New York Register, Volume 38, Issue 10, March 9, 2016
| Jurisdiction | New York |
| Library | New York Register |
| Published date | 09 March 2016 |
| Year | 2016 |
RULE MAKING
ACTIVITIES
Each rule making is identified by an I.D. No., which consists
of 13 characters. For example, the I.D. No.
AAM-01-96-00001-E indicates the following:
AAM -the abbreviation to identify the adopting agency
01 -the State Register issue number
96 -the year
00001 -the Department of State number, assigned upon
receipt of notice.
E -Emergency Rule Making—permanent action
not intended (This character could also be: A
for Adoption; P for Proposed Rule Making; RP
for Revised Rule Making; EP for a combined
Emergency and Proposed Rule Making; EA for
an Emergency Rule Making that is permanent
and does not expire 90 days after filing.)
Italics contained in text denote new material. Brackets
indicate material to be deleted.
Department of Economic
Development
EMERGENCY
RULE MAKING
START-UP NY Program
I.D. No. EDV-10-16-00001-E
Filing No. 205
Filing Date: 2016-02-16
Effective Date: 2016-02-16
PURSUANT TO THE PROVISIONS OF THE State Administrative Pro-
cedure Act, NOTICE is hereby given of the following action:
Action taken: Addition of Part 220 to Title 5 NYCRR.
Statutory authority: Economic Development Law, art. 21, sections 435-
36; L. 2013, ch. 68
Finding of necessity for emergency rule: Preservation of general welfare.
Specific reasons underlying the finding of necessity: On June 24, 2013,
Governor Andrew Cuomo signed into law the SUNY Tax-free Areas to
Revitalize and Transform UPstate New York (START-UP NY) program,
which offers an array of tax benefits to eligible businesses and their em-
ployees that locate in facilities affiliated with New York universities and
colleges. The START-UP NY program will leverage these tax benefits to
attract innovative start-ups and high tech industries to New York so as to
create jobs and promote economic development.
Regulatory action is required to implement the START-UP NY
program. The legislation creating the START-UP NY program delegated
to the Department of Economic Development the establishment of
procedures for the implementation and execution of the START-UP NY
program. Without regulatory action by the Department of Economic
Development, procedures will not be in place to accept applications from
institutions of higher learning desiring to create Tax-Free Areas, or busi-
nesses wishing to participate in the START-UP NY program.
Adoption of this rule will enable the State to begin accepting applica-
tions from businesses to participate in the START-UP NY program, and
represent a step towards the realization of the strategic objectives of the
START-UP NY program: attracting and retaining cutting-edge start-up
companies, and positioning New York as a global leader in high tech
industries.
Subject: START-UP NY Program.
Purpose: Establish procedures for the implementation and execution of
START-UP NY.
Substance of emergency rule: START-UP NY is a new program designed
to stimulate economic development and promote employment of New
Yorkers through the creation of tax-free areas that bring together educa-
tional institutions, innovative companies, and entrepreneurial investment.
1) The regulation defines key terms, including: “business in the forma-
tive stage,” “campus,” “competitor,” “high tech business,” “net new job,”
“new business,” and “underutilized property.”
2) The regulation establishes that the Commissioner shall review and
approve plans from State University of New York (SUNY) colleges, City
University of New York (CUNY) colleges, and community colleges seek-
ing designation of Tax-Free NY Areas, and report on important aspects of
the START-UP NY program, including eligible space for use as Tax-Free
Areas and the number of employees eligible for personal income tax
benefits.
3) The regulation creates the START-UP NY Approval Board, com-
posed of three members appointed by the Governor, Speaker of the As-
sembly and Temporary President of the Senate, respectively. The
START-UP NY Approval Board reviews and approves plans for the cre-
ation of Tax-Free NY Areas submitted by private universities and col-
leges, as well as certain plans from SUNY colleges, CUNY colleges, and
community colleges, and designates Strategic State Assets affiliated with
eligible New York colleges or universities. START-UP NY Approval
Board members may designate representatives to act on their behalf dur-
ing their absence. START-UP NY Approval Board members must remain
disinterested, and recuse themselves where appropriate.
4) The regulation establishes eligibility criteria for Tax-Free Areas.
