Start-up NY: 100% Tax-Free for 10 Years?(startup-ny.com)
startup-ny.com
Start-up NY: 100% Tax-Free for 10 Years?
http://startup-ny.com/
109 comments
I didn't think they were waiving personal income taxes either, but it actually looks like they are:
What is the Personal Income Tax exemption for employees?
Employees of businesses in START-UP NY will pay no income taxes on their wages for the first five years. For the second five years, employees will pay no taxes on income up to $200,000 of wages for individuals, $250,000 for a head of household and $300,000 for taxpayers filing a joint return.
(http://startup-ny.com/faq/#b-11)
What is the Personal Income Tax exemption for employees?
Employees of businesses in START-UP NY will pay no income taxes on their wages for the first five years. For the second five years, employees will pay no taxes on income up to $200,000 of wages for individuals, $250,000 for a head of household and $300,000 for taxpayers filing a joint return.
(http://startup-ny.com/faq/#b-11)
Still, that only applies to NYS/NYC income taxes.
You're still on the hook for federal income tax, which is most of your income tax. (Obviously, the state can't do anything about that!)
You're still on the hook for federal income tax, which is most of your income tax. (Obviously, the state can't do anything about that!)
Right and we're comparing this to other state/s with income tax. What's CA up to now? I'm sure they're the bullseye target.
If low income taxes tipped the scales enough to make it more profitable for businesses, why haven't we seen that already with states that have zero income tax?
Good catch, thanks! Of course, this still doesn't cover capital gains, dividends, or other income...
Don't start your startup in New York or San Francisco. Rents here are twice what they are in more reasonable parts of the country, and you get absolutely nothing in exchange except maybe a slightly-less-shallow talent pool. (Oh, and cockroaches. Lots of cockroaches.) Your employees will be paid twice as well, and your offices will be twice as nice... for free... if you locate yourself outside the expensive parts of the country.
Jane Jacobs is rolling in her grave right now.
NYC is much cheaper than SF and much more pleasant to live in than vast majority of cities in the US. You wouldn't convince me to live anywhere on the west. I would rather make 2x less money in NYC than live in some tract suburb with identical housing, identical shops and identical people. Been there, done that.
But in your tract house, you can watch your giant TV and devote your life to consuming the maximum possible quantity of industrial products! How can you say no!?
I just want to point out that there are large portions of New York that are not New York City
Pedantically, the name of the city is just New York. Given the context ("or San Francisco"), I think it's clear he didn't mean to include Buffalo. "New York or California" would have meant the entire state.
New York (city) native here. Usage of "New York City" for disambiguation by Americans, at least, became increasingly common beginning as far back as the late 19th century. But by the time I was a teenager (1980s) I would say that using "New York City" was ordinarily a reverse shibboleth for not being from New York, all the more so to write "NYC". (Where "New York City" tended to be used was governmental contexts, although "City of New York" is the more proper name of the municipality.)
At the same time, the older generation, such as my parents, used "New York" (or "the city") to mean approximately "Manhattan", a holdover from what the city was before the consolidation with what are now the remaining boroughs. That always seemed old-fashioned to me. I believe you can still see some old subway signs that use "New York" to mean "Manhattan". (Incidentally New York is also the name of the county that is almost but not quite coterminous with the borough of Manhattan.)
When I was growing up, the state was more or less never referred to as simply "New York" by people in the New York the city. It was "New York State", most of which was "Upstate New York" (though that couldn't refer to Long Island, and it was never quite clear where 'Upstate' began).
The reverse shibboleth quality of "New York City"/"NYC" is probably dying out, may be already dead. Nonetheless I find it annoying.
At the same time, the older generation, such as my parents, used "New York" (or "the city") to mean approximately "Manhattan", a holdover from what the city was before the consolidation with what are now the remaining boroughs. That always seemed old-fashioned to me. I believe you can still see some old subway signs that use "New York" to mean "Manhattan". (Incidentally New York is also the name of the county that is almost but not quite coterminous with the borough of Manhattan.)
When I was growing up, the state was more or less never referred to as simply "New York" by people in the New York the city. It was "New York State", most of which was "Upstate New York" (though that couldn't refer to Long Island, and it was never quite clear where 'Upstate' began).
The reverse shibboleth quality of "New York City"/"NYC" is probably dying out, may be already dead. Nonetheless I find it annoying.
For the jaded Manhattanite, upstate ≡ 5 blocks north of the home/office of the person who is speaking. Since I work on 120th, everything north of 125th is upstate.
It's commonly used as shorthand, yes, but jrockway is commenting in response to a startup program that does include Buffalo, saying not to start your business in New York. I think pragone, responding in turn, was just pointing out that "don't start your business in New York [the city]" is not advice that's incompatible with taking advantage of the Start-Up NY program.
