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Zoned out

State policy change may end tax credits

May 17, 2009
By ZACH SUBAR, The Leader-Herald

GLOVERSVILLE - Anthony Bauer opened his restaurant, 391 South Main, in 2007, knowing he would likely get tax credits for his business through the state's Empire Zone program.

After applying for them, he began receiving the credits in 2008. Money began flowing into his business, and the credits provided an incentive to keep his business in a relatively economically depressed area.

"I would have sooner opened my business in Saratoga, but I lived here and I wanted to make the area nicer," Bauer said.

Article Photos

The Leader-Herald/Bill Trojan

Anthony Bauer, the owner of 391 South Main in Gloversville, poses for a photo outside the restaurant on Thursday. The restaurant receives tax credits through the Empire Zone program.

Now, he must wait to receive the tax credits in 2009. A policy change, announced by Gov. David Paterson's office April 15, requires the Empire State Development Corp. to examine all businesses that receive Empire Zone benefits and determine whether they met the job creation and investment goals to be recertified. Certain investment ratios for any new applicants for tax credits were also changed.

Empire State Development Corp. spokeswoman Katie Krawczyk said the changes are intended "to provide more a strategic focus to the Empire Zone program, improving both cost-effectiveness and accountability." But local businesses and accountants say the state is taking money out of business owners' pockets they had been counting on.

"The unfortunate thing is those who need the credits to survive in New York state aren't going to receive the money until they approve them, which is going to be months away, and in the meantime, they have to pay the tax," said Elmer Washburn, a partner at West & Co. CPAs P.C. in Gloversville.

The state, he said, was trying to get out of debt, but in the process was not thinking about its small businesses.

"New York state's broke-they don't have the money," Washburn said. "Man, it's nasty."

The state's 85 Empire Zones have more than 8,000 certified businesses, which employ more than 300,000 people. Business groups have said the state may be able to save itself millions of dollars by decertifying some businesses, but it will do so by changing the program rules and delaying important tax credits for many other businesses.

Krawczyk said her office would likely have Empire Zone retention certificates-documents that businesses will receive if they are deemed eligible for the credits-ready for businesses no later than June 19.

That means businesses such as Bauer's will need to wait until then before they know if they will receive the credits. Bauer already filed his taxes claiming the credits, but now he must refile his taxes with the retention certificates in order to actually claim them.

Bauer said his business is thriving, and no matter what happens, it would make it through this challenge. As long as the restaurant eventually receives the benefits, he said, he will be content. It is the uncertainty that is difficult for him to take.

"It would be nice if I could have the benefits afforded to me that I expected when I opened my business," Bauer said.

Part of the policy change means the Empire Zone program will end in 2010, not 2011 as previously planned.

However, Fulton County Economic Development Corp. Marketing Director Lisa McCoy, who helps administer the Gloversville Empire Zone, said the state could revamp the program at that time or create something new.

McCoy said the Gloversville zone, which now encompasses much of downtown Gloversville as well as the Johnstown Industrial Park, the Crossroads Industrial Park and the Crossroads Business Park in Johnstown, has 38 businesses in it.

Amsterdam-Florida-Glen Empire Zone Coordinator Fred Quist said 91 businesses qualify for Empire Zone benefits in Amsterdam, Fonda, Canajoharie, Mohawk, Fultonville and business parks in Florida and Glen.

"There are a lot of misconceptions out there about the program," McCoy said.

Some complaints about the program's ineffectiveness are unfounded, she said. Those who receive the benefits are not simply exempt from paying taxes, she said-their tax credits decrease over time, and they are eventually assessed at 100 percent of what they would normally be taxed at without the credits.

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Businesses are not merely taking advantage of the program, she said-the credits are based on jobs that are created, rather than jobs the businesses promise they will create. Generally, she said, businesses do not come into the area, take the credits and leave.

The Empire Zone program offers the following incentives and tax credits to businesses:

Wage tax credit.

Investment tax credit.

Sales tax refund.

Real property tax abatement.

Utility rate reductions.


Tax reduction credit.

Real property tax credit.

Sales tax exemption.

Zach Subar can be reached at



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