COVID-19 Capital Costs Tax Credit Program Frequently Asked Questions

A. OVERVIEW

1. What is the COVID-19 Capital Costs Tax Credit Program?

The COVID-19 Capital Costs Tax Credit Program (the Program) offers tax credits to small businesses that incurred costs to comply with public health or other emergency orders or regulations related to the COVID-19 pandemic, or to generally increase safety through infectious disease mitigation during 2021 and 2022.

2. What is the goal of the Program? 

The Program was created to provide financial assistance to small businesses in order to offer relief from and reduce the duration of the economic burden caused by the COVID-19 pandemic.

3. How much funding is available under the Program?

In total, there is a maximum of $250 million available for tax credits under the Program.

4. Who is administering the Program?

The Program is administered by Empire State Development (ESD), the state’s chief economic development agency, which then offers tax credit certificates to eligible business entities whose applications are approved. Businesses that receive tax credits must then apply to the State Department of Taxation and Finance (DTF) to claim their credit.

B. BUSINESS ELIGIBILITY REQUIREMENTS

5. What is a “business entity” under the program?

A business entity is a sole proprietor, partnership, limited liability company, or a corporation (C-Corp or S-Corp) with its own federal employer identification number (FEIN), or in the case of a sole proprietor, a social security number.

A related business entity, with common ownership, but operating under a different FEIN, is generally considered a separate business entity.

6. What does it mean that, to be eligible, a business entity must be an eligible “small business?”

To be eligible, a business entity must be a small business, which in the context of this program, means an independently owned and operated business with less than 100 full time equivalents (FTEs) and gross receipts of less than $2.5 million.

7. What does it mean that, to be eligible, a small business must be “independently owned and operated?”

A business concern must independently manage and control the day- to-day operations of its own business through its ownership and management, without undue influence by an outside entity or person that may have an ownership and/or financial interest in the management responsibilities of the small business.  

Independently owned does not include a publicly traded entity, or a small business that is five percent or more owned, directly or indirectly, by a publicly traded entity.

8. What types of “businesses” may be eligible for the program?

To be eligible, a business must be a small business as defined above and have incurred qualified COVID-19 expenses of at least $2,000 between January 1, 2021 and December 31, 2022.  Qualified expenses must be paid on or before March 31, 2023.

9. Where must a small business be located to be eligible for the program?

Eligible small businesses must be operating at a location or locations within New York State.  

10. What other eligibility requirements apply to the program?

To be eligible, businesses must also meet the following requirements: 

  • Businesses must be in substantial compliance with State health laws and directives. 
  • Businesses must not owe past due state taxes or local property taxes unless the business is making payments and complying with an approved binding agreement with the taxing authority.

11. If my business received Federal assistance such as a U.S. Small Business Administration Payroll Protection Program (PPP) loan, Economic Injury Disaster Loan (EIDL), Restaurant Revitalization Fund (RRF), am I eligible to participate in this program?

Yes. Federal assistance from those programs does not disqualify a business from this program.

12. If my business received State assistance such as a New York Forward loan or a COVID-19 Pandemic Small Business Recovery grant, am I eligible to participate in this program?

Yes, however, if your business received grant assistance from the COVID-19 Pandemic Small Business Recovery Grant Program and grant proceeds were used to pay for certain COVID-19 expenses, then those expenses would not qualify for this Program.

Businesses that participated in the COVID-19 Pandemic Small Business Recovery Grant Program will need to attest that no qualified COVID-19 capital costs incurred between January 1, 2021 and March 31, 2021 were included in this Program if such costs were previously paid for with proceeds from the  New York State COVID-19 Small Business Recovery Grant Program.  

C. BENEFIT ELIGIBILITY AND CALCULATION

13. How is the tax credit calculated?

A business is eligible for a tax credit of 50% of qualified expenses, up to a maximum of $50,000 of expenses and a $25,000 tax credit.  