Plenty of times I have mentioned being from Rochester, NY when in Florida or California. People there often assume it is a part of or suburb of NYC. Even after I have told them I am a 7 hour drive from the city and never even visited it until after I moved to Washington DC at 26.
Wikipedia even notes the differentiation is important.
"The city is referred to as New York City or the City of New York to distinguish it from the State of New York, of which it is a part"
Wikipedia even notes the differentiation is important.
"The city is referred to as New York City or the City of New York to distinguish it from the State of New York, of which it is a part"
Exactly. Having grown up in between Albany and Saratoga, I'd be excited to see some more tech culture evolve there. I'm not tremendously optimistic, but if Atlanta can do it, why not Albany? (Atlanta being a similarly car-travel-intensive, sprawling pseudo-urban region)
Yes, everyone, please stay out of the Bay Area! Don't even consider locating here, it's a hellhole!
I have a small company in New York, and agree with all of your reasons why it's terrible.
The one advantage besides talent pool (which is a big advantage!) that both New York and San Francisco have, and that's often overlooked, is proximity to customers. If you're in a business where high touch sales are important, or where you need to be able to meet regularly with your customers, it's very difficult to do remotely.
I'm not sure if the cost-benefit really plays out in New York's favor. I often think that for what it costs to live here, it might be cheaper just to fly in twice a month from someplace else. But it's certainly an advantage I underestimated when I started out.
The one advantage besides talent pool (which is a big advantage!) that both New York and San Francisco have, and that's often overlooked, is proximity to customers. If you're in a business where high touch sales are important, or where you need to be able to meet regularly with your customers, it's very difficult to do remotely.
I'm not sure if the cost-benefit really plays out in New York's favor. I often think that for what it costs to live here, it might be cheaper just to fly in twice a month from someplace else. But it's certainly an advantage I underestimated when I started out.
Great point and I think the answer is both. We're in Durham and it's fundamentally cheaper for us to be here and for me to fly to the Bay Area every 90 days for a week (admittedly I have family there still so accommodation is free) However, there are a lot of customers or prospective customers I never met because I have to formally schedule it around a trip. No random meet ups. No "Oh, you guys are just 4 blocks over? To heck with email let's get coffee and explain what we're doing"
Couldn't you put sales in NYC, but everything else in NJ/CT? Lots of banks have finally wised up to that.
BofA sort of did that when I was there; important projects at 42nd/6th, most everyone else, downtown at WFC. (They also had an "offshore" office in Chicago, where I worked. Loved that term.)
Downtown is not quite New Jersey, but Midtown certainly seems to be the hotness these days.
Downtown is not quite New Jersey, but Midtown certainly seems to be the hotness these days.
...unless you're looking for investment cash.
[deleted]
Depends on the kind of company you want to build.
The data proves that the kinds of companies that need a great engineering talent pool and venture capital will tend to hail just a couple of locations.
I'm not saying there aren't exceptions. There are. But in an endeavor where the failure risk is so high in the most optimal of circumstances, I wouldn't add another risk factor like location into the mix.
Just my thoughts.
The data proves that the kinds of companies that need a great engineering talent pool and venture capital will tend to hail just a couple of locations.
I'm not saying there aren't exceptions. There are. But in an endeavor where the failure risk is so high in the most optimal of circumstances, I wouldn't add another risk factor like location into the mix.
Just my thoughts.
All of this may be true, or not true, but as far as geography is concerned, the #1 thing is to be near your customers. Do you know why Microsoft was first based in Albuquerque, NM of all places? Because that's where their biggest customer, MITS, was based.
http://en.wikipedia.org/wiki/History_of_Microsoft
http://en.wikipedia.org/wiki/History_of_Microsoft
You mean New York City. There is a whole state outside of NYC that is great for start-ups.
This applies to all of New York State. Taxes aren't low, but cost of living is definitely very low. There's lots of Universities upstate too (both to colocate with, and to try to hire talented grads from).
There's not just lots of universities upstate, but some really good universities (Cornell, Syracuse, RIT, Rochester, UB, Albany, RPI off the top of my head)
Nonsense. New York is not nearly as bad as SF for rent. I know someone who just rented a studio in the heart of lower Manhattan for $1500 and that includes heat and water. On top of that you don't need a car or Uber or any of that. Unlimited subway pass and/or a bike or CitiBike membership and you're set. That is absolutely manageable for a tech professional and well worth it for all the benefits of living here and access to opportunities. If you're doing a startup you're probably not that concerned with income taxes in the first few years. The one real downside is that office space is pretty expensive.
And I've lived here almost a year now and have never had a cockroach in my apartment, or even so much as a silverfish in the bath tub.
