NY TSB-A-99(2)C Corporation Tax 1999-01-25

May a corporation that bought the assets and hired the workforce of an unrelated predecessor claim the EDZ wage tax credit and EDZ investment tax credit?

Short answer: Yes, subject to meeting all the requirements. New Woerner Industries -- which acquired all the assets of the unrelated old Woerner Industries and hired its employees, then sought EDZ certification -- may claim the EDZ wage tax credit under section 210.19 and the EDZ investment tax credit under section 210.12-B for taxable years beginning on or after June 5, 1998. Because it did not exist during the prior four years, its employment base is its own short history, and the rehired workers are in a new employment relationship separate from the unrelated predecessor. The opinion notes there were not enough facts to confirm every credit requirement.

Disclaimer: This is an official New York State Department of Taxation and Finance Advisory Opinion (TSB-A), issued by the Office of Counsel at a taxpayer's request. It is limited to the facts set forth in it and binds the Department only with respect to the petitioner to whom it was issued, and only if that petitioner fully and accurately described all relevant facts; another taxpayer cannot rely on it. It reflects the law, regulations, and Department policy in effect when issued and may since have changed. Taxpayer-identifying details are redacted. New York State and local sales taxes are administered centrally by the Department. This summary is informational only and is not legal or tax advice. Consult a licensed New York tax professional about your specific situation.

About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked at the bottom of this page, or PDF in the sidebar) is the authoritative source for any reliance.

View original ruling (PDF)

Plain-English summary

A & C Acquisitions bought all the assets of old Woerner Industries (including the name), then renamed itself new Woerner Industries and hired all of old Woerner's employees; old Woerner became Gignar Industries. New and old Woerner were never related. Old Woerner had never been EDZ-certified or claimed EDZ credits. New Woerner sought EDZ certification and asked whether it may claim the EDZ wage tax credit (section 210.19) and the EDZ investment tax credit (section 210.12-B).

The Department held it may, for years beginning on or after June 5, 1998 (assuming it is a certified zone business with property and full-time employees in the zone, and meets all requirements):

EDZ wage tax credit. The credit's four-year employment-base test is satisfied because new Woerner did not exist during those prior four years (incorporated April 20, 1998, with no earlier employees). The rehired workers are in a new employment relationship, separate from their old (unrelated) employer, so their jobs count as created in the zone.
EDZ investment tax credit. New Woerner may claim the EDZ-ITC if it has qualifying property located in the designated zone that meets section 210.12-B.
The opinion cautions there were not enough facts to confirm that every requirement of sections 210.19 and 210.12-B is met.

What this means for you

An asset buyer can be a genuine new EDZ employer

When the buyer is unrelated to the seller and the workforce enters a new employment relationship, the rehired jobs can qualify as zone jobs created by the new employer.

The four-year base reflects the buyer's own history

Because the new corporation did not exist in the prior years, its employment base for the wage-credit test is its own short history -- not the predecessor's.

Certification and property requirements still must be met

The credits depend on EDZ certification (or a timely application) and on qualifying zone property and wages; the Department flagged that the facts did not establish all of these.

Common questions

Q: Can the asset buyer claim the EDZ wage tax credit for rehired workers?
A: Yes, where it is unrelated to the seller and the workers enter a new employment relationship -- the jobs count as created in the zone.

Q: Does the predecessor's history count against the four-year base test?
A: No. The new corporation did not exist during those years, so its employment base is its own.

Q: Are the credits guaranteed?
A: No. The buyer must still meet all the EDZ certification, property, and wage requirements; the opinion did not have enough facts to confirm them.

Citations and references

Statutes, regulations, and authorities:
- Tax Law section 210.19 (economic development zone wage tax credit)
- Tax Law section 210.12-B (economic development zone investment tax credit)
- Tax Law section 210.12(j) (definition of new business)
- General Municipal Law Article 18-B (economic development zone certification)
- Woerner Industries, Inc., TSB-A-99(2)C (Jan. 25, 1999)

Source

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-99(2)C
Corporation Tax
January 25, 1999

