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SECTION 16-V
New York state business incubator and innovation hot spot support act
Urban Development Corporation Act 174/68 (UDA) CHAPTER INTRO
§ 16-v. New York state business incubator and innovation hot spot
support act. 1. (a) The corporation is authorized, within available
appropriations, to issue requests for proposals once per fiscal year to
provide grants pursuant to subdivisions five and six of this section for
the purposes established under this act. The corporation may designate
entities, which upon application meet the requirements of subdivision
two of this section as New York state incubators, and may provide grants
and assistance as provided under subdivisions five and six of this
section to such designated entities. "New York state incubator" shall
mean a business incubation program which also provides physical space or
which is a virtual incubation program that has been designated upon
application by the corporation as a New York state incubator pursuant to
subdivisions two and three of this section and which thereby becomes
eligible for benefits, support, services, and programs available
pursuant to such designation. Provided however, that virtual incubators
which provide assistance to eligible businesses not in residence in one
physical location, shall submit a plan of operation which sets forth the
maximum number of eligible businesses to be served and their geographic
distribution.

(b) From among the qualified "New York state incubators", the
corporation is further authorized, within available appropriations, to
designate applicants as "New York state innovation hot spots." An
incubator receiving a "New York state innovation hot spot" designation
shall be eligible for the benefits under section thirty-eight of the tax
law, subparagraph eighteen of paragraph (a) of subdivision nine of
section two hundred eight of the tax law, subdivision eleven of section
two hundred nine of the tax law, paragraph thirty-nine of subsection (c)
of section six hundred twelve of the tax law, paragraph one of
subdivision (d) of section one thousand one hundred nineteen of the tax
law, and paragraph thirty-five of subdivision (c) of section 11-1712 of
the administrative code of the city of New York.

2. Requirements for designation. (a) An entity wishing to be
designated as a New York state innovation hot spot or as a New York
state incubator pursuant to this section shall be located in New York
state and shall have been in existence or otherwise in operation for a
period of at least three fiscal years prior to the current fiscal year,
or demonstrate continuity of staffing, program, and purpose showing
continuation through another auspice or governing entity, and shall have
demonstrated a connection to regional sources of innovation and
expertise, and that it meets the goals of creating jobs and incubating
businesses with survival rates in excess of average startups, and that
the program has a strategic plan to continue to meet such goals for the
three years succeeding designation and that commits the program to
implementing best practices. Such demonstration shall include a
commitment by the sponsor to continue to maintain the program for at
least three years after such designation, and to provide any reporting
information that the corporation shall require.

(b) In determining whether an entity shall be designated as a New York
state innovation hot spot or New York state incubator, the corporation
shall require that the entity meet the requirements of subparagraphs (i)
and (ii) of this paragraph and may consider whether the entity has
developed the programs, services, and attributes in subparagraphs (iii)
through (xvi) of this paragraph:

(i) institutional stability and long term viability, indicated by: the
sponsor's commitment to financially and programmatically maintaining the
incubator for at least two years in addition to the current fiscal year;
receipt of non-state public and private grant and/or other revenue
sources including property rentals and program fees that are or have
proven to be predictable and reliable; and manageable debt service;

(ii) a strategic plan that describes the impact on the regional
entrepreneurial environment that the incubator is intended to have and
commits the incubator to best incubation practices and describes a
defined process that accelerates commercialization and development for a
client company or entity through provision of technical assistance,
direct mentorship, entrepreneurial education, and business development
services, including development of a business plan and markets, aid in
development of the management team, product, customers, and local or
regional supply chain partners, access to investment, and launching of a
successful business which will employ New Yorkers;

(iii) an integrated array of services which includes management
guidance, technical assistance, consulting, mentoring, business plan
development, aid in creation of the business entity, and ongoing
counseling;

(iv) opportunities for clients to network, collaborate with other
business programs, and gain access to services, including through such
programs as the small business development center, the local or area
chamber of commerce or other business association, programs of the small
business administration, and/or other similar business organizations,
associations, and programs;

(v) access to capital via referral or other arrangements with
financial institutions, venture capitalists, angel investors, investment
funds managed or financed by private entities or state or local economic
development organizations, or other similar or equivalent capital
sources, evidenced by written agreements, memorandums of understanding,
letters of intent, or other endorsements acceptable to the corporation,
and including readying clients for financial meetings and interviews;

(vi) aid in accessing markets, via bid assistance or access programs
that may include but are not limited to literature review, establishment
of a resource documents room (physical or virtual), opportunity
notification of local, state, and federal governmental and private
opportunities, and identification of and introductions to potential
first customers;

(vii) physical office space and/or laboratory space and/or
manufacturing space under a written agreement for a period not to exceed
five years for any individual incubator client;

