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Department of Taxation and Finance

Recapture of tax credits

Certain New York State tax credits are subject to recapture. You might have to add back all or a part of the tax credit you claimed in prior years to your tax due in the tax year when the qualifying requirements for that credit are no longer met (for example, the investment tax credit is subject to recapture if an asset for which the credit was taken is disposed of before the end of its useful life).

In general, you must recapture a tax credit when:

  • the property for which the credit was claimed is disposed of or ceases to be in qualified use prior to the end of its useful life,
  • your certificate of eligibility or certificate of tax credit for a credit program is revoked,
  • you fail to meet minimum job or investment requirements for a credit program, or
  • the real estate taxes used as the basis for the calculation or for qualification of a credit are subsequently reduced.

Select a link below for more information about that specific credit’s requirements for recapture.

You must recapture if at any time before the end of its recovery period (depreciable life) :

  1. the property no longer qualifies as property described in IRC section 30C,
  2. 50% or more of the property’s use in a tax year is not in a trade or business in New York State, or
  3. the property is sold or disposed of and you know it will be used in a manner as described in (1) or (2), above.

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You must recapture if at any time before the end of its recovery period (depreciable life):

  1. the property no longer qualifies as alternative fuels vehicle refueling property or electric vehicle recharging property,
  2. 50% or more of the property’s use in a tax year is not in a trade or business in New York State, or
  3. the property is sold or disposed of and you know it will be used in a manner as described in (1) or (2), above.

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If your Certificate of Completion (COC) is revoked, you must recapture the amount of credit previously allowed in the tax year in which the determination is final.

Also, if qualified tangible property ceases to be in qualified use prior to the end of its useful life, you must compute a recapture.  

For a qualified site accepted into the Brownfield Cleanup Program:

If you fail to meet sufficient net new jobs or qualified investment requirements to achieve a benefit to cost ratio of at least 10:1 at the end of the benefit period, you are required to add back as tax for the last year of your benefit period the portion of the credit claimed for the years of your benefit period necessary to achieve a cost benefit ratio of 10:1.

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If your certificate of eligibility or a certificate of tax credit is revoked because you do not meet the eligibility requirements, you must recapture the amount of credit previously claimed prior to that revocation. You are required to add the amount of credit to be recaptured to tax for the tax year in which the revocation becomes final.

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If the qualified property you used as the basis for the EZ investment tax credit (EZ-ITC) is disposed of or ceases to be in qualified use prior to the end of its useful life, you must add the difference between the credit taken and the credit allowed for actual use back to the tax due in the year of disposition or disqualification. In addition, you must compute the recapture of EZ-EIC previously allowed.

If qualified property has a useful life of more than 12 years, no addback is necessary if the property has been in use more than 12 consecutive years.

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You must compute the recapture of EZ-ITC and EZ-EIC previously allowed if the property is disposed of or ceases to be in qualified use prior to the end of its useful life.

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If the Certificate of Completion (COC) is revoked, you must recapture the amount of the credit previously allowed in the tax year in which the determination is final.

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If the certificate of eligibility or a certificate of tax credit is revoked because you do not meet the eligibility requirements, you must recapture the amount of credit previously claimed prior to that revocation. The amount of credit to be recaptured must be added back to tax for the tax year in which the revocation becomes final.

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If all your qualified agricultural property is converted to nonqualified use before the end of the second tax year following the year in which you first claimed a credit, the entire credit you claimed on the converted property for the two previous years must be added back in the year of conversion.

If only a portion of the qualified property is converted to nonqualified use, you must add back a proportionate share of the credit claimed.

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You must compute the recapture of the investment tax credit (including the retail enterprise credit or historic barn rehabilitation credit) previously allowed if:

  • the qualified property was stolen, destroyed, or disposed of, or ceases to be in qualified use prior to the end of its useful life; or
  • there is an increase in nonqualified nonrecourse financing.

If qualified property has a useful life of more than 12 years, and it has been in use for more than 12 years, no recapture is necessary.

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You must compute the recapture of the credit previously allowed if:

  • the qualified property was stolen, destroyed, or disposed of, or ceases to be in qualified use prior to the end of its useful life; or
  • there is an increase in nonqualified nonrecourse financing.

If qualified property has a useful life of more than 12 years, and it has been in use for more than 12 years, no recapture is necessary.

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If, as of the close of any tax year in the 15‑year compliance period during which the residential rental building must continue to meet certain requirements, there is a reduction in the qualified basis of the building from the previous year, you may have to recapture part of the credits you have taken. Similarly, you may have to recapture part of the credits taken in previous years upon certain dispositions of the building or interests therein.  

See Form DTF-626, Recapture of Low‑Income Housing Credit, and its instructions, Form DTF-626-I.

You must recapture a portion of credit if the amount of real property tax on which the credit was calculated is subsequently reduced by a final order under any proceeding under Real Property Tax Law Article 7 or any other provision of law.

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You must add back the required portion of the credit originally allowed to the tax in the tax year of the disposition or recovery if: 

  • you sold, transferred, or otherwise disposed of corporate stock, a partnership interest, or other ownership interest arising from the making of a qualified investment, or
  • you recovered an investment that was the basis, in whole or in part, for the allowance of the QETC capital tax credit; and
  • the disposal or recovery occurs during the tax year or within 48 months (for a credit at the rate of 10% of qualified investments) or within 108 months (for a credit at the rate of 20% of investments) from the close of the tax year when the credit was allowed.

 See Form DTF-622, Claim for QETC Capital Tax Credit, and its instructions, Form DTF-622-I.

 

If the QEZE’s eligible real property taxes, which were the basis for the credit, are subsequently reduced as a result of a final order in any proceeding under the Real Property Tax Law Article 7 or other provision of the law, you must recapture a portion of the credit allowed in the year the final order is issued.

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You must recapture all or a portion of the rehabilitation of historic properties credit if:

  • the property that is used as the basis for this credit ceases to be qualified, and
  • you were required to recapture all or part of the federal credit upon which the New York State credit is based.

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If the eligible real property taxes that were the basis for a remediated brownfield real property tax credit are subsequently reduced as a result of a final order in any proceeding under Real Property Tax Law Article 7 (or other provision of law), you must recapture a portion of the credit allowed in the tax year the final order is issued.

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If you are notified by Empire State Development (ESD) that you are subject to a recovery of tax benefits due to not meeting your performance benchmarks outlined in your START-UP NY program application, you must reduce the credit by the percentage reduction in net new jobs as set by the performance benchmarks.

If the Commissioner of Economic Development makes a final determination that you have acted fraudulently in connection with your participation in the START-UP NY program, you will be required in that year to add back to tax the total value of all of the tax benefits provided under the program that you and your employees have received up to the date of the final determination.

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If you are notified by Empire State Development (ESD) that you are subject to a recovery of tax benefits due to not meeting your performance benchmarks outlined in your START-UP NY program application, you must reduce the credit by the percentage reduction in net new jobs as set by the performance benchmarks.

If the Commissioner of Economic Development makes a final determination that you have acted fraudulently in connection with your participation in the START-UP NY program, you will be required in that year to add back to tax the total value of all of the tax benefits provided under the program that you and your employees have received up to the date of the final determination.

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