And I've lived here almost a year now and have never had a cockroach in my apartment, or even so much as a silverfish in the bath tub.
$1500? Sounds like they got lucky. Streeteasy shows only 3 apartments for rent for less than $1500 and one is an SRO. (http://streeteasy.com/nyc/for-rent/downtown/rental_type:frbo...)
I'm sure you can find a really tiny non legal space in Chinatown or similar but I'm not sure I would call that a bargain.
I'm sure you can find a really tiny non legal space in Chinatown or similar but I'm not sure I would call that a bargain.
And chinatown is chock full of roaches and rats due to the restaurants dumping cooking oil and garbage into the streets. You get what you pay for.
$1500, does that include the cockroaches and bed bugs? Because you better believe it.
This program is largely focused on economic development in New York State outside of NYC. In NYC the program actually carries additional restrictions, while in Upstate NY it is easier for Universities to apply to designate space, and for companies be approved.
Unlike NYC, in Upstate NY rent and required salaries are lower - it's a great place to start a company (though I may be a bit biased).
Unlike NYC, in Upstate NY rent and required salaries are lower - it's a great place to start a company (though I may be a bit biased).
Forget rent. In Upstate New York buying is cheaper than renting. There's an idea for a starting bonus: we'll give you the downpayment on your house.
Not everyone wants to buy a house in a potentially illiquid market to work somewhere, unless they're already really committed, or lack foresight.
This is pretty awesome, and it seems to apply to New York City too:
- In New York City, Long Island and Westchester County, businesses must be start-ups or one of a number of broadly defined “high technology” businesses.
But this looks like a major caveat:
- Participation in START-UP NY does not necessarily require that your business be on or next to a campus, but it must be located on property affiliated with a university.
That's a very "interesting" requirement. I wonder how it will work in practice? What does it mean for a property to be "affiliated"?
Edit: here are the 3 NYC locations: http://startup-ny.com/properties/new-york-city-properties/
- In New York City, Long Island and Westchester County, businesses must be start-ups or one of a number of broadly defined “high technology” businesses.
But this looks like a major caveat:
- Participation in START-UP NY does not necessarily require that your business be on or next to a campus, but it must be located on property affiliated with a university.
That's a very "interesting" requirement. I wonder how it will work in practice? What does it mean for a property to be "affiliated"?
Edit: here are the 3 NYC locations: http://startup-ny.com/properties/new-york-city-properties/
Those 3 locations (all at SUNY Downstate Medical Center in Brooklyn) are "representative of the types of properties that may be available following submission of an application by the relevant university/college and approval by ESD and/or the Start-Up Approval Board". So, you could work with any university in NYC, not just SUNY Downstate (although the campus is a really nice spot for startups as well!)
NYU Poly operates incubators at Jay St/MetroTech in Brooklyn and Varick St in Manhattan. Columbia has a biotech incubator (AUDOBON) in Washington Heights. Cornell has 22k ft^2 in Google's building in Chelsea. All of those sounds like they would qualify (if you could get the right people on board)
NYU Poly operates incubators at Jay St/MetroTech in Brooklyn and Varick St in Manhattan. Columbia has a biotech incubator (AUDOBON) in Washington Heights. Cornell has 22k ft^2 in Google's building in Chelsea. All of those sounds like they would qualify (if you could get the right people on board)
I'm curious if SUNY gets what it wants and is allowed to close LICH whether they'd hang on to some of the space and try to get research into the area.. That's a huge tract of land (and I'd like to see it not sit completely vacant for a few years)
NYU-Poly has another incubator spot further up Jay St in DUMBO as well, looks like a nice space from the 15 minutes I've spent inside.
NYU-Poly has another incubator spot further up Jay St in DUMBO as well, looks like a nice space from the 15 minutes I've spent inside.
agreed!
I'm a bit confused about the "need to work in a university provisioned space". Theres so many ways i'd rather interact with / collaborate with folks at universities than use their office space. Though If that meant I could have zero pay wells for papers I need to look up occasionally, that could be tempting!
I'm a bit confused about the "need to work in a university provisioned space". Theres so many ways i'd rather interact with / collaborate with folks at universities than use their office space. Though If that meant I could have zero pay wells for papers I need to look up occasionally, that could be tempting!
