Is a New York-organized corporation eligible for franchise tax exemptions, and what must it do to claim Empire Zone wage credits and become a QEZE?

Plain-English summary

Imperial Optical, Inc. asked about SLIC, a New York State corporation (offices in Rouses Point, owned by a Quebec holding company) that distributes brand-name contact lenses and optical products worldwide via phone/Internet/fax/e-mail. It asked whether SLIC has any franchise tax exemptions, whether SLIC can be certified in the Champlain Empire Zone, and whether it would be eligible for the EZ wage tax credit (section 210.19) and QEZE benefits (sections 14, 15, 16). (The opinion is a multitax Corporation/Sales ruling.)

The Department held:

• No section 209.2 exemptions. The exemptions in section 209.2 apply only to foreign corporations. SLIC is organized in New York, so they do not apply, and SLIC is subject to Article 9-A.
• EZ certification is local, and is a prerequisite. Certification under Article 18-B of the General Municipal Law is made by local certification officers (section 963(a)), not the Tax Department. A business needs that certification to claim the EZ wage tax credit and to become a QEZE. So SLIC must first become Article 18-B certified; whether it can be certified is outside the scope of the advisory opinion. The EZ wage credit, once available, is computed against base-year EZ employment.

What this means for you

Domestic corporations can't use the foreign-corporation exemptions

The section 209.2 exemptions are only for foreign corporations. A corporation organized in New York -- even one owned by an out-of-state or foreign parent -- cannot use them and is subject to Article 9-A.

Empire Zone certification comes first, and it's local

Both the EZ wage tax credit and QEZE status require Article 18-B certification, which is granted by local certification officers, not the Tax Department. You must be certified before you can claim the credit or qualify as a QEZE.

The Tax Department won't decide certifiability

Whether your business can be certified under Article 18-B is not something the Tax Department resolves in an advisory opinion -- it is a local determination. Pursue the local certification, then apply the tax credit and QEZE rules.

Common questions

Q: Can a New York-organized corporation use the section 209.2 exemptions?
A: No. Those exemptions apply only to foreign corporations, so a domestic (New York) corporation is subject to Article 9-A.

Q: What does it take to claim the EZ wage credit or become a QEZE?
A: Certification under Article 18-B of the General Municipal Law, which both the EZ wage credit (section 210.19) and QEZE status (section 14) require.

Q: Who grants Empire Zone certification?
A: Local certification officers under General Municipal Law section 963(a), not the Tax Department. Whether a business can be certified is outside the scope of an advisory opinion.

Citations and references

Statutes, regulations, and authorities:
- Tax Law section 209.1 (Article 9-A franchise tax)
- Tax Law section 209.2 (exemptions limited to foreign corporations)
- Tax Law section 210.19 (Empire zone wage tax credit; certification requirement)
- Tax Law section 14 (QEZE; certification requirement)
- General Municipal Law Article 18-B and section 963(a) (Empire Zone certification by local officers)
- Imperial Optical, Inc. (SLIC), TSB-A-04(6)C / TSB-A-04(8)S (Apr. 2, 2004)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/corporation_ao_2004.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/multitax/a04_6c_8s.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Tax Policy Analysis
Technical Services Division

