WAGE TAX CREDIT

The program allows a wage tax credit, under the Tax Law for the franchise taxes on business, bank and insurance corporations and the personal income tax, to taxpayers certified pursuant to Article 18-B of the General Municipal law, based on the number of full-time employees (limited to those who receive economic development zone wages for more than one-half of the tax year) they employ in their Empire Zone (EZ) business. This credit is $1,500 for targeted employees paid at least 135% of the minimum wage specified in section 652 of the Labor Law and $750 for other individuals employed in jobs located in an area designated or previously designated as an EZ. This credit may be taken for up to five consecutive years, beginning with the first tax year in which EZ wages are paid.  (Starting on January 1, 2001, the amounts will double from $750 to $1,500 and from $1,500 to $3,000 for non-targeted and targeted employees, respectively)

To qualify for the credit, the average number of individuals (excluding general executive officers) employed full-time by the taxpayer in the state and the EZ, or an area previously designated as an EZ must exceed the average number of individuals (excluding general executive officers) employed full-time in the state and EZ, or area subsequently or previously designated as an EZ in the four years (or a shorter period, if full-time employment was for a period of less than four years) immediately preceding the first tax year in which EZ wages are paid. 

The amount of the tax credit and carryovers of the credit deducted may not exceed 50% of the tax imposed under the franchise taxes (the 50% of the tax imposed on insurance corporations is subject to the limitation of section 1505) or personal income tax (with the tax being computed without regard to any credit provided by franchise tax or personal income tax provisions). Any portion of the credit not deducted by reason of the above may be carried forward and deducted in the following year or years. For franchise tax, the credit or carryover of the credit also may not reduce the tax to an amount less than: (1) the tax due on the minimum taxable income base or the fixed dollar minimum, whichever is higher for business corporations; (2) the alternative minimum tax for banking corporations; (3) the fixed dollar minimum for insurance corporations.

In lieu of carrying over the unused wage tax credit, a new business taxed as a business corporation (Article 9-A), or the owner of a new business taxed under personal income tax (Article 22), located in an EZ may elect to treat 50% of the wage tax credit carryover as a tax overpayment in the tax year the credit was allowed and have the overpayment refunded or credited against any outstanding tax liability. 

Example 1:
In 1994, Wonder Widget Works, Inc. (Wonder), at its facility located in an EZ, employed both targeted and non-targeted individuals. In the first year that Wonder qualified to claim the wage tax credit, it hired and paid EZ wages to 10 individuals who were targeted employees paid at least 135% of the minimum wage and 30 non-targeted individuals paid the minimum wage. Its first year credit is $37,500 computed as follows: 

1.      $1,500 x 10 targeted employees paid at least 135% of the minimum
wage = $15,000

2. $750 x 30 non-targeted employees paid the minimum wage = 22,500
   Total Credit Available $37,500 

The first year credit is deducted as follows:

1. Tax imposed pursuant to section 209 (computed without regard to any credits) $10,000
2. Credit deductible (limited to 50% of the tax imposed pursuant to section 209) 5,000
3. Carryover of credit to following year or years ($37,500 less $5,000) $32,500.