START-UP NY

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The START-UP NY program is a New York State initiative that offers tax benefits to eligible businesses, such as exemptions from certain taxes or credits for others.
What are the main aims and objectives?
The main aim of START-UP NY is to create jobs and foster entrepreneurial activity in New York State. In particular the goal of the program is to attract new businesses to upstate New York. The program also seeks to leverage the academic expertise and resources of higher education institutions to support the commercialization of academic research and the growth of new businesses.  
How does the program work?

The main features of the START-UP NY program include tax-based incentives and academic partnerships to help new and expanding businesses. The program offers tax-free status for ten years to eligible businesses that locate to designated areas on or near eligible university or college campuses. Startups may also apply to the Tax Department for refunds of other taxes including sales and use tax, and excise tax on telecommunication services rendered within the tax-free zone.  

Employees of startups that qualify for the program are eligible for Personal Income Tax Exclusion for the first five years of employment. In the subsequent five years employees will pay no taxes on income up to $200k for individuals, $250k for a head of household and $300k for a joint return. The number of employees that qualify for this across the state is capped at 10,000 jobs per year.  

The program also provides access to resources, including incubator programs, to help businesses succeed in New York State.  

To be eligible for START-UP NY companies must meet the following criteria: 

  • Be a new business in New York State, or an existing New York business relocating to or expanding within the state 

  • Partner with a New York State college or university 

  • Create new jobs and contribute to the economic development of the local community 

Although the program lasts for 10 years, the maximum a company can spend within an individual tax-free zone is 2 years. After that point they must find another tax-free zone within New York state to join in order to keep the benefits.  

What is the overall cost?
The State of New York disclosed in 2016 that $53 million was spent on advertising and marketing during the first 4 years of programs operation. It has also been reported that administrative costs were high with $29 spent on salaries and other expenses related to the program. This does not include the lost revenue incurred through the tax incentives. However, it could be argued that the companies involved in the program would not have set up in New York so the cost of those figures remains neutral.  
How was it implemented?
The program was launched by Governor Andrew Cuomo in 2014 and is overseen by the Empire State Development Agency, which is responsible for promoting growth and economic development in New York state. It is delivered in collaboration with university and college campuses across New York, the full list can be accessed here.  
What impact has been measured?

A report in 2016 found that the University of Buffalo had sponsored 67 companies who pledged to invest around $50 million and create more than 1,600 new jobs. These companies included a mixture of new startups and mature businesses with some moving from other states and even other countries. By contrast, the results in Rochester were less positive with only 11 companies participating with a promise to create 350 net jobs over a five-year period. Regional variation was also evident in the company loss rate with 54 percent of startups dropping out in Long Island compared to 24 percent across the state.  

Although there is some evidence of wider economic impact it should be noted that the number of new jobs were pledged by companies and there has been no subsequent update on the figure actually achieved.  

As of 2021 there were over 300 companies involved in START-UP NY. 

What lessons can be learned?

The comparative success in Buffalo is attributed to having a strong economic development team in place already with strong relationships with local economic development partners. The university was able to quickly identify suitable space that was immediately available. Likewise, the size and scope of the university was an advantage.  

As of 2016 only 36 eligible colleges had participated out of 76 with some schools being more constrained in providing space to businesses while others had failed to find partnerships.  

The COVID-19 pandemic created some issues for the program as it had not been designed to account for home-working. As a result of lockdown policies, employees of START-UP NY businesses face unexpected income tax bills as the exemption required them to work from the tax-free zones.  

Critics of the program have compared it to “corporate welfare” and argued that it is a wasteful subsidy that creates an uneven playing field for existing businesses.  

In 2023, Governor Kathy Hochul pledged to revamp the program and expand eligibility to include a wider range of innovation businesses.  

 

CURATED BY

Tom Hancock

Research Associate
Global Entrepreneurship Network
United Kingdom