For empire zone credits, does a bank count employees in all empire zones, or only in the zones where it is certified?

Plain-English summary

NBT Bancorp Inc.'s banking subsidiary (NBT Bank, N.A., an Article 32 taxpayer) operated across New York, some locations in empire zones, and was getting certified in those zones. It asked, for the empire zone credits under sections 14, 15, 16 and 1456(e), (o), (p), whether "employees in an empire zone" means employees in all empire zones or only in zones where it is certified.

The Department drew a line between eligibility and credit amount:

• QEZE eligibility (section 14 employment test). Count employees in all empire zones, regardless of certification in any particular zone.
• QEZE real-property-tax credit and tax-reduction credit (employment increase factor, sections 15(d) and 16(d), applied through 1456(o) and (p)). Count only employees in the empire zones in which the bank is certified under Article 18-B.
• Empire zone wage tax credit (section 1456(e)). Compute a separate credit for each empire zone in which the bank is certified; "the zone" means the specific certified zone for which the credit is being computed.

What this means for you

Eligibility and credit amount use different employee counts

When testing whether you are a QEZE (the section 14 employment test), count employees across all empire zones. But when you compute the dollar amount of the QEZE credits, count only employees in the zones where you are certified.

Wage credits are computed zone-by-zone

The empire zone wage tax credit is figured separately for each certified zone -- you cannot pool employees across zones to inflate a single credit.

Certification timing affects your credits

Because credit amounts depend on certified-zone employment, getting (and timing) Article 18-B certification in each location directly affects how much credit you can claim.

Common questions

Q: For QEZE eligibility, which employees count?
A: All employees in all empire zones, whether or not the business is certified in a particular zone.

Q: For the QEZE credit amounts, which employees count?
A: Only employees in the empire zones where the business is certified under Article 18-B.

Q: Is the empire zone wage tax credit pooled across zones?
A: No. A separate credit is computed for each certified empire zone.

Citations and references

Statutes, regulations, and authorities:
- Tax Law section 14 (qualified empire zone enterprise; employment test; employment number)
- Tax Law section 15 (QEZE credit for real property taxes; employment increase factor)
- Tax Law section 16 (QEZE tax reduction credit)
- Tax Law section 1456(e) (Article 32 empire zone wage tax credit)
- Tax Law section 1456(o) and (p) (Article 32 QEZE credits)
- General Municipal Law article 18-B (empire zone certification)
- NBT Bancorp Inc., TSB-A-03(8)C (Sept. 2, 2003)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/corporation_ao_2003.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/corporation/a03_8c.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Tax Policy Analysis
Technical Services Division

TSB-A-03(8)C
Corporation Tax
September 2, 2003

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. C030514A

On May 14, 2003, a Petition for Advisory Opinion was received from NBT Bancorp Inc.,
52 South Broad Street, Norwich, New York 13815.
The issue raised by Petitioner, NBT Bancorp Inc., is whether for purposes of the empire zone
tax credit provisions under sections 14, 15, 16 and 1456(e), (o) and (p) of the Tax Law, employees
in an empire zone refers to all employees of a taxpayer within any and all empire zones in which the
taxpayer has operations.
Petitioner submits the following facts as the basis for this Advisory Opinion.
Petitioner’s subsidiary, NBT Bank, N.A., is subject to franchise tax under Article 32 of the
Tax Law, and operates in locations throughout New York State, some in empire zones. NBT Bank,
N.A. is currently working to become certified in all empire zone locations.
Applicable Law
Section 14 of the Tax Law provides, in part:
(a) Qualified empire zone enterprise. A business enterprise which is certified
under article eighteen-B of the general municipal law prior to July first, two thousand
five shall be a “qualified empire zone enterprise”:
(1) for purposes of articles ... thirty-two ... of this chapter, for each of the
taxable years within the “business tax benefit period,” which period shall consist of
(A) in the case of a business enterprise with a test date occurring on or before
December thirty-first, two thousand one, the first fifteen taxable years beginning on
or after January first, two thousand one, and (B) in the case of a business enterprise
with a test date occurring on or after January first, two thousand two, the fifteen
taxable years next following the business enterprise’s test year, but only with respect
to each of such fifteen years for which the employment test is met . . .
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(b) Employment test. (1) General. The employment test shall be met with
respect to a taxable year if the business enterprise’s employment number in empire
zones for such taxable year equals or exceeds its employment number in such zones
for the base period, and its employment number in the state outside of such zones for