14. What are considered qualified expenses?

Qualified expenses are costs incurred between January 1, 2021 and December 31, 2022, and paid for on or before March 31, 2023 for the following items:

  1. supplies to disinfect and/or protect against COVID-19 transmission;
  2. restocking of perishable goods to replace those lost during the COVID-19 pandemic;
  3. physical barriers and sneeze guards;
  4. hand sanitizer stations;
  5. respiratory devices such as air purifier systems installed at the business entity's location;
  6. signage related to the COVID-19 pandemic including, but not limited to, signage detailing vaccine and masking requirements, and social distancing;
  7. materials required to define and/or protect space such as barriers;
  8. materials needed to block off certain seats to allow for social distancing;
  9. certain point of sale payment equipment to allow for contactless payment;
  10. equipment and/or materials and supplies for new product lines in response to the COVID-19 pandemic;
  11. software for online payment platforms to enable delivery or contactless purchases;
  12. building construction and retrofits to accommodate social distancing and installation of air purifying equipment but not for costs for non-COVID-19 pandemic related capital renovations or general "closed for renovations" upgrades;
  13. machinery and equipment to accommodate contactless sales;
  14. materials to accommodate increased outdoor activity such as heat lamps, outdoor lighting, and materials related to outdoor space expansions; and
  15. other costs as determined by the department to be eligible under this section; provided, however, that "qualified COVID-19 capital costs" do not include any cost paid for with other COVID-19 grant funds as determined by the commissioner.

15. Are purchases made to have employees work remotely and communicate with clients contact free considered acceptable costs?

Yes, valid expenses that were made to support employees working remotely would be eligible for the program.

16. What is meant by “gross receipts” for purposes of the $2.5 million gross receipts requirement in the small business definition?

The annual gross receipts figure you report in your application should come from your tax documents and be the gross receipts figure for your fiscal year that includes December 31, 2021.

D. APPLICATION PROCESS 

17. How do I apply for the Program?

There will be a multi-step application process as follows:

  1. Fill out a required eligibility screening tool to determine if your business qualifies for the program.
  2. Once the full application is available you will be notified by email and will need to fill out and submit the completed application, including documentation to show proof of expenses.

Step 1 includes a compliance review check with the Department of Taxation and Finance (DTF) before a business is authorized to apply. To be pre-approved as an authorized applicant, a business may not owe past due state taxes unless the business is making payments and complying with an approved binding payment agreement with the DTF. 

Authorized applicants will be notified when the application portal is open. It is anticipated that the portal will be available in the fall of 2022.

18. What documentation will I need to apply?

You will need to provide proof of expenses in a form and manner prescribed by ESD showing that qualified expenses claimed in the application were paid on or before March 31, 2023.

For purposes of this Program, paid shall mean that the vendor of any item or items indicated in paragraph 9 above  has received  payment for such item or items from the applicant.

Proof of expenses may include an original invoice, legible photocopy thereof, or other record, or some combination thereof, identifying the qualified expense paid by the applicant.

Supporting documents provided as proof of expense should identify the payee, the amount paid, proof of payment, the date incurred, and include a description of the item purchased or service received that shows the amount was for a qualified expense. Documents for expenses may include the following:

  • Canceled checks or other documents reflecting proof of payment/electronic funds transferred
  • Cash register tape receipts
  • Account statements
  • Credit card receipts and statements
  • Invoices showing the bill was paid

A combination of supporting documents may be needed to substantiate all elements of an expense.

Copies of the documents must be uploaded at time of application. An application will not be considered complete and approved without all the necessary supporting documentation uploaded.

All file uploads are secure and protected.

19. Will I be required to show proof of expense for every item being claimed? 

Proof of expense will be required for every expense item over $1,000. A random sample of items less than $1,000 will be selected and proof of expense required for the selected items.

E. TAX CREDIT PROCESS

20. If I meet all Program eligibility criteria, am I guaranteed to receive tax credits under this program?

No. The State budget allocated a maximum of $250 million in available tax credits. If and when this allocation is exhausted, business entities will no longer be able to receive tax credit certificates. Business entities are encouraged to apply to the program as soon as possible.

21. How do I use the tax credit certificate I received from Empire State Development to claim my tax credit?

You will submit your tax credit certificate to the Department of Taxation and Finance (DTF) when filing a tax return.

The tax credit can be claimed in the taxable year in which the tax credit certificate is issued to your business.

The certificate will include the ownership information provided by the business in the application. It is very important that the ownership table in the application be completed correctly to include all owners of the applicant business, their tax identification or social security numbers, and the percentage ownership for each owner. The percentages must add to 100%. If the information is not accurate, it will likely cause a delay in receiving the credit.