TSB-A-04(6)C
Corporation Tax
TSB-A-04(8)S
Sales Tax
April 2, 2004

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. Z031103A

On November 3, 2003, a Petition for Advisory Opinion was received from Imperial Optical,
Inc., One Lincoln Boulevard, Rouses Point, New York 12979.
The issues raised by Petitioner, Imperial Optical, Inc., are:
1. Whether there are any franchise tax exemptions available to SLIC, as described below,
under Article 9-A of the Tax Law.
2. Whether SLIC, as described below, can be certified within the Champlain empire
zone (EZ).
3. Whether SLIC, as described below, will be eligible for the EZ wage tax credit under
section 210.19 of the Tax Law, and eligible to become a qualified empire zone
enterprise (QEZE) under section 14 of the Tax Law for purposes of qualifying for the QEZE
benefits provided under sections 14, 15, and 16 of the Tax Law.
Petitioner submits the following facts as the basis for this Advisory Opinion.
Petitioner is a New York State corporation, organized in May 1989. Its corporate offices are
located in Rouses Point, New York. Petitioner is owned by 2745-3083 Quebec Inc., a holding
company incorporated in the Province of Quebec. Petitioner’s business focus is the distribution of
brand name contact lens and related optical products to eye care practitioners, optical wholesalers,
and optical distributors worldwide. Sales are achieved by telephone, Internet, fax and e-mail order
processing. Petitioner’s activities include direct to patient services for any of the above listed client
base, fulfillment services to mail order contact lens replacement companies, and the occasional sale
of contact lens solutions. No manufacturing is conducted on the premises.
Visus, LLC, (Visus) is a Florida LLC created in 2000. Visus is treated as a corporation for
federal income tax purposes. Visus is currently owned 43 percent by Petitioner, 43 percent by
Mr. Neil Glachman and 14 percent by Dr. Ronald Snyder. Mr. Glachman and Dr. Snyder are both
Florida residents. Visus’s business focus is the marketing of its own Visus 2 proprietary lens
product. Visus’s fulfilment and inventory management have been contracted to Petitioner since
incorporation. However, in order to improve management capabilities and reduce unnecessary
overhead in the Florida offices, Visus agreed to move all financial and operational matters to Rouses

-2­
TSB-A-04(6)C
Corporation Tax
TSB-A-04(8)S
Sales Tax
April 2, 2004

Point starting September 2003. Currently Petitioner is contracted by Visus to conduct tasks relating
to Visus’s financial and operational matters.
Strategic Lens Innovations Corp. – USA (SLIC) is a New York State corporation
incorporated on August 28, 2003. SLIC is owned by Strategic Lens Innovations Corp. (SLI), a
company incorporated in Canada. SLI is owned 49 percent by 2745-3083 Quebec Inc., 49 percent
by PNL Consult Inc., and 2 percent by Mr. Jacques Matte. SLIC’s business focus is the
development of a private label contact lens business using the manufacturing capabilities of world
renowned contact lens manufacturers.
Unlike Petitioner’s business where distribution of well established and renowned branded
product occurs, SLIC will only be distributing either its own branded product worldwide or
distributing private label product for the specific use of its customers and their customer network.
Medium to smaller potential private label contact lens customers worldwide will be afforded the
ability to create their own private label brand, have SLIC manufacture branded product for them
and/or label proprietary outer boxes and bright stock blister lens packaging with their proprietary
brand. SLIC can fulfill and distribute the product anywhere their customers wish.
SLIC’s customer services and fulfillment services will be provided at Petitioner’s place of
business by Petitioner. Customer services will be billed out on a fee for service basis. Fulfillment
services will be executed by Petitioner and will be billed out on a fee for service basis. All
accounting, information technology, operational services and inventory planning and storage will
be the responsibility of Petitioner. The only manufacturing related work will be the labeling or
re-labeling of blistered lenses as well as outer box packages.
SLIC plans to purchase 6.5 acres of land on which a facility will be constructed. The
property is located in the Champlain EZ. SLIC will hire at least one new employee. SLIC has not
yet been certified under Article 18-B of the General Municipal Law. SLIC will lease commercial
space to Petitioner and Visus, as well as any other entity wishing to rent available space. No retail
space will be offered for lease. Petitioner will be moving from its current facility to SLIC’s EZ
facility and will not keep any employees or operations outside of the new facility.
Applicable law
Section 209 of the Tax Law contains the imposition of the franchise tax under Article 9-A
of the Tax Law, and provides, in part:
1. For the privilege of exercising its corporate franchise, or of doing business, or of
employing capital, or of owning or leasing property in this state in a corporate or organized
capacity, or maintaining an office in this state, for all or any part of each of its fiscal or

