The Innovation Hot Spot Tax Incentive Program Overview

In 2013, New York State created the Innovation Hot Spot program to fund operations in business incubators and extend tax incentives to qualified ventures in participating incubators and accelerators. The Hudson Valley Venture Hub serves as the Innovation Hot Spot in the Hudson Valley economic development region, and can certify companies for eligibility.

What the benefit is?

The Innovation Hot Spot Tax Incentive allows companies to enter into a five year window of exemption from NYS income tax (personal taxes, for all founders) and state sales tax on purchases (for the business). This window lasts for five years, regardless of company age when entering the program, provided the company remains in good standing as a resident or graduate of its incubator.

What makes a company eligible? 

• Be enrolled and in good standing with the HV Venture Hub incubator
• In their first five years of operations (or seven years for life sciences ventures)
• In the formative stages of development (defined as one of the following):
• Still in the testing/development phase of of the product being produced
• Has raised less than $1M equity capital
• Has not yet earned profits from sales

How do you apply?

Companies that are working within the Hudson Valley Venture Hub Accelerator Program should have received an initial "acceptance letter" which will provide the company with a unique business identification number and a link with the templated documents. The business identification number is for the it223 form (your accountant will need that). 

As required from New York State, each company needs to send the Hudson Valley Venture Hub Accelerator Program 3 documents:

1. IHS Worksheet (excel document)
2. A CEO Endorsement letter (Word document to be sent to HVVH as a PDF)
3. Articles of Incorporation (that prove you are in the first 5 years of business incorporation)

Send those 3 documents to the Hudson Valley Venture Hub Program Director. We will then provide a letter of support (if eligible and approved), and will send everything to ESD/NYS. At that point, it's up to each founder to work with their accountant to file and claim their tax benefits.

The IHS basics and questions answered video

This is a recorded video that covers what the benefit is, the steps to file for eligibility with the Innovation Hot Spot, and tips and tricks to take the most advantage of the tax incentives.

Official NYS Forms 

• Innovation Hot Spot Technical Memorandum (informational, FYI)
  Technical parts (likely for accountants).
• Form it223 (for the personal income filing - one per each founder)
• Form NYS AU-AA Sales Tax (for the business sales tax exception filing)

Frequently asked questions

1. I am an early-stage startup that isn't showing a profit, and won't for some time, can I wait to start claiming the benefit assuming I am still eligible in a few years?
   Yes! It's a strategic decision to apply for the credit when you can make the most savings during a 5 year period.