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such taxable year equals or exceeds its employment number in the state outside of
such zones for the base period. If the base period is zero years and the enterprise has
an employment number in such zone of greater than zero with respect to a taxable
year, then the employment test will be met only if the enterprise qualifies as a new
business under subdivision (j) of this section.
(2) Change in zone boundaries or newly designated zones. Provided,
however, where there has been one or more revisions of the boundaries of an empire
zone that resulted in the inclusion of the business enterprise within such zone, the
employment test shall be determined with respect to a taxable year as if the
boundaries of the revised zone on the last day of the taxable year existed during the
base period and test year and as if the enterprise had been located in the revised zone
during its base period and test year. In addition, where an area has been newly
designated as an empire zone, the employment test shall be determined with respect
to a taxable year as if such newly designated zone existed during the base period and
test year and as if the enterprise had been located in the newly designated zone
during its base period and test year.
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(g) Employment number. The term “employment number” shall mean the
average number of individuals, excluding general executive officers (in the case of
a corporation), employed full-time by the enterprise for at least one-half of the
taxable year. Such number shall be computed by determining the number of such
individuals employed by the taxpayer on the thirty-first day of March, the thirtieth
day of June, the thirtieth day of September and the thirty-first day of December
during the applicable taxable year, adding together the number of such individuals
determined to be so employed on each of such dates and dividing the sum so
obtained by the number of such dates occurring within such applicable taxable year.
Such number shall not include individuals employed within the immediately
preceding sixty months by a related person to the QEZE, as such term “related
person” is defined in subparagraph (c) of paragraph three of subsection (b) of section
four hundred sixty-five of the internal revenue code. . . .
Section 15 of the Tax Law provides for a QEZE credit for real property taxes as follows:
(a) Allowance of credit. A taxpayer which is a ... (QEZE), ... or a member
of a partnership which is a QEZE, and which is subject to tax under article ... thirty­
two ... of this chapter, shall be allowed a credit against such tax, pursuant to the
provisions referenced in subdivision (f) of this section, for eligible real property
taxes.

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(b) Amount of credit. The amount of the credit shall be the product (or pro
rata share of the product, in the case of a member of a partnership) of (i) the benefit
period factor, (ii) the employment increase factor and (iii) the eligible real property
taxes paid or incurred by the QEZE during the taxable year. However, the amount
of the credit may not exceed the credit limitation set forth in subdivision (f) of this
section.
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(d) Employment increase factor. The employment increase factor is the
amount, not to exceed 1.0, which is the greater of:
(1) the excess of the QEZE’s employment number in the empire zones with
respect to which the QEZE is certified pursuant to article eighteen-B of the general
municipal law for the taxable year, over the QEZE’s test year employment number
in such zones, divided by such test year employment number in such zones; or
(2) the excess of the QEZE’s employment number in such zones for the
taxable year over the QEZE’s test year employment number in such zones, divided
by 100.
(3) For purposes of paragraph one of this subdivision, where there is an
excess as described in such paragraph, and where the test year employment number
is zero, then the employment increase factor shall be 1.0.
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(h) Definitions and cross-references. For definitions of terms used in this
section see section fourteen of this article. For application of the credit provided for
in this section, see the following provisions of this chapter:
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(2) Article 32: Section 1456: subsection (o) ....
Section 16 of the Tax Law provides for a QEZE tax reduction credit as follows:
(a) Allowance of credit. A taxpayer which is a ... (QEZE), ... or a member
of a partnership which is a QEZE, and which is subject to tax under article ... thirty­
two ... of this chapter, shall be allowed a credit against such tax, pursuant to the
provisions referenced in subdivision (g) of this section, to be computed as hereinafter
provided.