-3­
TSB-A-04(6)C
Corporation Tax
TSB-A-04(8)S
Sales Tax
April 2, 2004

calendar years, every domestic or foreign corporation, except corporations specified in
subdivision four of this section, shall annually pay a franchise tax....
2. A foreign corporation shall not be deemed to be doing business, employing
capital, owning or leasing property, or maintaining an office in this state, for the purposes
of this article, by reason of (a) the maintenance of cash balances with banks or trust
companies in this state, or (b) the ownership of shares of stock or securities kept in this state,
if kept in a safe deposit box, safe, vault or other receptacle rented for the purpose, or if
pledged as collateral security, or if deposited with one or more banks or trust companies, or
brokers who are members of a recognized security exchange, in safekeeping or custody
accounts, or (c) the taking of any action by any such bank or trust company or broker, which
is incidental to the rendering of safekeeping or custodian service to such corporation, or (d)
the maintenance of an office in this state by one or more officers or directors of the
corporation who are not employees of the corporation if the corporation otherwise is not
doing business in this state, and does not employ capital or own or lease property in this
state, or (e) the keeping of books or records of a corporation in this state if such books or
records are not kept by employees of such corporation and such corporation does not
otherwise do business, employ capital, own or lease property or maintain an office in this
state, or (f) the use of fulfillment services of a person other than an affiliated person and the
ownership of property stored on the premises of such person in conjunction with such
services, or (g) any combination of the foregoing activities. For purposes of this subdivision,
persons are affiliated persons with respect to each other where one of such persons has an
ownership interest of more than five percent, whether direct or indirect, in the other, or
where an ownership interest of more than five percent, whether direct or indirect, is held in
each of such persons by another person or by a group of other persons which are affiliated
persons with respect to each other. The term “person” in the preceding sentence and in
paragraph (f) of this subdivision shall have the meaning ascribed thereto by subdivision (a)
of section eleven hundred one of this chapter.
Section 1-2.5(a) of the Business Corporation Franchise Tax Regulations (Regulations),
provides, in part:
(1) The term domestic corporation means a corporation incorporated by or under the
laws of the State or colony of New York State.
(2) The term foreign corporation means a corporation which is not a domestic
corporation.
Section 2-3.1(a) of the Regulations provides, in part, “every taxpayer is required to pay a tax
measured by entire net income (or other applicable basis) up to the date on which it ceases to possess

-4­
TSB-A-04(6)C
Corporation Tax
TSB-A-04(8)S
Sales Tax
April 2, 2004

a franchise if a domestic corporation, or ceases to do business, employ capital, own or lease property
in a corporate or organized capacity or maintain an office in New York if a foreign corporation.”
Section 14 of the Tax Law contains the provisions for the QEZE program and 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 article nine-A ... of this chapter, for each of the taxable years
within the “business tax benefit period,” which period shall consist of ... (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, and
(2) for purposes of articles twenty-eight and twenty-nine of this chapter, during the
“sales and use tax benefit period.” Such period shall consist of one hundred twenty
consecutive months beginning on the later of (A) March first, two thousand one, or (B) the
first day of the month next following the date of issuance of a qualified empire zone
enterprise certification by the commissioner under subdivision (h) of this section. Provided
however, such period shall not include any month falling within a taxable year immediately
preceded by a taxable year with respect to which the business enterprise did not meet the
employment test.
(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 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.
*

*

*

(c) Base period. The term “base period” means the five taxable years immediately
preceding the test year. If the business enterprise has fewer than five such years, then the
term “base period” means such smaller set of years.

-5­
TSB-A-04(6)C
Corporation Tax
TSB-A-04(8)S
Sales Tax
April 2, 2004
(d) Test year. The term “test year” means the last taxable year of the business
enterprise ending before the test date. If a business enterprise does not have a taxable year
that ends on or before the test date, such enterprise shall be deemed to have a test year which
shall be either the last calendar year ending on or before its test date, or if the enterprise has
as its taxable year a fiscal year, the last such fiscal year ending on or before its test date
(whether or not the enterprise in fact had a taxable year during that period).
(e) Test date. The term “test date” means the later of July first, two thousand or the
date prior to July first, two thousand five on which the business enterprise was first certified
under article eighteen-B of the general municipal law.
(f) Taxable year. The term “taxable year” means the taxable year of the business
enterprise under ... article nine-A ... of this chapter....
(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.
(h) Sales and use tax. (1) In addition to the other requirements of this section, in
order for the exemptions described in subdivision (z) of section eleven hundred fifteen of
this chapter or any like exemptions from taxes imposed pursuant to the authority of article
twenty-nine of this chapter to apply with respect to a qualified empire zone enterprise, such
enterprise shall apply to the commissioner of taxation and finance for the issuance of a
qualified empire zone enterprise certification, in the manner prescribed by such
commissioner. If such commissioner grants such certification, such certification shall be
subject to conditions specified by such commissioner. An enterprise to which the
commissioner issues such certification may furnish a qualified empire zone enterprise
exempt purchase certificate to a person required to collect sales and compensating use taxes
imposed under or pursuant to the authority of article twenty-eight or twenty-nine of this
chapter, which certificate shall be deemed to be an exemption certificate under subdivision
(c) of section eleven hundred thirty-two of this chapter. Nothing herein or in any other law
shall be construed to prohibit the disclosure, in such manner as the commissioner of taxation