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. C981027A

On October 27, 1998, a Petition for Advisory Opinion was received from Woerner Industries,
Inc., 485 Hague Street, Rochester, New York 14606.
The issue raised by Petitioner, Woerner Industries, Inc., is whether new Woerner Industries,
Inc. would be allowed to claim the economic development zone ("EDZ") wage tax credit, under
section 210.19 of the Tax Law, and the EDZ investment tax credit, under section 210.12-B of the
Tax Law, for taxable years beginning on or after June 5, 1998.
Petitioner submits the following facts as the basis for this Advisory Opinion.
A & C Acquisitions, Inc. was formed on April 20, 1998. On June 5, 1998, A & C
Acquisitions, Inc. acquired all of the assets of Woerner Industries, Inc. (old) including the company
name and all intangibles. A & C Acquisitions, Inc. then changed its name to Woerner Industries,
Inc. (new). Simultaneously, old Woerner Industries, Inc. changed its name to Gignar Industries, Inc.
New Woerner Industries, Inc., hired all of the employees of the old Woerner Industries, Inc.
There has never been any relationship between new Woerner Industries, Inc., the acquiring
corporation, and old Woerner Industries Inc., the acquired corporation. The old Woerner Industries,
Inc. did not apply for EDZ Certification, and therefore, it had never taken an EDZ wage tax credit
or an EDZ investment tax credit. New Woerner Industries, Inc. has applied for EDZ certification.
Discussion
Section 210.12-B(a) of the Tax Law provides that a taxpayer shall be allowed an EDZ
investment tax credit ("EDZ-ITC") against the tax imposed under Article 9-A of the Tax Law if the
taxpayer has been certified pursuant to Article 18-B of the General Municipal Law. The amount of
the credit is 10 percent of the cost or other basis for federal income tax purposes of tangible personal
property and other tangible property, including buildings and structural components of buildings,
described in section 210.12-B(b) of the Tax Law, which is located within a designated EDZ pursuant
to Article 18-B of the General Municipal Law, but only if the acquisition, construction,
reconstruction or erection of such property occurred or was commenced on or after the date of such
designation and prior to the expiration thereof.
Section 210.12-B(e) of the Tax Law provides that property which qualifies for the investment
tax credit provided under section 210.12 of the Tax Law may be treated as property principally used

-2
TSB-A-99(2)C
Corporation Tax
January 25, 1999

by the taxpayer in the production of goods by manufacturing, processing, assembling, refining,
mining, extracting, farming, agriculture, horticulture, viticulture or commercial fishing, provided the
property otherwise qualifies under section 210.12-B(b) of the Tax Law, in which event a credit shall
not be allowed under section 210.12 of the Tax Law.
Section 5-10.1(b) of the Business Corporation Franchise Tax Regulations ("Article 9-A
Regulations") provides that in order to claim a EDZ-ITC, a taxpayer must be certified pursuant to
Article 18-B of the General Municipal Law during the taxable year, or have applied for such
certification on or before the last day of the taxable year, in which the property for which the EDZITC is claimed becomes qualified property.
Section 210.12-B(d) of the Tax Law provides that the EDZ-ITC allowed for any taxable year
shall not reduce the tax due for such year to less than the higher of the amounts prescribed in section
210.1(c) and (d) of the Tax Law. However, if the amount of the EDZ-ITC allowed for any taxable
year reduces the tax to such amount, any amount of EDZ-ITC not deductible in such taxable year
may be carried over to the following year or years and may be deducted from the taxpayer's tax for
such year or years. In lieu of such carryover, any such taxpayer which qualifies as a new business
under section 210.12(j) of the Tax Law may elect, on its report for its taxable year with respect to
which the EDZ-ITC is allowed, to treat 50 percent of the amount of such carryover as an
overpayment of tax to be credited or refunded in accordance with the provisions of section 1086 of
the Tax Law.
Section 210.19(a) of the Tax Law provides that a taxpayer shall be allowed an EDZ wage
tax credit against the tax imposed under Article 9-A of the Tax Law where the taxpayer has been
certified pursuant to Article 18-B of the General Municipal Law. The credit shall be allowed only
with respect to the first taxable year during which payments of EDZ wages are made and the
conditions contained in section 210.19(c) are satisfied, and with respect to each of the four taxable
years next following if the conditions continue to be satisfied for those taxable years.
Section 5-9.1(b) of the Article 9-A Regulations provides that in order to claim an EDZ wage
tax credit, a taxpayer must be certified pursuant to Article 18-B of the General Municipal Law during
the taxable year, or have applied for such certification on or before the last day of the taxable year,
in which the eligibility requirements have been met.
Section 210.19(b)(1) of the Tax Law defines EDZ wages as 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 EDZ or zone equivalent area pursuant to Article 18-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 economic development zone,

