Qualified Empire Zone Enterprise (QEZE)

Once a business has been certified in the Empire Zones Program and receives a Certificate of Eligibility, it is eligible to apply for various Empire Zone incentives. Some of these incentives have enhanced requirements that are based o the business' ability to pass an employment test. Certified businesses eligible to receive these enhanced incentives are called a Qualified Empire Zone Enterprise or QEZE. Three tax incentives depend on the business' ability to pass this Employment Test: The Sales Tax Exemption, Tax Reduction Credit, and Real Property Tax Credit. The Sales Tax Exemption is the first tax incentive a business can apply for once it receives the Certificate of Eligibility. All other tax incentives are typically applied for the time the business income tax return is filed.

QEZE Terminology

Benefit Period:

The time period in which a company is eligible to qualify for the QEZE tax incentives.

Test Date:

The date that determines the beginning of a company's Benefit Period.

Test Year:

The company's last taxable year prior to the Test Date.

Base Period:

The Base Period varies by tax incentive and timing of when a company is certified:

For companies certified prior to April 1, 2005, it is the five taxable years immediately preceding the Test Year.

For companies certified on or after April 1, 2005, it follows this schedule:

Sales Tax Exemption:

Tax Reduction Credit:

Real Property Tax Credit:

3 years preceding the Test Year

4 years preceding the year of certification

Employment Number:

The average number of individuals excluding general executive officers that work full-time (or full-time equivalent) for at least half of the business' taxable year. This number excludes employees who worked for a related business or for a related person during the previous 5 years. Employment is calculated on the last day of each quarter.

Employment Test:

There are two different employment tests that depend on when the business is certified:

1. For companies certified prior to April 1, 2005, to meet the employment test, the company's Employment Number in (a) all Empire Zones in NY State must equal or exceed the company's employment in Zones during the five-year Base Period, and (b) the company's employment in NY State outside the Empire Zones must equal or exceed the company's Employment Number in NY State outside the Empire Zones during the Base Period. A company must pass the Employment Test for each year for which QEZE credits are claimed.

2. For companies certified on or after April 1, 2005, to meet the Employment Test, (a) the company's employment in all Empire Zones must exceed the company's Employment Number in all Empire Zones for the Base Period, and (b) the company's Employment Number in NY State must exceed the company's employment in NY State for the Base Period.

New Business Test:

New businesses certified after August 1, 2002 with zero years in the Base Period must pass a New Business Test. For the purposes of the QEZE incentives, a new business is any business entity except one that is substantially similar in operation and in ownership to another taxable business entity within NY State that has filed fewer than 5 NY State tax returns. If there are zero years in the Base Period and the company does not meet the definition of a New Business, it cannot apply for or receive QEZE incentives.