-6­
TSB-A-04(6)C
Corporation Tax
TSB-A-04(8)S
Sales Tax
April 2, 2004
and finance deems appropriate, of the names and other appropriate identifying information
of those persons holding qualified empire zone enterprise certifications pursuant to this
subdivision, those persons whose qualified empire zone enterprise certifications have been
revoked or those persons whose qualified empire zone enterprise certifications have expired.
(2) During the period that a business enterprise is eligible to apply, or is qualified,
for exemptions from sales and compensating use taxes under this section, the commissioner
of economic development shall, at the time such commissioner certifies or decertifies a
business enterprise under article eighteen-B of the general municipal law, notify the
commissioner of taxation and finance of such certification or decertification, which
notification shall include the full legal name, address and federal employer identification
number of such enterprise. The commissioner of economic development shall, at the time
of any such certification, also advise such enterprise of the requirements in paragraph one
of this subdivision.
*

*

*

(j) New business. (1) A new business shall include any corporation, except a
corporation which is substantially similar in operation and in ownership to a business entity
(or entities) taxable, or previously taxable, under ... article nine-A ... of this chapter; ...
Section 210.19 of the Tax Law provides for an EZ wage tax credit as follows:
(a) 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 by paragraph (d) hereof.
(b) For the purposes of this subdivision, the following terms shall have the following
meanings: (1) “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.

-7­
TSB-A-04(6)C
Corporation Tax
TSB-A-04(8)S
Sales Tax
April 2, 2004
(2) “Targeted employee” means a New York resident who receives empire zone
wages and who is (A) an eligible individual under the provisions of the targeted jobs tax
credit (section fifty-one of the internal revenue code), (B) eligible for benefits under the
provisions of the job training partnership act ... (C) a recipient of public assistance benefits
or (D) an individual whose income is below the most recently established poverty rate
promulgated by the United States department of commerce, or a member of a family whose
family income is below the most recently established poverty rate promulgated by the
appropriate federal agency.
*

*

*

(c) 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
(A) the state and (B) 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 (A) the state and (B) 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 (A)
the state or (B) 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.
*

*

*

(d) The amount of the credit shall equal the sum of (1) 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
three of paragraph (b) of this subdivision, who
(A) received empire zone wages for more than half of the taxable year,
(B) 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
(C) are targeted employees; and
(2) the product of fifteen hundred dollars and the average number of individuals
(excluding general executive officers and individuals described in subparagraph one of this
paragraph) employed full-time by the taxpayer, computed pursuant to the provisions of

-8­
TSB-A-04(6)C
Corporation Tax
TSB-A-04(8)S
Sales Tax
April 2, 2004
subparagraph three of paragraph (b) of this subdivision, who received empire zone wages
for more than half of the taxable year.
*

*

*

(3) 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 one or subparagraph two of
this paragraph, unless such related person was never allowed a credit under this subdivision
with respect to such employees.
(e) The credit and carryovers of such credit allowed under this subdivision for any
taxable year shall not, in the aggregate, reduce the tax due for such year to less than the
higher of the amounts prescribed in paragraphs (c) and (d) of subdivision one of this section.
However, if the amount of credit or carryovers of such credit, or both, allowed under this
subdivision for any taxable year reduces the tax to such amount, or if any part of the credit
or carryovers of such credit may not be deducted from the tax otherwise due by reason of
the final sentence of paragraph (d) hereof, any amount of credit or carryovers of such credit
thus not deductible in such taxable year may be carried over to the following year or years
and may be deducted from the tax for such year or years. In lieu of such carryover, any such
taxpayer which qualifies as a new business under paragraph (j) of subdivision twelve of this
section may elect, on its report for its taxable year with respect to which such credit is
allowed, to treat fifty percent of the amount of such carryover as an overpayment of tax to
be credited or refunded in accordance with the provisions of section ten hundred eighty-six
of this chapter. Provided, however, the provisions of subsection (c) of section ten hundred
eighty-eight of this chapter notwithstanding, no interest shall be paid thereon.
Section 210.12(j) of the Tax Law provides, in part:
a new business shall include any corporation, except a corporation which:
(1) over fifty percent of the number of shares of stock entitling the holders thereof
to vote for the election of directors or trustees is owned or controlled, either directly or
indirectly, by a taxpayer subject to tax under this article; ... or
(2) is substantially similar in operation and in ownership to a business entity (or
entities) taxable, or previously taxable, under this article; ... or