Read through the regulations, here's the gist:
-- New initiative to establish tax-free zones near and on university campuses
-- Businesses in those zones will operate 100% tax free for 10 years – no income, business, corporate, state, local, sales, property taxes nor franchise fees
-- Employees can be eligible to pay no income taxes as well
-- Business have to be either new startups OR expansion of existing businesses that will bring new jobs to New York state
-- Some industries are prohibited from participating
-- Types of companies targeted are in high-tech – generally engaged in the “design, development, and introduction of new biotech, IT, advanced materials, process engineering, electronic technology, and/or innovative manufacturing process”
-- New initiative to establish tax-free zones near and on university campuses
-- Businesses in those zones will operate 100% tax free for 10 years – no income, business, corporate, state, local, sales, property taxes nor franchise fees
-- Employees can be eligible to pay no income taxes as well
-- Business have to be either new startups OR expansion of existing businesses that will bring new jobs to New York state
-- Some industries are prohibited from participating
-- Types of companies targeted are in high-tech – generally engaged in the “design, development, and introduction of new biotech, IT, advanced materials, process engineering, electronic technology, and/or innovative manufacturing process”
I love startups and hate high taxes, but programs like this are bad.
The rewards go to firms most able to jump through confusing and often quite arbitrary eligibility hoops, or race to collect benefits before they are capped. (In some cases, the firms' skill in doing so is because they helped draft the program or otherwise have connections to the governing authorities.)
Jurisdictions get into bidding wars for the new/relocating firms able to qualify... but continue to subject older/less-politically-connected firms to growth-stunting tax levels. So it's creating incentives to move/restructure/game-the-rules, and an uneven playing field between sources of growth, and advantaging lawyers and policy-arbitrageurs above other more customer-focused innovators.
Just make a fair, welcoming environment for all employers, new and old, big and small, novice and expert, insider and outsider.
The rewards go to firms most able to jump through confusing and often quite arbitrary eligibility hoops, or race to collect benefits before they are capped. (In some cases, the firms' skill in doing so is because they helped draft the program or otherwise have connections to the governing authorities.)
Jurisdictions get into bidding wars for the new/relocating firms able to qualify... but continue to subject older/less-politically-connected firms to growth-stunting tax levels. So it's creating incentives to move/restructure/game-the-rules, and an uneven playing field between sources of growth, and advantaging lawyers and policy-arbitrageurs above other more customer-focused innovators.
Just make a fair, welcoming environment for all employers, new and old, big and small, novice and expert, insider and outsider.
This is why I hate being a democrat ( I know republicans do the same thing but I think hard to argue they have a stronger overall position of lower taxes for everyone). This kind of stuff is embarrassing. It seems like a secondary but big reason taxes are so high is so that politicos can hand out stupid breaks like this to arbitrary groups. Plus the fairly obvious admission that taxes diminish business growth.
I would say that tax breaks are not compelling to startups since they play almost no role. But the employee income tax waiver might be significant.
I would say that tax breaks are not compelling to startups since they play almost no role. But the employee income tax waiver might be significant.
Got excited, then saw that your business must operate from university-affiliated property. Those of us already established in NYC and working from shared spaces, home, etc. are ineligible. Might still be worth it (I don't have the experience to say) but it's not for everyone.
http://startup-ny.com/faq/#b-9
http://startup-ny.com/faq/#b-9
In addition, it has to be at a university that's applied for a "tax-exempt area" (the university has to make the application). This is still interesting, but not a blanket no-tax-for-startups program. It's closer to something like the way some countries set up industrial parks or Special Economic Zones or Free Trade Zones with special tax incentives. Except, any university in the state of NY can apply to turn itself into such a zone, rather than it only being a specific port or industrial park.
Can I freelance for 10 years tax free in NY if I incorporate?
Yes, if you're: at a university. Oh, and if you support the University's mission. Oh, and if the University decides to allow it. Did you read the article? It wouldn't be New York State if there weren't 173 rules and regulations that had to be met before you were eligible.
Ok, not really helpful.
You can't. The point of this program is to bring jobs to New york. You need to develop a forecast of new jobs your startup would bring to New York, which gets reported and reviewed on a regular basis. The penalties for not meeting those forecasts would be determined by your sponsoring university, which can include losing your tax free status for a year or getting kicked out of the program.
The regulations around this program aren't particularly onerous from reading the regulations document. You need to establish an understanding with a sponsoring university that your company will both benefit the community, the school's academic mission, and bring new jobs to New York. There are some reporting requirements, but that seems like a paltry ask compared to ~40-50% tax savings on profit and no income tax.
You can't. The point of this program is to bring jobs to New york. You need to develop a forecast of new jobs your startup would bring to New York, which gets reported and reviewed on a regular basis. The penalties for not meeting those forecasts would be determined by your sponsoring university, which can include losing your tax free status for a year or getting kicked out of the program.
The regulations around this program aren't particularly onerous from reading the regulations document. You need to establish an understanding with a sponsoring university that your company will both benefit the community, the school's academic mission, and bring new jobs to New York. There are some reporting requirements, but that seems like a paltry ask compared to ~40-50% tax savings on profit and no income tax.