Eligibility of vacant land and space varies based on whether it is affiliated
with a SUNY college, CUNY college, community college, or private col-
lege, and whether the land or space in question is located upstate,
downstate, or in New York City. The regulation prohibits any allocation
of land or space that would result in the closure or relocation of any
program or service associated with a university or college that serves
students, faculty, or staff.
5) The regulation establishes eligibility requirements for businesses to
participate in the START-UP program, and enumerates excluded
industries. To be eligible, a business must: be a new business to the State
at the time of its application, subject to exceptions for NYS incubators,
businesses restoring previously relocated jobs, and businesses the Com-
missioner has determined will create net new jobs; comply with applicable
worker protection, environmental, and tax laws; align with the academic
mission of the sponsoring institution (the Sponsor); demonstrate that it
will create net new jobs in its first year of operation; and not be engaged in
the same line of business that it conducted at any time within the last five
years in New York without the approval of the Commissioner. Businesses
locating downstate must be in the formative stages of development, or
engaged in a high tech business. To remain eligible, the business must, at
a minimum, maintain net new jobs and the average number of jobs that
existed with the business immediately before entering the program.
6) The regulation describes the application process for approval of a
Tax-Free Area. An eligible institution may submit a plan to the Commis-
sioner identifying land or space to be designated as a Tax-Free Area. This
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plan must: identify precisely the location of the applicable land or space;
describe business activities to be conducted on the land or space; establish
that the business activities in question align with the mission of the institu-
tion; indicate how the business would generate positive community and
economic benefits; summarize the Sponsor’s procedures for attracting
businesses; include a copy of the institution’s conflict of interest guide-
lines; attest that the proposed Tax-Free Area will not jeopardize or conflict
with any existing tax-exempt bonds used to finance the Sponsor; and
certify that the Sponsor has not relocated or eliminated programs serving
students, faculty, or staff to create the vacant land. Applications by private
institutions require approval by both the Commissioner and START-UP
NY Approval Board. The START-UP NY Approval Board is to approve
applications so as to ensure balance among rural, urban and suburban ar-
eas throughout the state.
7) A sponsor applying to create a Tax-Free Area must provide a copy of
its plan to the chief executive officer of any municipality in which the
proposed Tax-Free Area is located, local economic development entities,
the applicable university or college faculty senate, union representatives
and the campus student government. Where the plan includes land or space
outside of the campus boundaries of the university or college, the institu-
tion must consult with the chief executive officer of any municipality in
which the proposed Tax-Free Area is to be located, and give preference to
underutilized properties identified through this consultation. The Com-
missioner may enter onto any land or space identified in a plan, or audit
any information supporting a plan application, as part of his or her duties
in administering the START-UP program.
8) The regulation provides that amendments to approved plans may be
made at any time through the same procedures as such plans were
originally approved. Amendments that would violate the terms of a lease
between a sponsor and a business in a Tax-Free Area will not be approved.
Sponsors may amend their plans to reallocate vacant land or space in the
case that a business, located in a Tax-Free Area, is disqualified from the
program but elects to remain on the property.
9) The regulation describes application and eligibility requirements for
businesses to participate in the START-UP program. Businesses are to
submit applications to sponsoring universities and colleges by 12/31/20.
An applicant must: (1) authorize the Department of Labor (DOL) and
Department of Taxation and Finance (DTF) to share the applicant’s tax in-
formation with the Department of Economic Development (DED); (2) al-
low DED to monitor the applicant’s compliance with the START-UP
program; (3) provide to DED, upon request, information related to its
business organization, tax returns, investment plans, development strat-
egy, and non-competition with any businesses in the community but
outside of the Tax-Free Area; (4) certify efforts to ascertain that the busi-
ness would not compete with another business in the same community but
outside the Tax-Free Area, including an affidavit that notice regarding the
application was published in a daily publication no fewer than five con-
secutive days; (5) include a statement of performance benchmarks as to
new jobs to be created through the applicant’s participation in START-
UP; (6) provide a statement of consequences for non-conformance with
the performance benchmarks, including proportional recovery of tax
benefits when the business fails to meet job creation benchmarks in up to
three years of a ten-year plan, and removal from the program for failure to
meet job creation benchmarks in at least four years of a ten-year plan; (7)
identify information submitted to DED that the business deems confiden-
tial, proprietary, or a trade secret. Sponsors forward applications deemed
to meet eligibility requirements to the Commissioner for further review.