-9­
TSB-A-04(6)C
Corporation Tax
TSB-A-04(8)S
Sales Tax
April 2, 2004
(3) has been subject to tax under this article for more than five taxable years
(excluding short taxable years).
IRC section 465(b)(3)(C) provides:
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”.
Opinion
Issue 1
Under section 209.1 of the Tax Law, the business corporation franchise tax is imposed
annually on a domestic or foreign corporation for the privilege of exercising its corporate franchise,
or of doing business, employing capital or owning or leasing property in New York State, or
maintaining an office in New York. A domestic corporation is subject to tax for the period that it
exercises its franchise; that is, from the date of its incorporation until the date it dissolves.
The exemptions under section 209.2 of the Tax Law apply only to foreign corporations.
Under section 209.2(f) of the Tax Law, a foreign corporation will not be deemed to be doing
business, employing capital, owning or leasing property or maintaining an office in New York
because it uses the fulfillment services of a person that is not an affiliated person and it has
inventory stored on that person’s premises in conjunction with the fulfillment services.
In this case, SLIC is organized in New York State. Therefore, the exemptions from taxation
under section 209.2 of the Tax Law with respect to foreign corporations would not apply to SLIC.
Accordingly, SLIC is subject to tax under Article 9-A of the Tax Law from August 28, 2003, until
the date that it is dissolved.

-10­
TSB-A-04(6)C
Corporation Tax
TSB-A-04(8)S
Sales Tax
April 2, 2004
Issue 2
Certification under Article 18-B of the General Municipal Law is made jointly by the
Commissioner of Economic Development, the Commissioner of Labor and the local empire zone
certification officer. (See General Municipal Law §963(a)) Thus, the Tax Department is not
involved in this certification process. However, a business enterprise needs such certification to be
eligible to claim the EZ wage tax credit under section 210.19 of the Tax Law, and such certification
is one of the requirements to become a QEZE under section 14 of the Tax Law for eligibility to
receive the QEZE benefits provided under sections 14, 15 and 16 of the Tax Law.
Accordingly, it is not within the scope of this Advisory Opinion to determine whether SLIC
is a business enterprise that can be certified under Article 18-B of the General Municipal Law.
Issue 3
Pursuant to section 210.19(a) of the Tax Law, a taxpayer must be certified under
Article 18-B of the General Municipal Law before it can be eligible to claim the EZ wage tax credit.
Therefore, SLIC would have to become certified under Article 18-B of the General Municipal Law
before it could qualify for an EZ wage tax credit. The EZ wage tax credit would be allowed only
where the average number of individuals, excluding general executive officers, employed full-time
by SLIC in New York State and in the EZ during the taxable year exceeds the average number of
such individuals employed full-time by SLIC in New York State and in the EZ during the four years
immediately preceding the first taxable year in which the credit is claimed with respect to such EZ.
When computing the average number of employees under section 210.19(c) of the Tax Law,
if SLIC has not provided full-time employment for such four year period, then such section
210.19(c) provides that the term four years shall be deemed to refer instead to such portion, if any,
of the four year period during which SLIC provided full-time employment. SLIC was incorporated
August 28, 2003, and if it is a calendar year taxpayer and is certified under Article 18-B of the
General Municipal Law during 2004, the credit would be allowed only where the average number
of individuals, excluding general executive officers, employed full-time by SLIC in New York State
and in the EZ during taxable year 2004 exceeds the average number of such individuals employed
full-time by SLIC in New York State and in the EZ during taxable year 2003 (the only preceding
year.) If SLIC is a fiscal year taxpayer and has a taxable year or years prior to the taxable year it
becomes certified under Article 18-B of the General Municipal Law, the credit would be allowed
only where the average number of individuals, excluding general executive officers, employed
full-time by SLIC in New York State and in the EZ during the taxable year it becomes certified
exceeds the average number of such individuals employed full-time by SLIC in New York State and
in the EZ during the previous taxable year or years.