Clever, both financially and psychologically. If you plan on leaving after 10 years consider this, after a decade you will have built your entire logistics, business partnerships, network, staff, and support system in NYC. Moving out will be very difficult. You won't want to.
After 10 years, it's somebody else's problem - you should be on a beach sipping a cool drink!
I suspect most people understand the hook and motive of NY for doing this.
Then you can just create a new, younger start-up and acquire the older one. Taxes fixed at 0.
Is NY trying to race to the bottom?
Is NY trying to race to the bottom?
and this is bad, why?
Chris Norstrom isn't experssing an opinion, he's analyzing the talent of NY in attracting startups and making sure they stay there.
HN isn't a tribune for opinions but a tribune for learning and deconstructing how the (tech) world evolves. Unfortunately on the internet, everyone thinks everyone is interested in sharing layman opinions or political POVs, but we already have Facebook for that.
HN isn't a tribune for opinions but a tribune for learning and deconstructing how the (tech) world evolves. Unfortunately on the internet, everyone thinks everyone is interested in sharing layman opinions or political POVs, but we already have Facebook for that.
It's really interesting, funny and ironic that in a liberal, pro-tax-the-hell-out-of-everyone, government-knows-best state the best tool they can think of to entice businesses to set roots in the state is the elimination of income tax. Friggin hilarious. I almost got happy thinking that they started to understand but quickly realized it's a bait-and-switch. They are going to shaft these businesses one way or the other eventually and most-certainly after the ten year mark passes.
As a New Yorker, I think this sucks.
We already pay high taxes and if somebody gets a tax break that means all the rest of us will pay even more.
We already pay high taxes and if somebody gets a tax break that means all the rest of us will pay even more.
Better the tax breaks go to startups and new businesses than to bureaucracies and large corps.
There currently seems to be no shortage of startups in NYC, even without these tax breaks. And if a company only comes to NY because of the tax breaks, they might leave when the tax breaks expire.
I had the same thought until I realized that Human capital is a lot harder to move than buildings. Yes, it's possible to move a company away from a city, but 10 years is a long time. Long enough that a company would lose a ton of employees by moving out of state.
What about your average, everyday, not new, small business? If low taxes are good all of the sudden, why not lower them for everybody?
Make taxes higher, I say. I hope to one day have a New York City entirely funded by its full-time residents, so we can stop pretending to care about tourists.
A huge percentage of full-time residents work in the tourist industry (e.g., hotels, theaters, museums, etc.). And a lot of NYC business sectors would be much smaller without the tourist population, like restaurants and retail stores. Without the tourists, there would be a lot of unemployed New Yorkers.
The tears... they just aren't coming.
Why? What about tourists makes New York so intolerable for you? Is your desk in Times Square?
Their collective inability to stay on the pedestrian side of the Brooklyn Bridge. One time, I saw a couple getting married in the bike lane! WTF?
Wow, I can see how that must ruin your life and make the entire city intolerable.
Brooklyn Bridge is basically second only to Times Square in terms of tourist nonsense. If you bike you really ought to be taking the Manhattan Bridge.
Brooklyn Bridge is basically second only to Times Square in terms of tourist nonsense. If you bike you really ought to be taking the Manhattan Bridge.
Is there a provision that actually raises some tax along with this tax break?
it can't be higher than Vancouver, BC.
Tax Payable on Earning 150k:
$$20,127 CAD (New York) $45,624 CAD (Vancouver, BC) 1.07 (USD/CAD)
Tax Payable on Earning 150k:
$$20,127 CAD (New York) $45,624 CAD (Vancouver, BC) 1.07 (USD/CAD)
Is that $45K total Canadian taxes on it or just what you pay to BC?
$150K CAD ($140K USD) in NYC will result in you paying ~$58K CAD ($55K USD) in taxes between City, State and Federal.
$150K CAD ($140K USD) in NYC will result in you paying ~$58K CAD ($55K USD) in taxes between City, State and Federal.
Where I live (The Netherlands) that would be 52%, so $78,000. Sweden is even worse with 57% ($85,500), but the Swedish have way better incentives like (almost) free education/healthcare etc.
The hidden fine print is that you have to affiliate with a university and support that university's mission. I wonder how loose they'll be in interpreting that support. Does "providing internships to students every summer" count, or will it need to be more substantial?
The following is not sarcastic: be more cynical. What would you want, if you were a university president? Startup branding. They want you to walk around talking about how SUNY-whatever is where the startup culture is at.
a href="http://i-lab.harvard.edu/experiential-learning/startup-scram... Whatever do you mean? /a
It's more substantial. Each state university school is earmarked for specific areas, and candidate companies are selected based on fit with each schools mission.
The idea is to build more integrated links with the universities. It's intended to help drive benefits similar to the successful model used by the SUNY College of Nanoscale Science and Engineering to partner with the semiconductor industry.
