August 27, 2013

New Law May Bring Startups to Cornell, New York State

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As classes start, students will not be the only thing returning to upstate New York college campuses this fall.

The region could also see new businesses thanks to Start-Up NY, a bill that will create tax-free zones on and near college campuses in the state, according to Charlie Kruzansky, assistant vice president of the Office of State Government Relations.

Under the bill, certain types of businesses — start ups, businesses expanding within New York and businesses relocating to New York from another state — will be able to locate in areas across New York where they would be exempt from paying property tax, sales tax and business or corporate taxes.

The bill, previously known as Tax-Free N.Y., was introduced in May by Gov. Andrew Cuomo (D-N.Y.), and passed by the New York Legislature before the end of the session this year, according to The Associated Press. Cuomo signed the bill into law on June 28 in Purchase, N.Y.

According to Cuomo, Start-Up NY is a “game changer” that will use colleges and universities in the state to help boost the New York economy.

“Start-Up New York … utilizes private partnerships with New York’s higher education system to create jobs and spur economic development in areas of the state that have been depressed for decades,” Cuomo said in a letter June 26.

According to Kruzansky, Cornell can apply to create a tax-free zone on or near campus where student-owned businesses would be eligible to settle. The student-owned businesses do not have to work directly with the University, but have to “benefit from the research [or] teaching,” he added.

“To receive these tax breaks, the company has to be in a business that is related to a field of study or research at the university,” he said. “It has to have some relationship.”

Zachary Shulman ’87 J.D. ’90, senior lecturer of management and acting director of [email protected], which helps promote entrepreunership on campus, said Cuomo’s plan could affect Cornell and Ithaca “very positively.”

“It’s a huge advantage for businesses to locate in and around the University. … [It] creates more income and revenue and generates wages for employees to spend on the local economy,” Shulman said. “The more small businesses in Ithaca, the better the economy is.”

Shulman said that student businesses could also benefit by not having to pay the sales, property or corporate income taxes that businesses normally pay. Furthermore, student businesses could hire students and maintain a strong connection between the University and recent alumni, he said.

“In my ideal world, students would start a business while they’re here and then keep it here when they graduate,” he said.

Kruzansky echoed Shulman’s sentiments, saying the bill could create new employment opportunities that could keep entrepreneurial faculty at Cornell. Furthermore, these opportunities could attract students interested in start-ups to the University, he said.

For current Ithaca residents, however, there might be a cost to the additional new the bill could bring. People who do not support the bill say the migration of new people moving into upstate New York communities will create an additional tax burden on current residents paying for public services.

According to Gary Ferguson, executive director of the Downtown Ithaca Alliance, Ithaca could lose revenue from tax-free zones. He added, however, that this burden could be ameliorated somewhat by placing these businesses throughout the community.

“When you look at this holistically, there’s an opportunity for projects to be located on campus, near campus or in the community, wherever it makes sense,” Fergeson said. “That way, not only the tax burden, but also the job and investment benefits, can be spread in a way that makes sense for all.”

In addition to granting tax immunity to new businesses in these areas, the bill also includes a provision that would exempt employees of new businesses from paying income tax for five years and from paying income tax the following five years up to a certain wage, according to the bill.

According to Kathryn Boor ’80, dean of the College of Agriculture and Life Sciences, another concern with implementing the bill is “to ensure that we carefully avoid competing with exisiting businesses in our region.”

Boor added, however, that by making areas near college campuses tax free, the bill creates a “true incentive” for new businesses to move to New York and for existing businesses to expand their operations.

For CALS, she said, there is an “enhanced opportunity for our entreprenurial faculty members to develop start-up companies, either on their own or with external partners.”

Kruzansky added that certain CALS programs could benefit from the bill.

“The Geneva Experiment Station (part of Cornell Cooperative Extention in CALS) could be a hub of new agricultural businesses and make Geneva a more desirable place to work and live,” Kruzansky said.

Overall, according to Shulman, Cornell could benefit greatly from Cuomo’s bill.

“I cannot think of any downside for the University at all,” Shulman said.

Ferguson, however, said that there must be careful planning for these benefits to reach everyone, even beyond the Cornell community.

“I think there is a great opportunity for this program to provide benefits for everyone, including the broader community, but it’s going to take some time. It’s going to take some careful thinking to make it all happen,” he said.

Original Author: Caroline Flax