-11­
TSB-A-04(6)C
Corporation Tax
TSB-A-04(8)S
Sales Tax
April 2, 2004
If SLIC is certified under Article 18-B of the General Municipal Law, and it meets the
requirements contained in section 210.19 of the Tax Law, it would be eligible to claim an EZ wage
tax credit. If SLIC is eligible to claim an EZ wage tax credit under section 210.19 of the Tax Law,
the credit would be allowed only with respect to empire zone wages paid by SLIC for full-time
employment, excluding general executive officers, during the taxable year in the Champlain EZ
where such employment is in a job created in the area since it became an EZ.
In construing the phrase jobs created in the area, as used in section 210.19(b)(1) of the Tax
Law, it is instructive to look to the General Municipal Law, which established the EZ program.
In the statement of legislative findings pursuant to the creation of the EZ program, the
legislature declared:
[i]t is the public policy of the state to offer special incentives and assistance that will
promote the development of new businesses, the expansion of existing businesses and the
development of human resources within these economically impoverished areas and to do
so without encouraging the relocation of business investment from other areas of the state.
(General Municipal Law, section 956, emphasis added.)
Thus, the statute provides that a business which has shifted its operations, or some portions
thereof, from an area within New York State not designated as an EZ to an area so designated shall
not be certified to receive such benefits, except where
•

the shift is entirely within a municipality and has been approved by the local
governing body of the municipality,

•

it has been established after a public hearing that extraordinary circumstances exist
which warrant the relocation of the business, in whole or in part, into an EZ from
another municipality and the municipality from which the business is relocating
approves of such relocation, or

•

such shift in operation is from a business incubator facility operated by a
municipality or by a public or private not-for-profit entity. (General Municipal Law,
section 959(a))

In light of the above, SLIC will have jobs that are created in the Champlain EZ, for purposes
of determining empire zone wages under section 210.19(b)(1) of the Tax Law, if they did not exist
previously elsewhere in New York State, or if they did, the jobs conform to the principles in the
General Municipal Law.

-12­
TSB-A-04(6)C
Corporation Tax
TSB-A-04(8)S
Sales Tax
April 2, 2004
Pursuant to section 210.19(d)(3) of the Tax Law, if any of SLIC’s employees were employed
in the Champlain EZ within the immediately preceding 60 months by a related person, as defined
in IRC section 465(b)(3)(C)(i), such employees shall not be included in SLIC’s computation of the
amount of the EZ wage tax credit for the taxable year unless a credit under section 210.19 was never
allowed with respect to such employees. Under IRC section 465(b)(3)(C)(i) SLIC and Petitioner
would be related persons.
The EZ wage tax credit is not refundable under section 210.19(e) of the Tax Law unless
SLIC qualifies as a new business under section 210.12(j) of the Tax Law. SLIC is directly owned
by SLI, which, in turn, is 49 percent directly owned by 2745-3083 Quebec Inc., 49 percent directly
owned by PNL Consult Inc., and 2 percent directly owned by Mr. Matte. Petitioner is 100 percent
directly owned by 2745-3083 Quebec Inc. Visus is 43 percent directly owned by Petitioner, 43
percent directly owned by Mr. Glachman and 14 percent directly owned by Dr. Snyder.
Accordingly, 2745-3083 Quebec Inc., indirectly owns 49 percent of SLIC, indirectly owns 43
percent of Visus and directly owns 100 percent of Petitioner. PNL Consult Inc. and Mr. Matte do
not have any direct or indirect ownership interest in 2745-3083 Quebec Inc., Petitioner or Visus.
Mr. Glachman and Dr. Snyder do not have any direct or indirect ownership interest in SLIC,
2745-3083 Quebec Inc. or Petitioner. It is assumed for purposes of this Advisory Opinion that the
owner of PNL Consult Inc. does not have any direct or indirect ownership interest in 2745-3083
Quebec Inc., Petitioner, or Visus.
Since 2745-3083 Quebec Inc. through its 49 percent ownership interest in SLI, owns
indirectly 49 percent of SLIC, and PNL Consult Inc., through its 49 percent ownership interest in
SLI, owns indirectly 49 percent of SLIC, over fifty percent of the number of shares of stock entitling
the holders thereof to vote for the election of directors or trustees of SLIC is not owned or
controlled, either directly or indirectly, by Petitioner or Visus, taxpayers under Article 9-A of the
Tax Law. Further, since there is no indication that 2745-3083 Quebec Inc., through its 49 percent
indirect ownership in SLIC, in fact controls SLIC, SLIC is not substantially similar in ownership
to Petitioner or Visus. Also, SLIC has not been subject to tax under Article 9-A of the Tax Law for
more than five taxable years. Accordingly, SLIC will meet the three conditions to be a new business
under section 210.12(j) of the Tax Law.
Before a business enterprise can qualify to be a QEZE under section 14 of the Tax Law, it
must be certified under Article 18-B of the General Municipal Law. Therefore, SLIC would have
to become certified under Article 18-B of the General Municipal Law before it could qualify as a
QEZE under section 14 of the Tax Law. If SLIC is certified under Article 18-B of the General
Municipal Law prior to July 1, 2005, and it meets the requirements contained in section 14 of the
Tax Law, it would be a QEZE.