Note that this is really designed to benefit NY outside of NYC.
The idea is to build more integrated links with the universities. It's intended to help drive benefits similar to the successful model used by the SUNY College of Nanoscale Science and Engineering to partner with the semiconductor industry.
Note that this is really designed to benefit NY outside of NYC.
Why not just take the same money, and reduce taxes for all businesses, rather than favoring this, that or the other sector.
Italy does this a lot: incentives for biotech startups founded by Sardinian women under 35, or German speaking Italians over 50 with shoe companies, or whatever other silly thing some politician decides is a good idea. It creates incentives for people who are adept at navigating the bureaucracy and finding where the government money is directed, rather than simply getting on with business.
Italy does this a lot: incentives for biotech startups founded by Sardinian women under 35, or German speaking Italians over 50 with shoe companies, or whatever other silly thing some politician decides is a good idea. It creates incentives for people who are adept at navigating the bureaucracy and finding where the government money is directed, rather than simply getting on with business.
Because tax breaks are the products politicians sell: http://youtu.be/TruCIPy79w8 (relevant portion about 5:28 in but it's all worth watching)
(Because it's not on the front page)"START-UP NY is a groundbreaking new initiative from Governor Andrew M. Cuomo that will provide major incentives for businesses to relocate, start up or significantly expand in New York State through affiliations with public and private universities, colleges and community colleges. Businesses will have the opportunity to operate state and local tax-free on or near academic campuses, and their employees will pay no state or local personal income taxes. In addition, businesses may qualify for additional incentives."
Wow. As a former resident of NYS, this is incredible. Income tax in the state is really high and this seems like a good way to spark development.
Wow. As a former resident of NYS, this is incredible. Income tax in the state is really high and this seems like a good way to spark development.
I wonder what the trade-off is. I mean, business income taxes are generally a bad idea anyway, and it's great to see a state make a move toward eliminating them, but they would also need a way to offset lost revenue. Higher taxes on 10+ year businesses?
Perhaps they plan to make it up in volume, presumably from the increase in business / economic activity that will occur from businesses starting up / moving to NY
um...silicon valley already has this covered: you only pay taxes on revenues. (badam CHING).
profits, actually. But yes, "pre-revenue" companies have little to worry about in terms of corporate-level income taxes. Of course, if one of these pre-revenue startups gets gobbled up a la Instagram, then the founders and investors end up with large personal income tax bills—which are not affected by the NY policy. And yes, I realize your original comment was a joke, but it does raise a relevant point about the impact (or lack thereof) of the NY policy.
SF and WA State have essentially a gross receipts tax, so there's some tax on revenue :(
Don't employees in SV still have to pay state taxes on their salaries?
Startups in DC are exempt from many taxes for 5 years (and no capital gains on holdings older than 5 years). Makes sense that states would be competing for entrepreneurs.
[deleted]
Let say the person is not a US citizen. They recently incorporated (C-Corp or LLC) in a different state (e.g. Delaware). They're a one/two-person tech startup until forseeable future (e.g. building SaaS on the side). Are they eligible for this? (They might not be physically in US)
As a startup CEO, I don't really care about income taxes. Most tech startups get acquired or fail before profitability. I care about personal capital gains tax. Give me a personal capital gains tax exemption and I'm in. I love Hudson.
>As a startup CEO, I don't really care about income taxes. Most tech startups get acquired or fail before profitability. I care about personal capital gains tax. Give me a personal capital gains tax exemption and I'm in. I love Hudson.
only if you are rich enough that you don't have to pay yourself.
The rest of us have gotta pay income taxes on all the money we take out to live on until we sell out. Really, it doesn't matter if that money comes from revenue, if you are bootstrapping like I am, or from investors, if you are funded. You've gotta pay income taxes on the money you take out.
Personally? I'd rather have higher capital gains than income taxes. I've gotta pay income taxes while I'm poor; I won't have to pay capital gains until I sell the company, and at that point, hopefully, I'll be rich and have a much lower marginal value for each additional dollar.
only if you are rich enough that you don't have to pay yourself.
The rest of us have gotta pay income taxes on all the money we take out to live on until we sell out. Really, it doesn't matter if that money comes from revenue, if you are bootstrapping like I am, or from investors, if you are funded. You've gotta pay income taxes on the money you take out.
Personally? I'd rather have higher capital gains than income taxes. I've gotta pay income taxes while I'm poor; I won't have to pay capital gains until I sell the company, and at that point, hopefully, I'll be rich and have a much lower marginal value for each additional dollar.
I didn't get the impression that this tax break was on personal income tax, but corporate income tax. So you would only get a corporate income tax break if your company has a profit.