The Commissioner shall reject any application that does not satisfy the
START-UP program eligibility requirements or purpose, and provide writ-
ten notice of the rejection to the Sponsor. The Commissioner may approve
an application anytime after receipt; if the Commissioner approves the ap-
plication, the business applicant is deemed accepted into the START-UP
NY Program and can locate to the Sponsor’s Tax-Free NY Area. Applica-
tions not rejected will be deemed accepted after sixty days. The Commis-
sioner is to provide documentation of acceptance to successful applicants.
10) The regulation allows a business to amend a successful application
at any time in accordance with the procedure of its original application.
No amendment will be approved that would contain terms in conflict with
a lease between a business and a SUNY college when the lease was
included in the original application.
11) The regulation permits a business that has been rejected from the
START-UP program to locate within a Tax-Free Area without being
eligible for START-UP program benefits, or to reapply within sixty days
via a written request identifying the reasons for rejection and offering
verified factual information addressing the reasoning of the rejection.
Failure to reapply within sixty days waives the applicant’s right to
resubmit. Upon receipt of a timely resubmission, the Commissioner may
use any resources to assess the claim, and must notify the applicant of his
or her determination within sixty days. Disapproval of a reapplication is
final and non-appealable.
12) With respect to audits, the regulation requires businesses to provide
access to DED, DTF, and DOL to all records relating to facilities located
in Tax-Free Areas at a business location within the State during normal
business hours. DED, DTF, and DOL are to take reasonable steps to
prevent public disclosure of information pursuant to Section 87 of the
Public Officers Law where the business has timely informed the appropri-
ate officials, the records in question have been properly identified, and the
request is reasonable.
13) The regulation provides for the removal of a business from the
program under a variety of circumstances, including violation of New
York law, material misrepresentation of facts in its application to the
START-UP program, or relocation from a Tax-Free Area. Upon removing
a business from the START-UP program, the Commissioner is to notify
the business and its Sponsor of the decision in writing. This removal no-
tice provides the basis for the removal decision, the effective removal
date, and the means by which the affected business may appeal the re-
moval decision. A business shall be deemed served three days after notice
is sent. Following a final decision, or waiver of the right to appeal by the
business, DED is to forward a copy of the removal notice to DTF, and the
business is not to receive further tax benefits under the START-UP
program.
14) To appeal removal from the START-UP program, a business must
send written notice of appeal to the Commissioner within thirty days from
the mailing of the removal notice. The notice of appeal must contain
specific factual information and all legal arguments that form the basis of
the appeal. The appeal is to be adjudicated in the first instance by an ap-
peal officer who, in reaching his or her decision, may seek information
from outside sources, or require the parties to provide more information.
The appeal officer is to prepare a report and make recommendations to the
Commissioner. The Commissioner shall render a final decision based upon
the appeal officer’s report, and provide reasons for any findings of fact or
law that conflict with those of the appeal officer.
15) With regard to disclosure authorization, businesses applying to par-
ticipate in the START-UP program authorize the Commissioner to dis-
close any information contained in their application, including the
projected new jobs to be created.
16) In order to assess business performance under the START-UP
program, the Commissioner may require participating businesses to submit
annual reports within thirty days at the end of their taxable year describing
the businesses’ continued satisfaction of eligibility requirements, jobs
data, an accounting of wages paid to employees in net new jobs, and any
other information the Commissioner may require. The Commissioner shall
prepare annual reports on the START-UP program for the Governor and
publication on the DED website, beginning April 1, 2015. Information
contained in businesses’ annual reports may be published in these reports
or otherwise disseminated.
17) The Freedom of Information Law is applicable to the START-UP
program, subject to disclosure waivers to protect certain proprietary infor-
mation submitted in support of an application to the START-UP program.
18) All businesses must keep relevant records throughout their partici-
pation in the START-UP program, plus three years. DED has the right to
inspect all such documents upon reasonable notice.
19) If the Commissioner determines that a business has acted fraudu-
lently in connection with its participation in the START-UP program, the
business shall be immediately terminated from the program, subject to
criminal penalties, and liable for taxes that would have been levied against
the business during the current year.
