
Start-up NY: 100% Tax-Free for 10 Years? - jbarrec
http://startup-ny.com/
======
gnicholas
Not sure this is anywhere as good as it sounds. Most startups aren't
profitable for several years (if ever), so income tax would not be an issue
during this period. Even after there is income, there would be loss carry-
forwards that would have soaked up income taxes from the first couple of
profitable years. So this probably doesn't produce much benefit for much/most
of the 10 years.

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.

~~~
dworin
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](http://startup-ny.com/faq/#b-11))

~~~
crazygringo
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!)

~~~
jusben1369
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.

~~~
muzz
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?

------
jrockway
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.

~~~
dworin
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.

~~~
silverlake
Couldn't you put sales in NYC, but everything else in NJ/CT? Lots of banks
have finally wised up to that.

~~~
jrockway
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.

------
crazygringo
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/](http://startup-ny.com/properties/new-york-city-
properties/)

~~~
jpwright
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)

~~~
skyebook
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.

------
ajiang
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”

------
gojomo
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.

------
pbreit
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.

------
chrislgrigg
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)

~~~
_delirium
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.

------
skizm
Can I freelance for 10 years tax free in NY if I incorporate?

~~~
cpfohl
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.

~~~
ajiang
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.

------
ChrisNorstrom
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.

~~~
Aco-
and this is bad, why?

~~~
aragot
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.

------
robomartin
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.

------
PaulHoule
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.

~~~
raheemm
Better the tax breaks go to startups and new businesses than to bureaucracies
and large corps.

~~~
greenyoda
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.

~~~
cpfohl
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.

------
dworin
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?

~~~
gametheoretic
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.

~~~
gohrt
a href="[http://i-lab.harvard.edu/experiential-learning/startup-
scram...](http://i-lab.harvard.edu/experiential-learning/startup-scramble")
Whatever do you mean? /a

------
davidw
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.

~~~
tolmasky
Because tax breaks are the products politicians sell:
[http://youtu.be/TruCIPy79w8](http://youtu.be/TruCIPy79w8) (relevant portion
about 5:28 in but it's all worth watching)

------
matthewbadeau
(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.

------
bmmayer1
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?

~~~
m_ke
To qualify you need to start your business in the janitors closet at one of
the amazing SUNY universities, which are conveniently located in the middle of
nowhere.

~~~
greenyoda
There are also locations listed at CUNY (City University of New York) in NYC.

------
logicallee
um...silicon valley already has this covered: you only pay taxes on revenues.
(badam CHING).

~~~
gnicholas
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.

~~~
rdl
SF and WA State have essentially a gross receipts tax, so there's some tax on
revenue :(

------
eli
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.

------
wiradikusuma
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)

------
mikekij
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.

~~~
lsc
>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.

~~~
mikekij
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.

~~~
melvinram
It's both.

------
meddlepal
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.

------
curiousDog
Could these be great money-laundering opportunities as well ;)? Establish a
chain of start-ups, convert black money to white, tax free!

------
javajosh
Isn't this why people incorporate in Delaware? I don't really see the point of
this.

~~~
seehafer
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.

~~~
javajosh
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!

------
mathattack
Wow! Does this in include NYC?

~~~
matthewbadeau
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

------
suyash
What about Income Tax and Payroll Tax? That is more important for employees.

~~~
_delirium
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.)_

------
vishaldpatel
Guessing that none of these tax-free zones will be in New York City.

------
notastartup
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.

~~~
thekevan
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.

~~~
notastartup
Mind blown. I'm one of those ignorant Canadians that they constantly try to
keep in the woods and deny the existence.

~~~
thekevan
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.

~~~
ericd
DC? Not nearly as dangerous? As NY?

~~~
thekevan
I see what you mean. DC had more dangerous areas, but you knew that and stayed
away. NYC seems to have a thinner layer of danger spread around much more of
the city.

