What Is the COVID-19 Capital Costs Tax Credit Program?
Understand New York's tax credit for small businesses that made capital investments to comply with public health and safety protocols during the pandemic.
The COVID-19 Capital Costs Tax Credit Program was a New York State initiative that provided financial relief to small businesses for capital expenditures made to comply with public health mandates. The program aimed to lessen the economic strain from investing in structural changes, building upgrades, and other materials to ensure public safety and adapt operations to new health protocols.
Determining Your Eligibility
To qualify, a business had to be an independently owned and operated small business in New York State. This included entities with 100 or fewer employees and gross receipts of $2.5 million or less for the 2021 tax year. These requirements applied to various structures, including sole proprietorships, partnerships, LLCs, and corporations.
A business also had to incur a minimum of $2,000 in qualifying expenses between January 1, 2021, and December 31, 2022. Each entity operating under a separate Federal Employer Identification Number (FEIN) was considered a distinct business for application purposes. The application period for this program closed on September 30, 2023.
Identifying Qualifying Capital Costs
The program defined specific capital costs eligible for the credit, focusing on expenditures to enhance safety and comply with public health orders. Qualifying expenses included permanent structural changes or building retrofits to accommodate social distancing. This also covered installing air purifier systems and other HVAC equipment to improve air quality.
Eligible costs also included machinery and equipment purchased to create a safer environment, such as physical barriers, sneeze guards, and hand sanitizer stations. The program covered equipment for contactless payment systems and expenses for expanding outdoor service areas. Software for online payment platforms that enabled delivery or contactless purchases was also a qualifying expense.
Certain costs were ineligible for the credit, such as operational costs rather than capital investments. For example, recurring purchases of personal protective equipment like masks or cleaning supplies did not qualify. The program also did not cover any cost paid for using other COVID-19 grant funds.
Calculating and Claiming the Credit
The tax credit was 50% of the total qualifying capital costs a business incurred. The program capped the maximum credit at $25,000 per business entity, which corresponds to $50,000 in total qualifying expenses.
To claim the credit, businesses completed an application with Empire State Development (ESD), New York’s economic development agency. This required detailed documentation for expenses incurred between January 1, 2021, and December 31, 2022. These expenses must have been paid for on or before March 31, 2023.
Once ESD approved the application, it issued a tax credit certificate to the business. The business would then claim the credit by attaching the certificate to its annual state tax return to reduce its tax liability. Credits were awarded on a first-come, first-served basis until the program’s $250 million in funds were depleted.