costs above $200,000

Business Corporation Franchise Tax

Personal Income Tax

Qualified companies producing qualified commercials in New York

Empire State Music and Theatrical Production Tax Credit

Credit equals 25% of eligible production and transportation expenditures

Business Corporation Franchise Tax

Personal income tax

Approved production companies that conduct technical rehearsals and other pre-tour activities in upstate NY

Film Production Tax Credit

Up to 30% of qualified production costs plus 10% of qualified labor expenses incurred in upstate NY counties

Business Corporation Franchise Tax

Personal Income Tax

Companies that film a certain portion of their film or TV show in New York (requirements vary based on budget and type of company)

Film Post-Production Tax Credit

Up to 30% of qualified post-production costs plus an 5% of post-production costs incurred in upstate NY

Business Corporation Franchise Tax

Personal Income Tax

Companies that incur post- production costs at a qualified post-production facility in NY

Manufacturer Property Tax Credit

20% credit for property taxes paid on qualified manufacturing facilities

Business Corporation Franchise Tax

Personal Income Tax

Businesses paying property taxes on manufacturing facilities

Beer Production Credit

$0.14 per gallon for the first 500,000 gallons produced in NYS, and $0.045 per gallon after 500,000, (up to 15,000,000 additional gallons)

Business Corporation Franchise Tax

Personal Income Tax

Registered distributors that produce 60,000,000 or fewer gallons of beer in NYS the year the credit is claimed

Attachment 4 (Cont.)

Targeted Area

Program Name

Incentive Type and Amount

Applicable Taxes

Eligible Companies and Activities

Start Up New York

Full tax exemptions for businesses and their employees

Business Corporation Franchise Tax

Sales and Use Tax

Property Tax

Personal Income Tax

Businesses:

forming, expanding, or relocating to designated tax-free areas or on or near a college or university;

using a college's or university's resources

creating jobs or providing other community or economic benefits

Tax-Free New York Area Elimination Credit

Credit based on share of business activity in designated tax-free area

Business Corporation Franchise Tax

Personal Income Tax

Any type of business operating in a tax-free area

Sales and Use Tax Credit or Refund

100% credit

Sales and Use Tax

Any type of business operating in a tax-free area

Economic Transformation and Facility Redevelopment Program

Credit amounts vary by activity:

6.85% of new job's wages

10% of qualified investments in a closed state facility or 6% outside facility in designated area

50% training credit, up to $4,000 per employee hired after losing job at closed state facility

50% property tax credit that decreases by 10% per year for businesses located in closed state facility and 25%, with a five-year, 5% phase-out for businesses outside facility but still in designated area

Business Corporation Franchise Tax

Personal Income

Insurance Corporation Franchise

Qualified new businesses in designated areas that create at least five new jobs

Qualified businesses include:

High Technology

Clean Technology

Manufacturing

Other businesses identified in regional strategic plans

Venture Capital Investments

Program Name

Incentive Type and Amount

Applicable Taxes

Eligible Companies and Activities

QETC Capital Tax Credit

Credit equals 10% of qualified investments in certified QETCs with a useful life of four years, and 20% of those with a useful life of nine years

Business Corporation Franchise Tax

Personal income tax

Businesses that invest in QETCs

* QETCs are businesses with total annual product sales of $10 million or less that provide products or services in certain technology fields

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