(viii) policies requiring participation by clients in the incubator
program, including disqualification or suspension from the program for
failure to participate;

(ix) criteria for acceptance and graduation from the program or
physical space, and terms and conditions for ongoing relationships, if
any, between the incubator and the client;

(x) at least fifty percent of the total incubator budget provided from
sources other than tenant rents and fees and in-kind support from the
sponsoring entity, and must be from sources other than New York state
government agencies;

(xi) an independent advisory council or similar body that includes one
or more executive officers of firms that have graduated from the
incubator, local economic development professionals, and individuals
with business and technology expertise in areas appropriate to the
sector or concentration of clients, and the mission and goal of the
incubator;

(xii) a professional management and service delivery team with
experience, expertise, or credentials in management, entrepreneurship,
business development, or other equivalent areas;

(xiii) access by clients to mentoring, advisory, or educational
services, including classroom teaching, from individuals who have
successfully created, grown or managed businesses or are lawyers,
professional accountants, or individuals who have been in business at an
executive level for at least five years;

(xiv) evidence that the incubator is a center of entrepreneurial
activities of a city, region, or distressed portion thereof, as
documented by programs and activities coordinated with county or local
economic development organizations, investor and financial clubs or
institutions, or student or youth-oriented entrepreneurial activities;

(xv) a partnership with other incubators in the region to offer
services and opportunities for entrepreneurs and leverage regional
economic development assets; and

(xvi) a plan to recruit minority- and women-owned businesses for
location and participation with the incubator program.

(c) The corporation, subject to appropriations provided for this
purpose, may approve and designate ten New York state incubator hot
spots. Such designees will be required to demonstrate an affiliation
with and the application support of at least one college, university or
independent research institution, and that its programs and purposes are
consistent with regional economic development strategies.

3. Designation. (a) The corporation may designate applicants that meet
the requirements of subdivision two of this section as New York state
innovation hot spots or as New York state incubators.

(b) As a condition of maintaining designation, each incubator shall
annually submit to the corporation in a manner and according to a
schedule established by the corporation:

(i) updated information requested by the corporation pursuant to
subparagraph (iii) of paragraph (a) of subdivision two of this section;

(ii) its strategic plan, as updated along with a brief description of
its success in meeting the goals of its strategic plan;

(iii) a statement that the items listed in paragraph (b) of
subdivision two of this section and, in the case of New York state
innovation hot spots, paragraph (c) of subdivision two of this section
are still applicable to the operations of the incubator, or any change
in applicability;

(iv) a list of business enterprises served by the incubator, and in
the case of New York state innovation hot spots, those clients certified
as a "qualified entity" eligible for tax incentives under section
thirty-eight of the tax law; and

(v) such additional information as the corporation may require.

(c) The corporation shall design simplified forms to aid in the
submission of the data required in this subdivision, which may be
submitted electronically. Such forms shall state the purposes of the
required data submissions.

(d) The corporation shall evaluate the operations of the New York
state innovation hot spot or the New York state incubator using methods
including but not limited to site visits, reports pursuant to specified
information, and review evaluations. If the corporation is unsatisfied
with the progress of a New York state innovation hot spot or a New York
state incubator, the corporation shall notify such incubator of the
results of its evaluations and the findings of deficiencies in the
incubator's operations and shall allow such incubator to remedy such
findings in a timely manner. For New York state innovation hot spots or
New York state incubators that receive operating grants pursuant to
paragraph (a) of subdivision five of this section, such evaluations
shall include independent peer review and shall take place no less than
once every three years or more frequently at the discretion of the
corporation. Such independent peer review shall result in a written
report that includes programmatic and fiscal evaluation of the
incubation program and recommendations for improvement.

(e) Notwithstanding any other provision of law to the contrary, a
qualified entity that has previously been designated as a New York state
incubator and has not fully disbursed any grants awarded pursuant to
this section, shall continue being designated as such by the corporation
for an additional three years.

4. Audit. The corporation shall have the authority to audit New York
innovation hot spots, New York state incubators and clients designated
by such hot spots as qualified entities.

5. Grants. (a) Operating grants. A program designated as a New York
state innovation hot spot or as a New York state incubator shall be
eligible for an operating grant in an amount to be determined by the
corporation from funds appropriated to the corporation for such purpose,
provided however that:

(i) Any such grant shall be matched on a two-to-one basis by the
institution receiving the funds and collaborative partners in the form
of cash or in-kind personnel, equipment, material donations, and other
facility and operations expenditures, provided that no more than fifty
percent of such match shall be in-kind;

(ii) A program applying for a grant shall demonstrate financial
stability and long term viability, as provided in subparagraph (i) of
paragraph (b) of subdivision two of this section;

(iii) A grant recipient shall agree to provide data as required to the
corporation and shall agree to conform to best practices as outlined by
state and/or national business incubator associations;

(iv) Failure to abide by the requirements of this subdivision or to
cure a default after review and agreement with the corporation shall
result in loss of the grant and disqualification of the designee as a
New York state innovation hot spot or as a New York state incubator; and

(v) Provided that a portion of the grants shall be awarded to the New
York state innovation hot spots and the New York state incubators.

