In computing the eligible business facility credit, can wages of employees at a separate, non-qualified branch be counted as eligible wages?

Plain-English summary

Richard W. Genetelli asked how to compute the eligible business facility credit under Tax Law section 210.11 (a Job Incentive Program credit). The taxpayer's certified eligible business facility is its New York City headquarters; it also has a branch in Albany that is not a qualified facility. The taxpayer argued that because the Albany employees are controlled from the certified headquarters, their wages should count as eligible wages.

They do not count. The credit equals the tax otherwise due multiplied by a percentage that is the average of two factors: a property percentage (eligible property value over all New York real and tangible personal property) and a payroll percentage (eligible wages over all New York wages). The numerators -- eligible property value and eligible wages -- are the amounts stated on the Certificate of Eligibility issued for the year. Under Appendix 1 of the Article 9-A regulations, eligible wages include only employees serving in jobs created or retained at the business facility. Jobs assigned outside the eligible business facility -- like the Albany branch, which never received Job Incentive Board approval -- are not jobs created or retained by the facility, so their wages are excluded.

Worked example. Only the $200,000 of headquarters wages counted (not the $400,000 that swept in the Albany branch):
- Property percentage: $1,000,000 / $5,000,000 = 20 percent
- Payroll percentage: $200,000 / $800,000 = 25 percent
- Average of the two: 22.5 percent
- Credit: $100,000 tax x 22.5 percent = $22,500
- Tax due after credit: $77,500

What this means for you

Only the certified facility's jobs count

Eligible wages are limited to employees in jobs created or retained at the certified eligible business facility -- the amounts on your Certificate of Eligibility.

A separate branch does not qualify just because HQ controls it

Wages at a non-certified branch are excluded even if the branch is managed from the eligible facility; the branch's jobs were not approved by the Job Incentive Board.

The credit is an average of a property and a payroll factor

Multiply the tax otherwise due by the average of the property percentage and the payroll percentage to get the credit.

Common questions

Q: Can I count wages at my other New York branch toward the facility credit?
A: No -- only wages of employees in jobs created or retained at the certified eligible business facility count, even if the branch is controlled from headquarters.

Q: Where do the eligible amounts come from?
A: The eligible property value and eligible wages stated on the Certificate of Eligibility issued for that year.

Q: How is the credit calculated?
A: It is the tax otherwise due times the average of the property percentage and the payroll percentage -- in the example, 22.5 percent of a $100,000 tax, or $22,500.

Citations and references

Statutes, regulations, and authorities:
- Tax Law section 210.11 (eligible business facility credit; property and payroll factors)
- 20 NYCRR 5-1.1 (certificate of eligibility states eligible property values and wages)
- 20 NYCRR Subpart 5-1 Appendix 1 (administration of the Job Incentive Program credit)
- Commerce Law section 115 and section 118 (eligible area; eligible business facility)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/corporation_ao_1993.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/corporation/a93_9c.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-93 (9) C
Corporation Tax
March 17, 1993

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. C921113A

On November 13, 1992, a Petition for Advisory Opinion was received from Richard W.
Genetelli, c/o Genetelli & Associates, 400 Madison Avenue, Suite 907, New York, New York
10017.
The issue raised by Petitioner, Richard W. Genetelli, is how to compute the amount of
eligible business facility credit allowable in a taxable year under section 210.11 of the Tax Law
based on the facts herein.
A taxpayer owns a facility in New York City which qualifies as an eligible business facility.
The facility is the taxpayer's headquarters. The taxpayer also has a branch in Albany, New York that
is not a qualified eligible business facility. Because the headquarters are in New York City,
Petitioner contends that the employees in the Albany branch are controlled by the New York City
facility and that the wages of employees serving in jobs in the Albany branch should be included in
eligible wages for purposes of computing the eligible business facility credit.
In the current taxable year, the taxpayer reported the following facts:
1)

value of property as defined in section 210.11(d) of the Tax Law and included in the
eligible business facility in New York City - $1,000,000;

2)

average value of real and tangible personal property (excluding inventory) located in
New York State - $5,000,000;

3)

wages, salaries and other personal service compensation of employees (excluding
general executive officers) serving in jobs created or retained in the eligible business
facility in New York City - $200,000;

4)

wages, salaries and other personal service compensation of employees (excluding
general executive officers) serving in jobs created or retained in the New York City
eligible business facility and serving in jobs in the Albany branch - $400,000;

5)

wages, salaries and other personal service compensation of all employees (excluding
general executive officers) within New York State - $800,000; and

6)

tax due before application of eligible business facility credit - $100,000.