I was recently in the situation where I had to pay a ton of capital gains tax on an acquisition, even though my company never really had a profit, and therefore paid no corporate income tax.
But I agree. Not having to pay personal income tax would be sweet. You need to go to NH or TX for that.
I was recently in the situation where I had to pay a ton of capital gains tax on an acquisition, even though my company never really had a profit, and therefore paid no corporate income tax.
But I agree. Not having to pay personal income tax would be sweet. You need to go to NH or TX for that.
It's both.
I wonder, if, and how MA and Boston might respond? NYC is probably a bigger competitor than San Francisco is for getting start-ups in the region only because of proximity.
Could these be great money-laundering opportunities as well ;)? Establish a chain of start-ups, convert black money to white, tax free!
Isn't this why people incorporate in Delaware? I don't really see the point of this.
People incorporate Delaware because of Delaware's well-codified, well-understood corporate law, that simplifies things like investments, M&A and the like.
Incorporating in Delaware doesn't exempt you from NYC income tax if you do all your business in NYC.
Incorporating in Delaware doesn't exempt you from NYC income tax if you do all your business in NYC.
That's embarrassing. But then again, I'm CA incorporated so I guess I never really understood the legal implications of extra-state incorporation. Thanks for clearing that up!
Wow! Does this in include NYC?
It looks like it does so long as you pair up with a CUNY school. It looks like the New York City region goes up to Westchester county
What about Income Tax and Payroll Tax? That is more important for employees.
From the FAQ:
Employees hired for and whose jobs are certified as net new jobs in a tax-free area will pay no state or local income taxes for the first five years. For the second five years, employees will pay no taxes on income up to $200,000 for individuals, $250,000 for a head of household and $300,000 for taxpayers filing a joint return. There is an annual cap per business on the number of employees that qualify for this exemption and an annual cap statewide of 10,000 net new jobs (i.e., there will be a maximum of 10,000 tax-free jobs after year one, 20,000 tax-free jobs after year two, etc.)
Employees hired for and whose jobs are certified as net new jobs in a tax-free area will pay no state or local income taxes for the first five years. For the second five years, employees will pay no taxes on income up to $200,000 for individuals, $250,000 for a head of household and $300,000 for taxpayers filing a joint return. There is an annual cap per business on the number of employees that qualify for this exemption and an annual cap statewide of 10,000 net new jobs (i.e., there will be a maximum of 10,000 tax-free jobs after year one, 20,000 tax-free jobs after year two, etc.)
The bulk of these are federal, and therefore unaffected by state & local policies. Agreed that they are much larger costs than state & local taxes for many/most startups.
Guessing that none of these tax-free zones will be in New York City.
Okay but the rents must be cheaper than Vancouver, BC right? Taxation must be lower too?
I signed up and planning to move there IF this is not one of those 'too good to be true' deal that ends up in snow flakes.
The tax rates in BC is insane both as an employee and employer. The cost of hiring an employee because of taxation and other social welfare benefits in an attempt to become more 'Netherlandly' forces down salary for software engineers and designers. What makes it worse the scarcity of such jobs forces engineers to compete with each other on the non-paid overtime one can work to become 'invaluable'. Plenty of software sweatshops here in BC, where a nurse or a manager at mcdonalds find more stability and higher pay (when you count the unpaid overtime).
Not to mention that up to 40% of any money you make goes to federal government and the BC government still trying to pay off the loans from holding the winter olympics.
Not to mention the special taxes on rent, food, bars, everything.
If the door opens, I'm going to be the first in line to get to NY if the tax thing turns out to be true. I hear New Yorkers are mean and cold, that's totally fine with me, I'd rather have someone admit they are an asshole and not hide behind it, rather than try to deny it to keep some false image as the 'warmest part of Canada and the whole world' thing. I've been part of this hypocrisy too long.
I signed up and planning to move there IF this is not one of those 'too good to be true' deal that ends up in snow flakes.
The tax rates in BC is insane both as an employee and employer. The cost of hiring an employee because of taxation and other social welfare benefits in an attempt to become more 'Netherlandly' forces down salary for software engineers and designers. What makes it worse the scarcity of such jobs forces engineers to compete with each other on the non-paid overtime one can work to become 'invaluable'. Plenty of software sweatshops here in BC, where a nurse or a manager at mcdonalds find more stability and higher pay (when you count the unpaid overtime).
Not to mention that up to 40% of any money you make goes to federal government and the BC government still trying to pay off the loans from holding the winter olympics.
Not to mention the special taxes on rent, food, bars, everything.
If the door opens, I'm going to be the first in line to get to NY if the tax thing turns out to be true. I hear New Yorkers are mean and cold, that's totally fine with me, I'd rather have someone admit they are an asshole and not hide behind it, rather than try to deny it to keep some false image as the 'warmest part of Canada and the whole world' thing. I've been part of this hypocrisy too long.
