N.Y. Urban Development Corporation Act 174/68 § 16-v: New York state business incubator and innovation hot spot support act

§ 16-v. New York state business incubator and innovation hot spot

support act. 1. (a) The corporation is authorized, within available

appropriations, to issue requests for proposals once per fiscal year to

provide grants pursuant to subdivisions five and six of this section for

the purposes established under this act. The corporation may designate

entities, which upon application meet the requirements of subdivision

two of this section as New York state incubators, and may provide grants

and assistance as provided under subdivisions five and six of this

section to such designated entities. "New York state incubator" shall

mean a business incubation program which also provides physical space or

which is a virtual incubation program that has been designated upon

application by the corporation as a New York state incubator pursuant to

subdivisions two and three of this section and which thereby becomes

eligible for benefits, support, services, and programs available

pursuant to such designation. Provided however, that virtual incubators

which provide assistance to eligible businesses not in residence in one

physical location, shall submit a plan of operation which sets forth the

maximum number of eligible businesses to be served and their geographic

distribution.

(b) From among the qualified "New York state incubators", the

corporation is further authorized, within available appropriations, to

designate applicants as "New York state innovation hot spots." An

incubator receiving a "New York state innovation hot spot" designation

shall be eligible for the benefits under section thirty-eight of the tax

law, subparagraph eighteen of paragraph (a) of subdivision nine of

section two hundred eight of the tax law, subdivision eleven of section

two hundred nine of the tax law, paragraph thirty-nine of subsection (c)

of section six hundred twelve of the tax law, paragraph one of

subdivision (d) of section one thousand one hundred nineteen of the tax

law, and paragraph thirty-five of subdivision (c) of section 11-1712 of

the administrative code of the city of New York.

2. Requirements for designation. (a) An entity wishing to be

designated as a New York state innovation hot spot or as a New York

state incubator pursuant to this section shall be located in New York

state and shall have been in existence or otherwise in operation for a

period of at least three fiscal years prior to the current fiscal year,

or demonstrate continuity of staffing, program, and purpose showing

continuation through another auspice or governing entity, and shall have

demonstrated a connection to regional sources of innovation and

expertise, and that it meets the goals of creating jobs and incubating

businesses with survival rates in excess of average startups, and that

the program has a strategic plan to continue to meet such goals for the

three years succeeding designation and that commits the program to

implementing best practices. Such demonstration shall include a

commitment by the sponsor to continue to maintain the program for at

least three years after such designation, and to provide any reporting

information that the corporation shall require.

(b) In determining whether an entity shall be designated as a New York

state innovation hot spot or New York state incubator, the corporation

shall require that the entity meet the requirements of subparagraphs (i)

and (ii) of this paragraph and may consider whether the entity has

developed the programs, services, and attributes in subparagraphs (iii)

through (xvi) of this paragraph:

(i) institutional stability and long term viability, indicated by: the

sponsor's commitment to financially and programmatically maintaining the

incubator for at least two years in addition to the current fiscal year;

receipt of non-state public and private grant and/or other revenue

sources including property rentals and program fees that are or have

proven to be predictable and reliable; and manageable debt service;

(ii) a strategic plan that describes the impact on the regional

entrepreneurial environment that the incubator is intended to have and

commits the incubator to best incubation practices and describes a

defined process that accelerates commercialization and development for a

client company or entity through provision of technical assistance,

direct mentorship, entrepreneurial education, and business development

services, including development of a business plan and markets, aid in

development of the management team, product, customers, and local or

regional supply chain partners, access to investment, and launching of a

successful business which will employ New Yorkers;

(iii) an integrated array of services which includes management

guidance, technical assistance, consulting, mentoring, business plan

development, aid in creation of the business entity, and ongoing

counseling;

(iv) opportunities for clients to network, collaborate with other

business programs, and gain access to services, including through such

programs as the small business development center, the local or area

chamber of commerce or other business association, programs of the small

business administration, and/or other similar business organizations,

associations, and programs;

(v) access to capital via referral or other arrangements with

financial institutions, venture capitalists, angel investors, investment

funds managed or financed by private entities or state or local economic

development organizations, or other similar or equivalent capital

sources, evidenced by written agreements, memorandums of understanding,

letters of intent, or other endorsements acceptable to the corporation,

and including readying clients for financial meetings and interviews;

(vi) aid in accessing markets, via bid assistance or access programs

that may include but are not limited to literature review, establishment

of a resource documents room (physical or virtual), opportunity

notification of local, state, and federal governmental and private

opportunities, and identification of and introductions to potential

first customers;

(vii) physical office space and/or laboratory space and/or

manufacturing space under a written agreement for a period not to exceed

five years for any individual incubator client;

