On Aug. 11, 2022, New York Gov. Kathy Hochul signed the “Green CHIPS” legislation, expanding the benefits available under the existing Excelsior Jobs Program by up to $10 billion.1 The enacted legislation will allow semiconductor manufacturers to apply for enhanced incentives, including state tax credits of up to 7.5% of salaries and wages, 5% of project capital expenditures, and 8% of research and development costs. These credits are awarded annually for up to two 10-year terms with credits available until Jan. 1, 2050.
The Green CHIPS project must be within the semiconductor manufacturing and related equipment and material supplier sector.2 To qualify for the enhanced incentives available under the Green CHIPS legislation, semiconductor manufacturing projects must meet five statutory requirements.
Minimum job creation and capital investment
In order to be eligible, a project must result in the creation at least 500 new jobs with a minimum of $3 billion in qualified investment over a 10-year term (referred to as a phase one project).3 Projects in good standing may enter a second 10-year term (referred to as a phase two project) if the project creates an additional 500 new jobs and spends an additional $3 billion in qualified investment above and beyond the first phase.4
Applicants must submit an approved clean energy plan that mitigates the project’s greenhouse gas emissions and other environmental impacts.5
Workforce and community development
Recipients of the program benefits must commit to significant investments in workforce and community development, including training and education benefits and programs to expand employment opportunity for economically disadvantaged individuals.6
During the project’s construction, not less than the federal prevailing wage must be paid to construction workers.7
15:1 private – public investment (“benefit-cost”) ratio
Green CHIPS projects must result in at least $15 of private investment for every $1 of state investment.8 Private investment includes the value of all remuneration for all new jobs and the value of capital investments made during the program period.9
The existing Excelsior Jobs Program allows applicants to access five fully refundable tax credits over a period of 10 years.10 Applicants must operate predominantly in strategic industries and create a minimum number of net new jobs, which varies by strategic industry. Similar to childcare services, a Green CHIPS project is allowed increased incentives under the Excelsior Jobs Program. Along with these incentives, Green CHIPS projects will also qualify for payment in-lieu-of tax (PILOT) benefits and discounted utility service. The following table outlines these incentives and how they differ from standard (non-green) Excelsior Projects.
The Green CHIPS legislation was signed into law shortly after the enactment of the federal government’s CHIPS and Science Act which included further funding to encourage the development of semiconductor manufacturing in the United States.16 According to the New York Governor’s Office, this legislation “will help the State to conform to the requirements of the federal program, enhancing its competitiveness against other states looking to attract chip manufacturers, all while ensuring this expansion of advanced manufacturing is environmentally sustainable.”17
Safety measures taken by the largest producers of semiconductors (primarily in East Asia) during the pandemic have resulted in an ongoing global shortage of computer chips, exacerbating inflationary pressures, and creating further shortages on goods where the chips are used, including consumer electronics, automobiles, and military equipment. The outbreak of the Russia-Ukraine war has also highlighted the geopolitical risk associated with sourcing strategic inputs from potential areas of conflict. Given that Taiwan and China represent a potential geopolitical flashpoint and are also two of the largest producers of this key component of both civilian and defense hardware, the United States has sought to “reshore” a portion of semiconductor manufacturing to better position itself in case these supply chains are interrupted.
In addition to both substantial federal and state subsidies available to semiconductor manufacturers, New York State also features several potentially attractive sites such as the 1,250-acre White Pine Commerce Park in Onondaga County. Other sites are available at locations that already feature either chip manufacturing or related technology companies, including the Luther Forest Technology Campus in Saratoga County, Marcy Nanocenter in Oneida County, and the Western New York Science & Technology Advanced Manufacturing Park (STAMP) in Genesee County.18 Businesses eligible for the Green CHIPS Excelsior Credit Program should consider applying soon while additional federal funding can be leveraged and attractive sites remain available.
1 Ch. 494 (S. 9467/A. 10507), Laws 2022.
2 N.Y. Econ. Dev. Law § 352.24(a). New York State’s Green CHIPS Program, Empire State Development, Aug. 2022.
3 N.Y. Econ. Dev. Law § 352.24(e).
4 N.Y. Econ. Dev. Law §§ 352.24(e); 353.7.
5 N.Y. Econ. Dev. Law § 352.24(b). This requirement is consistent with the state’s sustainability goals included in the New York State Climate Leadership and Community Protection Act. Ch. 106 (S. 6599), Laws 2019.
6 N.Y. Econ. Dev. Law § 352.24(d).
7 N.Y. Econ. Dev. Law § 352.24(c).
8 N.Y. Econ. Dev. Law § 352.24(f).
9 For this benefit-cost ratio, the numerator is the sum of the following during the period of participation in the program: (i) the value of all remuneration projected to be paid for all net new jobs; (ii) the value of capital investments to be made by the business enterprise; and (iii) all research and development expenditures by the participant in the state. The denominator is the amount of total tax benefits under these provisions that will be used and refunded as well as any state grants provided to the participant. N.Y. Econ. Dev. Law § 352.3-a.
10 N.Y. Econ. Dev. Law § 355; New York State’s Green CHIPS Program, Empire State Development, Aug. 2022.
11 N.Y. Econ. Dev. Law § 355.1.
12 N.Y. Econ. Dev. Law § 355.2.
13 N.Y. Econ. Dev. Law § 355.3.
14 N.Y. Econ. Dev. Law § 355.4. This credit is explained on the Empire State Development website (see New York State’s Green CHIPS Program, Empire State Development, Aug. 2022), but it is not amended by the legislation. Presumably, this is how the state intends to apply this credit to Green CHIPs projects.
15 N.Y. Econ. Dev. Law § 355.7.
16 P.L. 117-167, enacted Aug. 9, 2022.
17 Governor Hochul Signs Transformative Green CHIPS Legislation to Create Jobs and Lower Emissions by Boosting Semiconductor Manufacturing in New York, Office of New York Governor, Aug. 11, 2022.
18 Mark Weiner, “NY lawmakers OK $10B in tax breaks to lure computer chip makers to Clay, other sites.” Syracuse.com, June 6, 2022.
Matthew DiDonato is a State and Local Tax (SALT) practice partner in the New York office and leads the Metro New York SALT practice. He has more than 18 years of public accounting, private industry and legal state and local tax experience.
Iselin, New Jersey
- Technology and telecommunications
- Retail and consumer products
- State and local tax
Jamie C. Yesnowitz
Jamie Yesnowitz, principal serving as the State and Local Tax (SALT) leader within Grant Thornton's Washington National Tax Office, is a national technical resource for Grant Thornton's SALT practice. He has 22 years of broad-based SALT consulting experience at the national and practice office levels in large public accounting firms.
Washington DC, Washington DC
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