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(b) Amount of credit. The amount of the credit shall be the product of (i) the
benefit period factor, (ii) the employment increase factor, (iii) the zone allocation
factor and (iv) the tax factor.
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(d) Employment increase factor. The employment increase factor for the
taxable year shall be as prescribed in subdivision (d) of section fifteen of this article.
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(g) Definitions and cross-references. For definitions of terms used in this
section see sections fourteen and fifteen of this article. For application of the credit
provided for in this section, see the following provisions of this chapter:
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(1) Article 32: Section 1456: subsection (p) ....
Section 1456(e) of the Tax Law provides for an empire zone wage tax credit as follows:
(1) A taxpayer shall be allowed a credit, to be computed as hereinafter
provided, against the tax imposed by this article where the taxpayer has been
certified pursuant to article eighteen-B of the general municipal law. The amount
of such credit shall be as prescribed in paragraph four hereof.
(2) For purposes of this subsection, the following terms shall have the
following meanings: (A) “Empire zone wages” means wages paid by the taxpayer
for full-time employment, other than to general executive officers, during the taxable
year in an area designated or previously designated as an empire zone or zone
equivalent area pursuant to article eighteen-B of the general municipal law where
such employment is in a job created in the area (i) during the period of its
designation as an empire zone, (ii) within four years of the expiration of such
designation, or (iii) during the ten year period immediately following the date of
designation as a zone equivalent area, provided, however, that if the taxpayer’s
certification under article eighteen-B of the general municipal law is revoked with
respect to an empire zone or zone equivalent area, any wages paid by the taxpayer,
on or after the effective date of such decertification, for employment in such zone
shall not constitute empire zone wages.
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(3) The credit provided for herein shall be allowed only where the average
number of individuals, excluding general executive officers, employed full-time by
the taxpayer in (i) the state and (ii) the empire zone or area previously constituting
such zone or zone equivalent area, during the taxable year exceeds the average
number of such individuals employed full-time by the taxpayer in (i) the state and
(ii) such zone or area subsequently or previously constituting such zone or such zone
equivalent area, respectively, during the four years immediately preceding the first
taxable year in which the credit is claimed with respect to such zone or area. Where
the taxpayer provided full-time employment within (i) the state or (ii) such zone or
area during only a portion of such four-year period, then for purposes of this
paragraph the term “four years” shall be deemed to refer instead to such portion, if
any.
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(4) The amount of the credit shall equal the sum of (i) (A) the product of
three thousand dollars and the average number of individuals (excluding general
executive officers) employed full-time by the taxpayer, computed pursuant to the
provisions of subparagraph (C) of paragraph two of this subsection, who (i) received
empire zone wages for more than half of the taxable year, (ii) received, with respect
to more than half of the period of employment by the taxpayer during the taxable
year, an hourly wage which was at least one hundred thirty-five percent of the
minimum wage specified in section six hundred fifty-two of the labor law, and (iii)
are targeted employees; and
(B) the product of fifteen hundred dollars and the average number of
individuals (excluding general executive officers and individuals described in
subparagraph (A) of this paragraph) employed full-time by the taxpayer, computed
pursuant to the provisions of subparagraph (C) of paragraph two of this subsection,
who received empire zone wages for more than half of the taxable year.
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(C) For purposes of calculating the amount of the credit, individuals
employed within an empire zone or zone equivalent area within the immediately
preceding sixty months by a related person, as such term is defined in subparagraph
(c) of paragraph three of subsection (b) of section four hundred sixty-five of the
internal revenue code, shall not be included in the average number of individuals
described in subparagraph (A) or subparagraph (B) of this paragraph, unless such
related person was never allowed a credit under this subdivision with respect to such
employees. . . .
Section 465(b)(3)(C) of the Internal Revenue Code provides:

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Related person. – For purposes of this subsection, a person (hereinafter in this
paragraph referred to as the “related person”) is related to any person if –
(i) the related person bears a relationship to such person specified in
section 267(b) or section 707(b)(1), or
(ii) the related person and such person are engaged in trades or
business under common control (within the meaning of subsections (a) and
(b) of section 52).
For purposes of clause (i), in applying section 267(b) or 707(b)(1), “10
percent” shall be substituted for “50 percent”.
Section 1456(o)(1) of the Tax Law provides for a QEZE credit for real property taxes as
follows:
Allowance of credit. A taxpayer which is a qualified empire zone enterprise
shall be allowed a credit for eligible real property taxes, to be computed as provided
in section fifteen of this chapter, against the tax imposed by this article.
Section 1456(p)(1) of the Tax Law provides for a QEZE tax reduction credit as follows:
Allowance of credit. A taxpayer which is a qualified empire zone enterprise
shall be allowed a QEZE tax reduction credit, to be computed as provided in section
sixteen of this chapter, against the tax imposed by this article.
Opinion
For purposes of the employment test under section 14(b) of the Tax Law, in determining
whether NBT Bank, N.A. is a qualified empire zone enterprise (QEZE), NBT Bank, N.A.’s
employment number in the empire zones includes employees in all empire zones, regardless of
whether NBT Bank, N.A. is certified in a particular zone.
Assuming NBT Bank, N.A. is a QEZE under section 14 of the Tax Law, for purposes of the
employment increase factor under section 15(d) of the Tax Law, in determining the amount of the
QEZE credit for real property taxes allowed pursuant to section 1456(o) of the Tax Law, NBT Bank,
N.A.’s employment number in the empire zones includes only employees in empire zones in which
NBT Bank, N.A. is certified pursuant to Article 18-B of the General Municipal Law.
Assuming NBT Bank, N.A. is a QEZE under section 14 of the Tax Law, for purposes of the
employment increase factor under section 16(d) of the Tax Law (which is determined as prescribed
under section 15(d) of the Tax Law), in determining the amount of the QEZE tax reduction credit
allowed pursuant to section 1456(p) of the Tax Law, NBT Bank, N.A.’s employment number in the

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empire zones includes only employees in empire zones in which NBT Bank, N.A. is certified
pursuant to Article 18-B of the General Municipal Law.
For purposes of computing the empire zone wage tax credit allowed under section 1456(e)(1)
of the Tax Law, a separate credit must be computed for each empire zone in which NBT Bank, N.A.
is certified pursuant to Article 18-B of the General Municipal Law. Therefore, when computing an
empire zone wage tax credit for a particular empire zone or zone equivalent area in which NBT
Bank, N.A. is certified, any reference to the empire zone or zone equivalent area means the empire
zone or zone equivalent area in which NBT Bank, N.A. is certified and for which the credit is being
computed.

DATED: September 2, 2003

NOTE:

/s/
Jonathan Pessen
Tax Regulations Specialist IV
Technical Services Division

The opinions expressed in Advisory Opinions are
limited to the facts set forth therein.