New York

R&D Tax Credits

New York

The R&D tax credit can help a wide variety of businesses offset and reduce their income tax liability, in addition to providing many other benefits.

New York’s Excelsior R&D program provides a 6% return on research expenses that meet eligibility criteria, and an 8% return for green projects that meet environmental standards.

Life sciences organizations can take advantage of New York State’s Life Sciences Research and Development Tax Credit Program, which provides a refundable credit of up to $500,000 per year for up to three years, at a rate of either 15% or 20%, depending on the number of employees. Companies with 10 or more employees are eligible for a 15% credit, while those with fewer than 10 employees can receive a 20% credit.

To claim New York state tax credits, businesses must submit a consolidated funding application to their respective Empire State Development (ESD) regional office. Upon approval, the business must meet job and investment requirements to receive tax credits. Businesses must file their tax returns on time to claim the credits and submit a performance report within 30 days of the end of the taxable year to receive a certificate of tax credit for succeeding tax periods.

Qualified research activities (QRAs), also known as research and development work, can be categorised into four main areas: improved business component, technological uncertainty, process of experimentation, and technological in nature. The expenses that fall under the umbrella of qualified research expenses (QREs) and contribute to these categories include patents, research and development supplies, salaries for US employees and subcontractors, and hosting costs for off-premise computers and other technology. By conducting QREs in any of these categories, businesses can claim valuable tax credits while advancing innovation and progress in their field.

The Excelsior Research and Development Tax Credit is a valuable incentive for businesses engaged in qualified research activities in New York. Under this program, eligible companies can receive a refundable credit equal to 50% of their corresponding federal research and development tax credit, capped at up to 8% of qualified research expenses (QREs) attributable to New York activity. To qualify for the credit, applicants must operate predominantly in specific industries that create a minimum number of new jobs for the strategic industry or retail jobs and make significant capital investments.

For life sciences organisations, the state offers a Life Sciences R&D Tax Credit that can provide a considerable financial boost. Companies employing more than ten persons are eligible for a 15% credit, while those with less than ten employees can claim a 20% credit on their QREs in New York State. The credit is available for up to three consecutive years, with a limit of $500,000 per year ($1.5 million lifetime cap). Upon approval, the state issues a Certificate of Tax Credit showing the amount of tax credit allowed and the tax year in which the credit may be claimed. It is worth noting that a qualified life sciences company must be a new business to benefit from this program.

R&D Tax Credits in New York

New York offers a strong Research and Development (R&D) tax credit program for businesses.The credit aims to encourage and reward companies investing in innovation and contributing to the growth of technology and the economy. There are two distinct tax credits available for research and development in New York. The Excelsior Jobs Program in New York includes tax credits for jobs, investment, child care services and research and development. The Excelsior R&D program in New York offers a 6% return on eligible research expenditures and 8% return for qualified environment friendly projects. For life sciences organisations, the state offers a Life Sciences Research and Development Tax Credit Program.

To be eligible for New York Research and Development Tax Credit, the businesses must either create or enhance products, processes, or software; have a technological element for research and employ a methodical approach to experimentation.

What Goes into the New York R&D Tax Credit as a Qualified Research Expense?

The New York research and development tax credit allows for businesses to claim a percentage of their qualifying research expenses.

In order for an expense to qualify it must meet specific research criteria:

  1. Products, services, processes, or software must be new or improved in some way 
  2. Uncertainty must be eliminated as a result of the research 
  3. The research must be technological 
  4. Research must include experimentation processes of some nature

The types of expenses that are applicable to claim under the credit include the following:

Wages paid to employees who are directly involved in the performance of research and development activities within the state of New York. This includes payments made to subcontractors involved in the performance of such activities.

Take Advantage of the
R&D Tax Credit with Source Advisors

Most states offer R&D tax credits as well with many of them being more lucrative than the federal credit. At Source Advisors, we can help assess your company’s federal R&D tax credit opportunity and also determine any state R&D tax credit availability. Our team of experienced CPAs, attorneys, engineers, and technology experts helps companies save money and create cash flow with R&D tax credits that can then help drive overall growth.