New York small business restaurants impacted by the pandemic may soon be eligible for a New York refundable income tax credit of up to $50,000 under the Restaurant Return-To-Work Tax Credit Program Act (the “Act”). An eligible small business is one that meets each of the following requirements:
Businesses meeting these requirements are eligible to receive an income tax credit of $5,000 for each net new full-time equivalent employee, up to $50,000. Net new full-time equivalent employment is calculated as the difference between the average starting full-time employment and average ending full-time employment. The starting full-time employment is the business’s average full-time equivalent positions between January 1, 2021 and March 31, 2021 and the ending full-time employment is the business’s average full-time equivalent positions between April 1, 2021 and August 31, 2021 or December 31, 2021 (at the discretion of the business). The Act provides that the total credits issued shall be capped at $35,000,000 (reduced from an initial proposal of $50,000,000). Given the number of restaurant businesses impacted by the pandemic and the limited funds available, eligible businesses should apply early. While no timeline has been announced, we anticipate applications to be available beginning this summer.
Restaurant and hospitality businesses should also consider securing recently extended federal income tax incentives, including the Empowerment Zone tax credit and the Work Opportunity Tax Credit (WOTC). Under these programs, businesses that hire and/or employ qualified individuals may receive a credit of up to $9,600 per qualified individual. Empowerment Zone incentives may be especially lucrative for businesses located in certain targeted zones across the country, including New Haven (Connecticut), Camden (New Jersey), Cumberland County (New Jersey), New York (New York), Yonkers (New York), and Syracuse (New York).
1 The Restaurant Return-To-Work Tax Credit Program Act is an article within the Legislature's FY2021-2022 state budget. As of April 13, 2021, the Legislature's FY2021-2022 state budget awaits Governor Cuomo's signature.
2 Full-time equivalent is not defined within the bill but appears to mean full-time employment. There is no indication part-time positions can be aggregated to arrive at a full-time equivalent position.
3 "COVID-19 impacted food services sector” business is a business which is: (a) independently owned and located inside New York City and has been subjected to a ban on indoor dining for over six months and is primarily organized to prepare and provide meals, and/or beverages to customers for consumption OR (b) independently owned and located outside New York City in an area which has been designed by the Dept. of Health as either an orange zone or red zone, for which such designation has been in effect and resulted in additional restrictions on indoor dining for at least 30 consecutive days, and is primarily organized to prepare and provide meals, and/or beverages to customers for consumption.