(viii) policies requiring participation by clients in the incubator

program, including disqualification or suspension from the program for

failure to participate;

(ix) criteria for acceptance and graduation from the program or

physical space, and terms and conditions for ongoing relationships, if

any, between the incubator and the client;

(x) at least fifty percent of the total incubator budget provided from

sources other than tenant rents and fees and in-kind support from the

sponsoring entity, and must be from sources other than New York state

government agencies;

(xi) an independent advisory council or similar body that includes one

or more executive officers of firms that have graduated from the

incubator, local economic development professionals, and individuals

with business and technology expertise in areas appropriate to the

sector or concentration of clients, and the mission and goal of the

incubator;

(xii) a professional management and service delivery team with

experience, expertise, or credentials in management, entrepreneurship,

business development, or other equivalent areas;

(xiii) access by clients to mentoring, advisory, or educational

services, including classroom teaching, from individuals who have

successfully created, grown or managed businesses or are lawyers,

professional accountants, or individuals who have been in business at an

executive level for at least five years;

(xiv) evidence that the incubator is a center of entrepreneurial

activities of a city, region, or distressed portion thereof, as

documented by programs and activities coordinated with county or local

economic development organizations, investor and financial clubs or

institutions, or student or youth-oriented entrepreneurial activities;

(xv) a partnership with other incubators in the region to offer

services and opportunities for entrepreneurs and leverage regional

economic development assets; and

(xvi) a plan to recruit minority- and women-owned businesses for

location and participation with the incubator program.

(c) The corporation, subject to appropriations provided for this

purpose, may approve and designate ten New York state incubator hot

spots. Such designees will be required to demonstrate an affiliation

with and the application support of at least one college, university or

independent research institution, and that its programs and purposes are

consistent with regional economic development strategies.

3. Designation. (a) The corporation may designate applicants that meet

the requirements of subdivision two of this section as New York state

innovation hot spots or as New York state incubators.

(b) As a condition of maintaining designation, each incubator shall

annually submit to the corporation in a manner and according to a

schedule established by the corporation:

(i) updated information requested by the corporation pursuant to

subparagraph (iii) of paragraph (a) of subdivision two of this section;

(ii) its strategic plan, as updated along with a brief description of

its success in meeting the goals of its strategic plan;

(iii) a statement that the items listed in paragraph (b) of

subdivision two of this section and, in the case of New York state

innovation hot spots, paragraph (c) of subdivision two of this section

are still applicable to the operations of the incubator, or any change

in applicability;

(iv) a list of business enterprises served by the incubator, and in

the case of New York state innovation hot spots, those clients certified

as a "qualified entity" eligible for tax incentives under section

thirty-eight of the tax law; and

(v) such additional information as the corporation may require.

(c) The corporation shall design simplified forms to aid in the

submission of the data required in this subdivision, which may be

submitted electronically. Such forms shall state the purposes of the

required data submissions.

(d) The corporation shall evaluate the operations of the New York

state innovation hot spot or the New York state incubator using methods

including but not limited to site visits, reports pursuant to specified

information, and review evaluations. If the corporation is unsatisfied

with the progress of a New York state innovation hot spot or a New York

state incubator, the corporation shall notify such incubator of the

results of its evaluations and the findings of deficiencies in the

incubator's operations and shall allow such incubator to remedy such

findings in a timely manner. For New York state innovation hot spots or

New York state incubators that receive operating grants pursuant to

paragraph (a) of subdivision five of this section, such evaluations

shall include independent peer review and shall take place no less than

once every three years or more frequently at the discretion of the

corporation. Such independent peer review shall result in a written

report that includes programmatic and fiscal evaluation of the

incubation program and recommendations for improvement.

(e) Notwithstanding any other provision of law to the contrary, a

qualified entity that has previously been designated as a New York state

incubator and has not fully disbursed any grants awarded pursuant to

this section, shall continue being designated as such by the corporation

for an additional three years.

4. Audit. The corporation shall have the authority to audit New York

innovation hot spots, New York state incubators and clients designated

by such hot spots as qualified entities.

5. Grants. (a) Operating grants. A program designated as a New York

state innovation hot spot or as a New York state incubator shall be

eligible for an operating grant in an amount to be determined by the

corporation from funds appropriated to the corporation for such purpose,

provided however that:

(i) Any such grant shall be matched on a two-to-one basis by the

institution receiving the funds and collaborative partners in the form

of cash or in-kind personnel, equipment, material donations, and other

facility and operations expenditures, provided that no more than fifty

percent of such match shall be in-kind;

(ii) A program applying for a grant shall demonstrate financial

stability and long term viability, as provided in subparagraph (i) of

paragraph (b) of subdivision two of this section;

(iii) A grant recipient shall agree to provide data as required to the

corporation and shall agree to conform to best practices as outlined by

state and/or national business incubator associations;

(iv) Failure to abide by the requirements of this subdivision or to

cure a default after review and agreement with the corporation shall

result in loss of the grant and disqualification of the designee as a

New York state innovation hot spot or as a New York state incubator; and

(v) Provided that a portion of the grants shall be awarded to the New

York state innovation hot spots and the New York state incubators.