(b) The corporation shall make entities designated as New York state
innovation hot spots or as New York state incubators aware of
opportunities for funding or grants by or through the corporation or the
department of economic development.

(c) No deduction. In addition to the foregoing requirements, an
incubator sponsor shall agree to dedicate all funds from any grants or
support received pursuant to this subdivision to the operations of the
incubator without deductions for indirect costs of such sponsor. In no
case shall an incubator sponsor agree to provide less than eighty-five
percent of all funds received pursuant to this subdivision to the
operations of the incubator without exception.

6. Other assistance. The corporation may make such other aid,
assistance, and resources available to New York state innovation hot
spots and New York state incubators and their clients as it shall deem
useful and appropriate for the furtherance of the purposes of this act,
including without limitation technical assistance, aid in marketing, aid
in reaching and providing entrepreneurship training opportunities to
such marginalized groups as those composed of individuals who are
minority, female, disabled, or poor, and others, curriculum development,
and other services and resources. The corporation shall also seek
assistance from other state agencies in the development of procurement
and marketing resources and training opportunities for New York state
innovation hot spots and New York state incubators and their clients.

7. Association of incubators. The corporation may consult with a
statewide entity which is a membership association of incubators and
others and which has expertise in providing services to incubators for
the purpose of providing services to entities designated as New York
state innovation hot spots and New York state incubators and to entities
seeking to apply or applying to become New York state innovation hot
spots and New York state incubators or which otherwise are included as
recipients of services pursuant to this section. Such services shall
include advising concerning best practices of incubation and development
of plans to incorporate and integrate such practices, development of
data concerning incubation in this state and recommendations for
improvement, aid in marketing and event sponsorship, and such other
services as the corporation shall deem necessary and appropriate to the
strengthening of business incubation in this state.

8. New York state innovation hot spots may certify clients which meet
the requirements of subdivision nine of this section as qualified
entities eligible for New York state innovation hot spot program tax
benefits pursuant to section thirty-eight of the tax law. Business
enterprises of incubators designated as New York state incubators under
paragraph (a) of subdivision one of this section may be certified by the
New York state innovation hot spot if the incubator has entered into a
memorandum of understanding with such hot spot establishing a process
and threshold for the provision of innovation hot spot benefits to
qualified enterprises or the hot spot is providing demonstrable services
or assistance to the business enterprise in addition to those provided
by the incubator.

9. "Qualified entity" shall mean a business enterprise that is:

(i) in the formative stage of development;

(ii) located in New York state;

(iii) either: (A) any corporation, except a corporation which:

(1) over fifty percent of the number of shares of stock entitling the
holders thereof to vote for the election of directors or trustees is
owned or controlled, either directly or indirectly, by a taxpayer
subject to tax under the following provisions of the tax law: article
nine-A; section one hundred eighty-three or one hundred eighty-four
former section of article nine; or article thirty-three; or

(2) is substantially similar in operation and in ownership to a
business entity (or entities) taxable or previously taxable under the
following provisions of the tax law: article nine-A; section one hundred
eighty-three, one hundred eighty-four, former section one hundred
eighty-five or former section one hundred eighty-six of article nine;
former article thirty-two; article thirty-three; article twenty-three,
or would have been subject to tax under such article twenty-three (as
such article was in effect on January first, nineteen hundred eighty) or
the income (or losses) of which is (or was) includable under article
twenty-two; or

(B) a sole proprietorship, partnership, limited partnership, limited
liability company, or New York subchapter S corporation that is not
substantially similar in operation and in ownership to a business entity
(or entities) taxable, or previously taxable, under article nine-A of
the tax law, section one hundred eighty-three, one hundred eighty-four,
former section one hundred eighty-five or former section one hundred
eighty-six of article nine of the tax law, former article thirty-two or
article thirty-three of the tax law, article twenty-three of the tax law
or which would have been subject to tax under such article twenty-three
(as such article was in effect on January first, nineteen hundred
eighty) or the income (or losses) of which is (or was) includable under
article twenty-two of the tax law; and

(iv) is certified by a New York state innovation hot spot as being
approved to locate in, or be part of a virtual incubation program
operated by, such New York innovation hot spot.

10. The corporation may establish guidelines concerning this program
to implement the purposes of this act.