New York is not synonymous with New York City.
There's a whole other state outside of NYC. In fact, many of us don't even like the city.
There's a whole other state outside of NYC. In fact, many of us don't even like the city.
Mind blown. I'm one of those ignorant Canadians that they constantly try to keep in the woods and deny the existence.
I live in Rochester, NY. When I moved to Washington DC, two friends who grew up just outside of DC always said I was a "New Yawker" in a NY City accent. With DC being 4 hours from NYC, I said then they must be as well because since I grew up 7 hours drive from the city and they grew up only 4 hours drive from the city.
Western NY, where I am from, is in the Finger Lakes region. It is full of rolling hills and long lakes. There are several cities here but many, many more pastoral small towns, much like New England. The "tall" part of NYS is home to Adirondacks region which is full of east coast sized mountains and small rustic towns, plus lots of wilderness areas. Adirondack park could actually fit Glacier, Yosemite, the Great Smoky Mountains, Yellowstone and the Grand Canyon Nationals parks all inside its borders. (Although that is a bit of a misnomer--there are towns, roads, businesses and homes technically inside the park's boundaries. Some of those parks listed have nothing but parkland inside of them.)
I should say that between Buffalo, Syracuse and Rochester, I snobbishly say that I always refer to Rochester as nowhere near as boring as Syracuse or as depressing as Buffalo.
I never even went to NYC until I was 26 and by then I had been to England several times, 8 or 9 US states and 6 or 7 other major US cities.
Editorials time: I don't like NYC. Many of the people are extremely egotistical about their city, it's loud but not in a good way, crowded, dirty as hell and there are lots of shady areas. Granted it has a lot to offer but I feel the good/bad ratio is much worse than other cities. Washington DC for example is damn near as powerful and culturally rich yet isn't anywhere as bad to look at or dangerous.
Also, don't worry, plenty of people here in Rochester think Canada is pretty much Toronto and tundra, with some weird area near New England that wants to be France again. They technically know Canada goes all the way to the west coast, but but they don't really think about it.
Western NY, where I am from, is in the Finger Lakes region. It is full of rolling hills and long lakes. There are several cities here but many, many more pastoral small towns, much like New England. The "tall" part of NYS is home to Adirondacks region which is full of east coast sized mountains and small rustic towns, plus lots of wilderness areas. Adirondack park could actually fit Glacier, Yosemite, the Great Smoky Mountains, Yellowstone and the Grand Canyon Nationals parks all inside its borders. (Although that is a bit of a misnomer--there are towns, roads, businesses and homes technically inside the park's boundaries. Some of those parks listed have nothing but parkland inside of them.)
I should say that between Buffalo, Syracuse and Rochester, I snobbishly say that I always refer to Rochester as nowhere near as boring as Syracuse or as depressing as Buffalo.
I never even went to NYC until I was 26 and by then I had been to England several times, 8 or 9 US states and 6 or 7 other major US cities.
Editorials time: I don't like NYC. Many of the people are extremely egotistical about their city, it's loud but not in a good way, crowded, dirty as hell and there are lots of shady areas. Granted it has a lot to offer but I feel the good/bad ratio is much worse than other cities. Washington DC for example is damn near as powerful and culturally rich yet isn't anywhere as bad to look at or dangerous.
Also, don't worry, plenty of people here in Rochester think Canada is pretty much Toronto and tundra, with some weird area near New England that wants to be France again. They technically know Canada goes all the way to the west coast, but but they don't really think about it.
Eliminating sales tax isn't that big a benefit either: SASS, social, or other popular startup types would not pay much of this anyway (on purchases of desks, computers, etc?).
Property tax benefits could be sizable, though many bootstrapped startups don't have this for a couple of years anyway.
Cutting franchise taxes provides a small benefit that would probably help all startups.
As others have pointed out, the non-tax costs of being in an expensive city like NYC are substantial. And don't forget, NY isn't waiving personal income taxes—so if your startup does hit a homerun, they'll take their pound of flesh on the back end.
For some startups (like the rare one with high anticipated sales tax costs), this program might be enough to tip the scales in favor of locating in NY. For most startups, however, state/local tax cuts in the first 10 years are just not that big a deal. As the saying goes: don't let the tax tail wag the dog.
Looking at the policy from a macro perspective, it looks a lot like what Swiss cantons do to negotiate tax breaks for a limited time based on anticipated future tax revenues and job creation. Also seems a lot like what Ireland has done to build up its tech sector (and been chastised for of late: see Apple, Google, etc.). So it could be produce benefits (for NY), but it would of course pull talent from other regions, thereby reducing the net benefit.