For purposes of this example, no limitations on the eligible business facility credit are to be
considered.
TP-9 (9/88)

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Corporation Tax
March 17, 1993

Section 210.11(a) of the Tax Law provides that a credit against the tax imposed by Article
9-A of the Tax Law is allowed to a taxpayer owning or operating an eligible business facility where
such taxpayer has received a certificate of eligibility for tax credits, or a renewal or extension thereof,
for such facility from the New York State Job Incentive Board prior to April 1, 1983, or has received
a certificate of eligibility for tax credits, or a renewal or extension thereof, for such facility from the
Commissioner of Taxation and Finance subsequent to such date pursuant to section 210.ii(h) of the
Tax Law, and only with respect to such facility.
Section 210.11(b) of the Tax Law provides that the amount of the eligible business facility
credit allowable in any taxable year is determined by multiplying the tax otherwise due by a
percentage determined by the following method:
(1)

ascertaining the percentage which the total of eligible property values
during the period covered by its report as defined in paragraph (d) of
this subdivision, bears to the average value of all the taxpayer's real and
tangible personal property except for inventory within the state during
such period ....

(2)

ascertaining the percentage which the total wages, salaries and other
personal service compensation during such period, of employees,
except general executive officers, serving in jobs created or retained in
an eligible area (as the term "eligible area" was defined by section one
hundred fifteen of the commerce law as it existed on March thirty-first,
nineteen hundred eighty-three) by such business facility, bears to the
total wages, salaries and other personal service compensation, during
such period, of all the taxpayer's employees within the state, except
general executive officers.

(3)

adding together the percentages so determined and dividing the result by two....

For purposes of section 115 of the Commerce Law, as it existed on March 31, 1983, the term
"eligible area" included every county in New York State.
Section 5-1.1 of the Business Corporation Franchise Tax Regulations (hereinafter "Article
9-A Regulations") provides that the certificate of eligibility, or a renewal or extension thereof, that
is issued to an eligible business facility for each taxable year, states the total amount of the eligible
property values and eligible wages, salaries and other personal service compensation that are used
in computing the tax credit.
Accordingly, the numerators of the property and payroll percentages for computing the
eligible business facility credit are the amounts stated as eligible property value and eligible wages,
respectively, on the Certificate of Eligibility for tax credits issued for that taxable year.

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TSB-A-93 (9) C
Corporation Tax
March 17, 1993
Section 210.11(h) of the Tax Law provides that the Commissioner of Taxation and Finance
shall issue a certificate of eligibility for tax credits to a taxpayer for an eligible business facility with
regard to which such taxpayer has prior to July 1, 1983 received from the New York State Job
Incentive Board initial approval of an application for such certificate and to renew, extend, revoke
or modify a certificate of eligibility for tax credits.
Appendix 1 of the Article 9-A Regulations provides the rules regarding the administration
of the tax credit portion of the Job Incentive Program. Subdivision (a) of such Appendix 1 defines
"eligible business facility" as a place of business which meets the requirements of section 118 of the
Commerce Law as such section existed on March 31, 1983. It is the business facility at the identical
location with regard to which a taxpayer has received initial approval and shall encompass one or
more structures, or a substantial part or parts thereof, in which an identifiably separable business
activity or activities are performed.
Before the Commissioner of Taxation and Finance can issue a certificate of eligibility for tax
credits, a taxpayer must submit an affidavit of compliance (form CT-45.2 - Affidavit of Compliance
for a Certificate of Eligibility). Pursuant to subdivision (a) of Appendix 1 of the Article 9-A
Regulations, such affidavit includes the information necessary for the determination of original or
continuing eligibility.
Subdivision (d)(2) of Appendix 1 of the Regulations provides that:
For purposes of the computation of the wage factor of the eligible business
facility credit in which total wages, salaries or other personal service compensation
of employees serving in jobs created or retained by the business facility are included
(see sections 5-1.2[a][2] ... of this Title):
(i) The number of jobs created shall be the amount by which
the number of jobs for the applicable taxable year exceeds the number
of jobs at the time of the commencement of the project as stated on
its application for initial approval.
(ii) The number of jobs retained shall be an amount equal to
the number of jobs for which approval for job retention was given by
the Job Incentive Board for purposes of the computation of the credit
when:
(a) subparagraph (1)(i) of this subdivision is met,
where initial approval was based on the creation of five or
more jobs and approval for job retention was given by the Job
Incentive Board for purposes of the computation of the credit;
or
(b) clause (1) (ii) (a) or (1) (ii) (b) of this subdivision
is met, where initial approval was based on the retention of
five or more jobs and approval for job retention was