(b) The corporation shall make entities designated as New York state

innovation hot spots or as New York state incubators aware of

opportunities for funding or grants by or through the corporation or the

department of economic development.

(c) No deduction. In addition to the foregoing requirements, an

incubator sponsor shall agree to dedicate all funds from any grants or

support received pursuant to this subdivision to the operations of the

incubator without deductions for indirect costs of such sponsor. In no

case shall an incubator sponsor agree to provide less than eighty-five

percent of all funds received pursuant to this subdivision to the

operations of the incubator without exception.

6. Other assistance. The corporation may make such other aid,

assistance, and resources available to New York state innovation hot

spots and New York state incubators and their clients as it shall deem

useful and appropriate for the furtherance of the purposes of this act,

including without limitation technical assistance, aid in marketing, aid

in reaching and providing entrepreneurship training opportunities to

such marginalized groups as those composed of individuals who are

minority, female, disabled, or poor, and others, curriculum development,

and other services and resources. The corporation shall also seek

assistance from other state agencies in the development of procurement

and marketing resources and training opportunities for New York state

innovation hot spots and New York state incubators and their clients.

7. Association of incubators. The corporation may consult with a

statewide entity which is a membership association of incubators and

others and which has expertise in providing services to incubators for

the purpose of providing services to entities designated as New York

state innovation hot spots and New York state incubators and to entities

seeking to apply or applying to become New York state innovation hot

spots and New York state incubators or which otherwise are included as

recipients of services pursuant to this section. Such services shall

include advising concerning best practices of incubation and development

of plans to incorporate and integrate such practices, development of

data concerning incubation in this state and recommendations for

improvement, aid in marketing and event sponsorship, and such other

services as the corporation shall deem necessary and appropriate to the

strengthening of business incubation in this state.

8. New York state innovation hot spots may certify clients which meet

the requirements of subdivision nine of this section as qualified

entities eligible for New York state innovation hot spot program tax

benefits pursuant to section thirty-eight of the tax law. Business

enterprises of incubators designated as New York state incubators under

paragraph (a) of subdivision one of this section may be certified by the

New York state innovation hot spot if the incubator has entered into a

memorandum of understanding with such hot spot establishing a process

and threshold for the provision of innovation hot spot benefits to

qualified enterprises or the hot spot is providing demonstrable services

or assistance to the business enterprise in addition to those provided

by the incubator.

9. "Qualified entity" shall mean a business enterprise that is:

(i) in the formative stage of development;

(ii) located in New York state;

(iii) either: (A) any corporation, except a corporation which:

(1) over fifty percent of the number of shares of stock entitling the

holders thereof to vote for the election of directors or trustees is

owned or controlled, either directly or indirectly, by a taxpayer

subject to tax under the following provisions of the tax law: article

nine-A; section one hundred eighty-three or one hundred eighty-four

former section of article nine; or article thirty-three; or

(2) is substantially similar in operation and in ownership to a

business entity (or entities) taxable or previously taxable under the

following provisions of the tax law: article nine-A; section one hundred

eighty-three, one hundred eighty-four, former section one hundred

eighty-five or former section one hundred eighty-six of article nine;

former article thirty-two; article thirty-three; article twenty-three,

or would have been subject to tax under such article twenty-three (as

such article was in effect on January first, nineteen hundred eighty) or

the income (or losses) of which is (or was) includable under article

twenty-two; or

(B) a sole proprietorship, partnership, limited partnership, limited

liability company, or New York subchapter S corporation that is not

substantially similar in operation and in ownership to a business entity

(or entities) taxable, or previously taxable, under article nine-A of

the tax law, section one hundred eighty-three, one hundred eighty-four,

former section one hundred eighty-five or former section one hundred

eighty-six of article nine of the tax law, former article thirty-two or

article thirty-three of the tax law, article twenty-three of the tax law

or which would have been subject to tax under such article twenty-three

(as such article was in effect on January first, nineteen hundred

eighty) or the income (or losses) of which is (or was) includable under

article twenty-two of the tax law; and

(iv) is certified by a New York state innovation hot spot as being

approved to locate in, or be part of a virtual incubation program

operated by, such New York innovation hot spot.

10. The corporation may establish guidelines concerning this program

to implement the purposes of this act.