-13­
TSB-A-04(6)C
Corporation Tax
TSB-A-04(8)S
Sales Tax
April 2, 2004
If SLIC becomes a QEZE under section 14 of the Tax Law, it must also apply to the
Commissioner of Taxation and Finance for the issuance of a QEZE certification, pursuant to section
14(h) of the Tax Law, in order to be eligible for sales and use tax exemptions.
Under section 14(b) of the Tax Law, 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 such taxable year equals or exceeds its employment
number in the state outside of such zones for the base period.
For purposes of the employment test under section 14(b) of the Tax Law, SLIC’s test date
would be the date, prior to July 1, 2005, on which it first becomes certified under Article 18-B of
the General Municipal Law, and the test year would be the last taxable year of SLIC ending before
the test date. SLIC’s base period would be the five taxable years immediately preceding the test
year. SLIC was incorporated August 28, 2003. Therefore, if SLIC becomes certified under
Article 18-B of the General Municipal Law during 2004, SLIC’s test date would be in 2004. If
SLIC is a calendar year taxpayer, 2003 would be the test year, but its base period would be zero
years since SLIC was organized in 2003. If SLIC is a fiscal year taxpayer and has a taxable year
ending before the test date in 2004, it would have a test year, but it would have a base period only
if it had a taxable year prior to the test year. If SLIC does not have a base period, it would meet the
employment test only if it qualifies as a new business under section 14(j) of the Tax Law.
Pursuant to section 14(j) of the Tax Law, SLIC would be a new business if it was not
substantially similar in ownership and operation to a business entity taxable or previously taxable
in New York. This condition is similar to the condition contained in section 210.12(j)(2) of the Tax
Law. As determined above, SLIC is not substantially similar in ownership to Petitioner or Visus.
Accordingly, SLIC would qualify as a new business, as defined in section 14(j) of the Tax Law, for
purposes of qualifying as a QEZE under section 14(a) of the Tax Law.
If SLIC becomes certified under Article 18-B of the General Municipal Law during 2004,
and SLIC is a calendar year taxpayer, its test date would be in 2004, its test year would be 2003 and
it would have a base period of zero years. However, SLIC would be a new business under section
14(j) of the Tax Law with respect to taxable year 2004, and it would meet the employment test if
it hires at least one employee. Accordingly it would be a QEZE pursuant to section 14 of the Tax
Law, and it would be entitled to QEZE tax benefits under sections 14, 15 and 16 of the Tax Law as
applied under Articles 9-A, 28 and 29 of the Tax Law.
If SLIC is a fiscal year taxpayer and it becomes certified under Article 18-B of the General
Municipal Law during 2004, it would have a base period of at least one year only if it has a taxable
year prior to the test year. In that case, SLIC would meet the employment test if SLIC’s
employment number in the EZ for taxable year 2004 equals or exceed its employment number in

-14­
TSB-A-04(6)C
Corporation Tax
TSB-A-04(8)S
Sales Tax
April 2, 2004
the EZ for the base period, and its employment number in New York State outside of the EZ for
taxable year 2004 equals or exceeds its employment number in New York State outside of the EZ
for the base period.
Pursuant to section 14(g) of the Tax Law, the employment number used in such
computations shall not include individuals employed within the immediately preceding 60 months
by a related person. If SLIC meets the employment test it would be a QEZE pursuant to section 14
of the Tax Law, and it would be entitled to QEZE tax benefits under sections 14, 15 and 16 of the
Tax Law as applied under Articles 9-A, 28 and 29 of the Tax Law.

DATED: April 2, 2004

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.