-3
TSB-A-99(2)C
Corporation Tax
January 25, 1999

(ii) within four years of the expiration of such designation, or
(iii) during the five year period immediately following the date of designation
as a zone equivalent area.
Section 210.19(c) of the Tax Law provides that the EDZ wage tax credit shall be allowed
only where the average number of individuals, excluding general executive officers, employed full
time by the taxpayer in (A) New York State and (B) such EDZ 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) New York State and (B) such zone or area subsequently
or previously constituting such zone or 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) New York State or (B) such
zone or area during only a portion of such four-year period, then the term "four years" shall be
deemed to refer instead to such portion, if any.
Section 210.19(e) of the Tax Law provides that the EDZ wage tax credit and carryovers of
such credit allowed for the taxable year shall not, in the aggregate, reduce the tax due for such year
to less than the higher of the amounts prescribed in section 210.1(c) and (d) of the Tax Law.
However, if the amount the EDZ wage tax credit or carryovers of such credit, or both, allowed 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 section
210.19(d) of the Tax Law, any amount of such EDZ wage tax 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 section 210.12(j) of the Tax Law may elect, on its report for its
taxable year with respect to which such credit is allowed, to treat 50 percent of the amount of such
carryover as an overpayment of tax to be credited or refunded in accordance with the provisions of
section 1086 of the Tax Law.
Section 210.12(j) of the Tax Law defines a "new business" as any corporation except:
1. a corporation in which over 50 percent of the number of shares of stock
entitling their holders to vote for the election of directors or trustees is owned or
controlled, either directly or indirectly, by a taxpayer subject to tax under Article 9A; section 183, 184, 185, 186 of Article 9; Article 32 or 33 of the Tax Law; or
2. a corporation that is substantially similar in operation and in ownership to
a business entity or entities taxable, or previously taxable under Article 9-A; section
183, 184, 185, or 186 of Article 9; Article 32 or 33; or Article 23 or that would have
been subject to tax under Article 23, as such article was in effect on January 1, 1980,

-4
TSB-A-99(2)C
Corporation Tax
January 25, 1999

or the income (or losses) of which is (or was) includable under Article 22 of the Tax
Law whereby the intent and purpose of section 210.19(e) of the Tax Law with respect
to refunding of credit to new business would be evaded; or
3. a corporation that has been subject to tax under Article 9-A for more than
four years (excluding short periods) before each tax year during which the taxpayer
becomes eligible for the EDZ-ITC or EDZ wage tax credit (that is, the year for which
the credit is allowed).
Conclusions
For purposes of this advisory opinion, it is assumed that new Woerner Industries, Inc., is a
certified zone business pursuant to Article 18-B of the General Municipal Law and has property and
full-time employees in a designated EDZ pursuant to such Article 18-B.
With respect to the EDZ wage tax credit, New Woerner Industries, Inc., meets the conditions
of section 210.19(c) of the Tax Law with respect to the four year test period for the average number
of full-time employees because it did not exist as a corporation during those four years. New
Woerner Industries, Inc. was not incorporated until April 20, 1998, and it did not have any
employees prior to that time.
However, to qualify for the EDZ wage tax credit, new Woerner Industries, Inc. must have
paid EDZ wages as defined in section 210.19(b) of the Tax Law to an employee (or employees) in
a job (or jobs) created in the EDZ area during the period of its designation as an EDZ. The
employees of new Woerner Industries, Inc. working in the EDZ meet this requirement, because new
Woerner Industries, Inc. and old Woerner Industries, Inc. were unrelated corporations, and the
former employees of old Woerner Industries, Inc. entered into a new employment relationship with
new Woerner Industries, Inc. which is separate and apart from their former employment relationship
with old Woerner Industries, Inc.
Therefore, new Woerner Industries, Inc. may claim an EDZ wage tax credit, for taxable
years beginning on or after June 5, 1998, for its employees that were formerly employed by old
Woerner Industries, Inc., who are working in the designated EDZ and meet all of the requirements
of section 210.19 of the Tax Law. However, there are not enough facts presented in this advisory
opinion to determine whether new Woerner Industries, Inc. meets all of those requirements.
With respect to the EDZ-ITC provided in section 210.12-B of the Tax Law, new Woerner
Industries, Inc. may claim the credit, for taxable years beginning on or after June 5, 1998, if it has
property located in the designated EDZ and the property meets all of the requirements of section
210.12-B of the Tax Law. However, there are not enough facts presented in this advisory opinion
to determine whether new Woerner Industries, Inc.'s property meets all of those requirements. Note

-5
TSB-A-99(2)C
Corporation Tax
January 25, 1999

that if the EDZ-ITC is claimed under section 210.12-B of the Tax Law, new Woerner Industries, Inc.
may not claim the ITC provided in section 210.12 of the Tax Law.
It appears that new Woerner Industries, Inc., may be considered a new business for purposes
of section 210.12(j) of the Tax Law. If so, it may elect to treat a portion of its EDZ wage tax credit
and EDZ-ITC as an overpayment of tax to be credited or refunded as provided in sections 210.19(e)
of the Tax Law and 210.12-B(d) of the Tax Law.

DATED: January 25, 1999

NOTE:

/s/
John W. Bartlett
Deputy Director
Technical Services Bureau

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