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TSB-A-93 (9) C
Corporation Tax
March 17, 1993
given by the Job Incentive Board for purposes of the
computation of the credit.
Subdivision (a) of Appendix 1 of the Article 9-A Regulations also provides that:
(4) Initial approval means the preliminary approval by the Job Incentive
Board of an application for a certificate of eligibility, as evidenced by the minutes of
the Job Incentive Board meeting at which such initial approval was granted or by a
letter of intent issued by the Job Incentive Board to the applicant pursuant to 5
NYCRR 102.4.
(5) Initial approval was based on the creation of five or more jobs means such
initial approval was given by the Job Incentive Board to an applicant that had stated
in its application for initial approval that it would increase the number of jobs at its
facility by at least five.
(6) Initial approval was based on the retention of five or more jobs means
such initial approval was given by the Job Incentive Board to an applicant that had
not stated in its application for initial approval that it would increase the number of
jobs at its facility by at least five .... (emphasis added)
When a taxpayer completes its affidavit of compliance (form CT-45.2) for the purpose of
receiving a certificate of eligibility for tax credits, pursuant to Appendix 1 of the Article 9-A
Regulations, the taxpayer submits the required information with respect to the wages, salaries or
other personal service compensation of employees (other than general executive officers) serving
in jobs created or retained at the business facility. This does not include jobs located in an eligible
area that did not receive initial approval by the Job Incentive Board. That is, jobs that are located
in New York State that are assigned outside the eligible business facility are not jobs created or
retained by the eligible business facility.
Herein, based on the facts presented, the taxpayer's affidavit of compliance would state that
the total eligible property value is $1,000,000 (fact 1) and the total qualified wages, salaries and other
compensation is the $200,000 representing the wages, salaries and other personal service
compensation of employees serving in jobs created or retained in the eligible business facility in New
York City (fact 3). If the Commissioner of Taxation and Finance, determines that the business
facility satisfies the requirements of section 118 of the Commerce Law as it existed on March 31,
1983, he would issue a certificate of eligibility for tax credits stating that the amount of eligible
property value is $1,000,000 and the amount of eligible wages is $200,000 which is the wages,
salaries and other personal service compensation of employees serving in jobs created or retained
in the eligible business facility in New York City.
Accordingly, the taxpayer's eligible business facility credit for the taxable year is computed
as follows:
(1)

Property percentage: $1,000,000 (fact 1) + $5,000,000 (fact 2) = 20%

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TSB-A-93 (9) C
Corporation Tax
March 17, 1993

(2)

Payroll percentage: $200,000 (fact 3) + $800,000 (fact 5) - 25%

(3)

Sum of the percentages: line(l) + line(2) = 45%

(4)

Average of the percentages: 45% + 2 = 22 1/2%

(5)

Tax Due before application
of the eligible business
facility credit (fact 6)

= $100,000

(6)

Eligible business facility credit = line(5) x line(4) = $22,500

(7)

Tax due: line(5) - line(6) = $77,500

DATED: March 17, 1993

s/PAUL B. COBURN
Deputy Director
Taxpayer Services Division

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