20) The regulation requires participating universities and colleges to
maintain a conflict of interest policy relevant to issues that may arise dur-
ing the START-UP program, and to report violations of said policies to
the Commissioner for publication.
This notice is intended to serve only as an emergency adoption, to be
valid for 90 days or less. This rule expires May 15, 2016.
Text of rule and any required statements and analyses may be obtained
from: Phillip Harmonick, New York State Department of Economic
Development, 625 Broadway, Albany, New York 12207, (518) 292-5112,
email: pharmonick@esd.ny.gov
Regulatory Impact Statement
STATUTORY AUTHORITY:
Chapter 68 of the Laws of 2013 requires the Commissioner of Eco-
nomic Development to promulgate rules and regulations to establish
procedures for the implementation and execution of the SUNY Tax-free
Areas to Revitalize and Transform UPstate New York program
(START-UP NY). These procedures include, but are not limited to, the
application processes for both academic institutions wishing to create
Tax-Free NY Areas and businesses wishing to participate in the
START-UP NY program, standards for evaluating applications, and any
other provisions the Commissioner deems necessary and appropriate.
LEGISLATIVE OBJECTIVES:
NYS Register/March 9, 2016Rule Making Activities
2
The proposed rule is in accord with the public policy objectives the
New York State Legislature sought to advance by enacting the START-UP
NY program, which provides an incentive to businesses to locate critical
high-tech industries in New York State as opposed to other competitive
markets in the U.S. and abroad. It is the public policy of the State to estab-
lish Tax-Free Areas affiliated with New York universities and colleges,
and to afford significant tax benefits to businesses, and the employees of
those businesses, that locate within these Tax-Free Areas. The tax benefits
are designed to attract and retain innovative start-ups and high-tech
industries, and secure for New York the economic activity they generate.
The proposed rule helps to further such objectives by establishing the ap-
plication process for the program, clarifying the nature of eligible busi-
nesses and facilities, and describing key provisions of the START-UP NY
program.
NEEDS AND BENEFITS:
The emergency rule is necessary in order to implement the statute
contained in Article 21 of the Economic Development Law, creating the
START-UP NY program. The statute directs the Commissioner of Eco-
nomic Development to establish procedures for the implementation and
execution of the START-UP NY program.
Upstate New York has faced longstanding economic challenges due in
part to the departure of major business actors from the region. This divest-
ment from upstate New York has left the economic potential of the region
unrealized, and left many upstate New Yorkers unemployed.
START-UP NY will promote economic development and job creation
in New York, particularly the upstate region, through tax benefits
conditioned on locating business facilities in Tax-Free NY Areas. Attract-
ing start-ups and high-tech industries is critical to restoring the economy
of upstate New York, and to positioning the state as a whole to be compet-
itive in a globalized economy. These goals cannot be achieved without
first establishing procedures by which to admit businesses into the
START-UP NY program.
The proposed regulation establishes procedures and standards for the
implementation of the START-UP program, especially rules for the cre-
ation of Tax-Free NY Areas, application procedures for the admission of
businesses into the program, and eligibility requirements for continued
receipt of START-UP NY benefits for admitted businesses. These rules
allow for the prompt and efficient commencement of the START-UP NY
program, ensure accountability of business participants, and promote the
general welfare of New Yorkers.
COSTS:
I. Costs to private regulated parties (the business applicants): None. The
proposed regulation will not impose any additional costs to eligible busi-
ness applicants.
II. Costs to the regulating agency for the implementation and continued
administration of the rule: None.
III. Costs to the State government: None.
IV. Costs to local governments: None.
LOCAL GOVERNMENT MANDATES:
The rule establishes certain property tax benefits for businesses locating
in Tax-Free NY Areas that may impact local governments. However, as
described in the accompanying statement in lieu of a regulatory flexibility
analysis for small businesses and local governments, the program is
expected to have a net-positive impact on local government.
PAPERWORK:
The rule establishes application and eligibility requirements for Tax-
Free NY Areas proposed by universities and colleges, and participating
businesses. These regulations establish paperwork burdens that include
materials to be submitted as part of applications, documents that must be
submitted to maintain eligibility, and information that must be retained for
auditing purposes.
