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Purpose

For years, New York State has taken a shoot-at-the-hip approach toward economic development in regard to its use of tax benefits. Their aim has been questionable. Their results, hit or miss. Despite recording $3.13 billion in Corporate Franchise Tax expenditures in 2005 for economic development purposes, the state’s return on investment was marginal. Given this predicament, the Select Committee will review the New York’s  Corporate Franchise Tax (Article 9-A of the Tax Law), with an emphasis on the effectiveness  of various tax benefits and whether they create inequities in the state’s business environment.

Testimony should relate to proposals to modify New York State’s business taxes.  Among the questions that testimony should address are:

• Are the tax benefits associated with the Corporate Franchise Tax doing what they promised to do: creating jobs, promoting economic development and providing the state with an adequate return on investment?
• Are there certain tax benefits provided for larger corporations that small businesses cannot take advantage of or have difficulty receiving? How can a better balance between small and large businesses be achieved?
• How should the Corporate Franchise Tax’s expenditures be structured to better balance the needs of needs of New York’s agriculture, retail and manufacturing sectors?
• What is the best way to use tax benefits to revitalize upstate urban areas?
• What provisions in the Empire Zone program should be preserved, scrapped or replaced to better achieve its missions of job creation and economic development?
• What tax benefits should be added or enhanced to the Corporate Franchise Tax to give New York an edge in attracting business investment?
• Is the Corporate Franchise Tax’s four-way structure, which computes tax liability under four alternative bases, too complex for or unfair for certain businesses?