The revised regulation now defines three new terms added in statute, “eligible training costs”: “software development,” and “clean energy” and updates the definition of stipend. The definitions of “eligible training costs” and “stipend” are updated to allow necessary travel and child care costs as part of the credit.

The revised regulation makes clear that eligible internship programs now include those in software development and clean energy as well as those in life sciences and advanced technology and that a business utilizing the internship component of this program will no longer have to demonstrate that its interns make up less than 50% of its workforce

The revised regulation clarifies that in order to be eligible for the program a business entity must demonstrate that it is either conducting the training itself or having a third-party provider conduct it. The regulation also makes clear that significant capital investment now has to be “related to” the training, not “in connection with.” It also adds, for clarity’s sake, a section setting forth the calculation of the credit which parallels the statutory calculation.

Finally, the revised regulation requires a business entity participating in the program to fill out a post project survey for information tracking purposes.

STATUTORY AUTHORITY:

Section 1 of Part O of Chapter 59 of the Laws of 2015 required the Commissioner of the Department of Economic Development (the “Department”) to promulgate regulations establishing the application process for the Employee Training Incentive Program (“ETIP”). These procedures included the process for applying for tax credits under ETIP, standards for the assessment of applications, and other provisions deemed necessary and appropriate. Part B of Chapter 59 of the Laws of 2019 amended certain aspects of the program which, in turn, are being captured by this rulemaking along with certain other revisions described below.

LEGISLATIVE OBJECTIVES:

The revised rule gives effect to the intention of the legislature in adopting ETIP to encourage employers in strategic industries, characterized by technological disruption and a shortage of potential employees within New York State, to develop talent in New York State through eligible training and internship programs rather than relocating to other regions to secure skilled employees.

NEEDS AND BENEFITS:

The rulemaking is necessary in order to update the existing regulations which govern the program so that they will now conform to recent statutory changes made by the Legislature.

New York suffers from a skills gap in its workforce, resulting in thousands of job vacancies that employers are unable to fill due to a shortage of qualified workers. Without action on the part of the state, employers in industries subject to such shortages of skilled workers may relocate outside of New York in order to retain adequate numbers of skilled employees. This problem is made more acute by the action of other states in the region to create programs to cultivate pools of skilled labor, creating an incentive for employers in New York to relocate jobs outside of the state. To address this problem, ETIP provides tax credit incentives to business entities that conduct or procure eligible training or provide eligible internship programs in advanced technology, life sciences, software development or clean energy.

Business applicants to the program must first establish that they are engaged in a strategic industry, as evidenced by factors such as shortages of skilled employees and technological disruption in the industry. Furthermore, such applicants must demonstrate, among other things, that they themselves will be providing or they will be procuring eligible training from an approved provider or providing an eligible internship program in advanced technology, life sciences, software development or clean energy.

The revised rule updates the administrative aspects of the program to allow for the business entities themselves to receive the tax credit when they provide for such training in house in addition to when they utilize a third party. In addition, it extends the eligible sectors for internship programs under this program to include software development and clean energy internships.

The revised rule also clarifies: 1) that necessary travel and child care service costs may be covered as part of the credit for the skills training and internship components of the program; 2) that a business utilizing the internship component of this program will no longer have to demonstrate that its interns make up less than 50% of its workforce; and 3) that business entities participating in the program will have to complete a post project survey for the Department.

COSTS:

I. Costs to private regulated parties (the business applicants): None. The revised rule will not impose any additional costs to eligible business applicants.

II. Costs to the regulating agency for the implementation and continued administration of the rule: None.

III. Costs to the State government: None.

IV. Costs to local governments: None. The revised rule will not impose any costs on local governments.

LOCAL GOVERNMENT MANDATES:

None. There are no local government mandates associated with ETIP.

PAPERWORK:

The rule updates qualification rules and application procedures for ETIP. The rule entails certain paperwork burdens including materials to be submitted as part of applications for tax credits, additional documents the Commissioner may request from applicants as part of his evaluation of applications, and certain records that must be maintained by program participants for auditing purposes.

DUPLICATION:

The revised rule amends the existing regulations of the Commissioner of the Department of Economic Development, Part 250 of 5 NYCRR. Accordingly, there is no risk of duplication in the adoption of the revised rule.

ALTERNATIVES:

No alternatives were considered with regard to creating a new rule in response to the statutory requirement. The rule updates procedures for business entities to apply to ETIP. This action is necessary in order to clarify how qualifying businesses in strategic industries may receive program benefits and puts the regulations in conformity with the ETIP statute.

FEDERAL STANDARDS:

There are no federal standards applicable to ETIP; it is purely a state program that offers tax benefits to business entities in strategic industries incurring qualifying costs for eligible training or an eligible internship program in advanced technology. Therefore, the revised rule does not exceed any federal standard.

COMPLIANCE SCHEDULE:

The affected agency (Department of Economic Development) and any applicants to ETIP will be able to achieve compliance with the regulation as soon as it is adopted.

Participation in the Employee Training Incentive Program (“ETIP”) is entirely at the discretion of qualifying business entities. Neither statute nor the rule impose any obligation on any local government or business entity to participate in the program. The rule does not impose any adverse economic impact or compliance requirements on small businesses or local governments. In fact, the proposed rule may have a positive economic impact on small businesses. Only small businesses, those with one hundred (100) employees or fewer, are eligible to apply to ETIP for benefits associated with providing an eligible internship program.

Because it is evident from the nature of the rule that it will have either no impact or a positive impact on small businesses and local government, no further affirmative steps were needed to ascertain that fact and none were taken. Accordingly, a regulatory flexibility analysis for small businesses and local governments is not required and one has not been prepared.

The Employee Training Incentive Program is a statewide business assistance program. Strategic businesses in rural areas of New York State are eligible to apply to participate in the program entirely at their discretion. Municipalities are not eligible to participate in the Program. The rule does not impose any special reporting, record keeping or other compliance requirements on private entities in rural areas. Therefore, the rule will not have a substantial adverse economic impact on rural areas nor on the reporting, record keeping or other compliance requirements on public or private entities in such rural areas. Accordingly, a rural area flexibility analysis is not required and one has not been prepared.

The rule updates administrative procedures for business entities to apply to the Employee Training Incentive Program (“ETIP”) for tax credit benefits associated with providing eligible training to their employees, or an eligible internship program in advanced technology, life sciences, software development or clean energy. The program aims to induce employers to provide training in order to cultivate a pool of skilled workers who can meet the requirements for unfilled positions in strategic industries. The rule will not have a substantial adverse impact on jobs and employment opportunities; rather, the program is intended to increase employment opportunities.

Because it is evident from the nature of the rulemaking that it will have either no impact or a positive impact on job and employment opportunities, no further affirmative steps were needed to ascertain that fact and none were taken. Accordingly, a job impact statement is not required and one has not been prepared.

The agency received no public comment.