DUPLICATION:
The proposed rule will create a new section of the existing regulations
of the Commissioner of Economic Development, Part 220 of 5 NYCRR.
Accordingly, there is no risk of duplication in the adoption of the proposed
rule.
ALTERNATIVES:
No alternatives were considered in regard to creating a new regulation
in response to the statutory requirement. The regulation implements the
statutory requirements of the START-UP NY program regarding the ap-
plication process for creation of Tax-Free NY Areas and certification as
an eligible business. This action is necessary in order to clarify program
participation requirements and is required by the legislation establishing
the START-UP NY program.
FEDERAL STANDARDS:
There are no federal standards applicable to the START-UP NY
program; it is purely a State program that offers tax benefits to eligible
businesses and their employees. Therefore, the proposed rule does not
exceed any federal standard.
COMPLIANCE SCHEDULE:
The affected State agency (Department of Economic Development) and
the business applicants will be able to achieve compliance with the regula-
tion as soon as it is implemented.
Regulatory Flexibility Analysis
Participation in the START-UP NY program is entirely at the discretion
of qualifying business that may choose to locate in Tax-Free NY Areas.
Neither statute nor the proposed regulations impose any obligation on any
business entity to participate in the program. Rather than impose burdens
on small business, the program is designed to provide substantial tax
benefits to start-up businesses locating in New York, while providing
protections to existing businesses against the threat of tax-privileged
start-up companies locating in the same community. Local governments
may not be able to collect tax revenues from businesses locating in certain
Tax-Free NY Areas. However, the regulation is expected to have a net-
positive impact on local governments in light of the substantial economic
activity associated with businesses locating their facilities in these
communities.
Because it is evident from the nature of the proposed rule that it will
have a net-positive impact on small businesses and local government, no
further affirmative steps were needed to ascertain that fact and none were
taken. Accordingly, a regulatory flexibility analysis for small businesses
and local government is not required and one has not been prepared.
Rural Area Flexibility Analysis
The START-UP NY program is open to participation from any business
that meets the eligibility requirements, and is organized as a corporation,
partnership, limited liability company, or sole proprietorship. A business’s
decision to locate its facilities in a Tax-Free NY Area associated with a ru-
ral university or college would be no impediment to participation; in fact,
START-UP NY allocates space for Tax-Free NY Areas specifically to the
upstate region which contains many of New York’s rural areas. Further-
more, START-UP NY specifically calls for the balanced allocation of
space for Tax-Free NY Areas between eligible rural, urban, and suburban
areas in the state. Thus, the regulation will not have a substantial adverse
economic impact on rural areas, and instead has the potential to generate
significant economic activity in upstate rural areas designated as Tax-Free
NY Areas. Accordingly, a rural flexibility analysis is not required and one
has not been prepared.
Job Impact Statement
The regulation establishes procedures and standards for the administration
of the START-UP NY program. START-UP NY creates tax-free areas
designed to attract innovative start-ups and high-tech industries to New
York so as to stimulate economic activity and create jobs. The regulation
will not have a substantial adverse impact on jobs and employment op-
portunities; rather, the program is focused on creating jobs. Because it is
evident from the nature of the rulemaking that it will have either no impact
or a positive impact on job and employment opportunities, no further af-
firmative steps were needed to ascertain that fact and none were taken.
Accordingly, a job impact statement is not required and one has not been
prepared.
Education Department
EMERGENCY
RULE MAKING
School Receivership
I.D. No. EDU-27-15-00008-E
Filing No. 208
Filing Date: 2016-02-22
Effective Date: 2016-02-22
PURSUANT TO THE PROVISIONS OF THE State Administrative Pro-
cedure Act, NOTICE is hereby given of the following action:
Action taken: Addition of section 100.19 to Title 8 NYCRR.
Statutory authority: Education Law, sections 207(not subdivided), 211-
f(15), 215(not subdivided), 305(1), (2), (20), 308(not subdivided) and
309(not subdivided); L. 2015, ch. 56, subpart H, part EE
Finding of necessity for emergency rule: Preservation of general welfare.
Specific reasons underlying the finding of necessity: The purpose of the
proposed rulemaking is to implement section 211-f of Education Law, as
NYS Register/March 9, 2016 Rule Making Activities
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