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New York Legislature Passes Largest Industry-Specific Tax Break

The bill would provide large businesses with up to $10 billion in tax credits over 20 years to promote green semiconductor manufacturing. But watchdog groups have questioned how the bill was hastily pushed by Gov. Hochul.

(TNS) — With little public debate, the state Legislature passed a bill near the end of its session last week that's been characterized by opponents as the largest industry-specific tax break ever granted by New York's government.

The bill would provide large, private businesses up to $10 billion in state tax credits over 20 years to promote the growth of new, "green" semiconductor manufacturing projects.

It was introduced by legislators last Tuesday, May 31, at the request of Gov. Kathy Hochul's office, and passed the Senate by Thursday, June 2, the final day those lawmakers were in Albany. On Saturday morning around 8 a.m. — after the Assembly had been voting on bills continuously for 20 hours — sleep-deprived lawmakers who were enduring the grueling schedule passed the measure in their chamber before adjourning their work.

Watchdog groups have questioned why the bill, regardless of its merits, was hastily pushed by Hochul's office.

"This is like the ugliest of Albany," said John Kaehny, executive director of Reinvent Albany. "In this type of fog, the governor's office can misinform the Legislature, and do it all at the last second."

This spring, less than four days before the state budget was due, Hochul announced an agreement to subsidize a new, $1.4 billion stadium for the NFL's privately owned Buffalo Bills — a move also giving lawmakers little time to examine an enormous state benefit to the private sector.

The state's "Green CHIPS" bill aims to entice computer chip manufacturers to build new factories, also known as "fabs," in upstate New York. The bill would create a new subset of tax incentives the state can offer chip-makers through its Excelsior business tax credit program.

Hochul's push came after U.S. Sen. Charles E. Schumer of New York has pressed to dramatically expand semiconductor production across the country. At the same time, Schumer is keeping an eye on how New York can win the competition between states to land the well-paying jobs.

A spokeswoman for Empire State Development, the governor's economic development arm, said the bill's late-session introduction was simply a matter of the proposal being "developed very recently." The spokeswoman, Kristin Devoe, said the legislation is a way to capitalize on the anticipated passage of Schumer's bill in Congress, putting New York "in the best position to stand apart from the other states and countries who are trying to attract the semiconductor industry."

"The speed of its development and passage comes alongside a number of significant recent developments on Capitol Hill of late," Devoe said. "For example, the congressional conference committee on the bill just held its first public meeting on May 12, a little over three weeks ago. The bill needed to be passed by session's end to make sure that ( New York) is ready for the passage of the federal bill."

Besides semiconductor manufacturers, another beneficiary of the bill will be building trades unions, major political supporters of Hochul and many state legislators. The bill includes a requirement that federal prevailing wage be paid on the new construction projects, which will make the potential developments costlier for companies to build here. Asked about the reason for the state mandate, Devoe said that a prevailing wage mandate was also expected to be part of the federal bill.

The Assembly passed the measure using a "fast roll call," where lawmakers are assumed to be in the affirmative, unless they indicate otherwise. The only person recorded in the negative at the time of the vote was Queens Assemblyman Ron Kim, a Democrat.

Democratic Assemblyman Al Stirpe, the bill's Assembly sponsor, said in a floor speech that its passage was the final barrier to multiple, "massive" semiconducter projects coming to New York. He asserted the biggest one would land in his Syracuse-area district.

Stirpe's district includes the White Pine Commerce Park, which Intel and others reportedly looked at for semiconductor manufacturing. Intel since decided to build in Ohio.

"To those of you who may doubt that we should have tax credits for these kinds of businesses, this has been a transformative industry," said Democratic Assemblywoman Carrie Woerner, whose district includes Malta-based GlobalFoundries, the largest semiconducter manufacturer in North America. "There's a reason Saratoga County is the only county outside of New York City that grew over the past 10 years. And it is because we have semiconducter manufacturing in the midst of our county."

The bill was introduced in the state Senate on Tuesday, two days before it passed. The short interval meant it required a "message of necessity" to be issued by Hochul, a tool allowing an immediate vote on complex legislation.

The bill, which was placed on the state Senate's "non-controversial" calendar, passed by a vote of 61-2. The lone dissenters were two state Senate Democrats, James Skoufis and Liz Krueger.

"We owe people in New York transparency and accountability when we do these kinds of deals," Krueger said in explaining her vote in opposition. "And this one will be the biggest one New York state has ever done."

Krueger estimated that, with local tax breaks that often accompany the state's, the true cost of the new measure could be upwards of $20 billion.

According to Reinvent Albany, the state's Excelsior tax credit expenditures totaled $163 million for the fiscal year ending in March. Though that Excelsior program, the new bill would allow the state to offer up to $500 million a year in state tax credits to chip companies that build new factories here.

The companies would be required to create at least 500 new jobs; spend at least $3 billion in capital investment over a period of ten years; spend $15 for every $1 of state incentives; and include "sustainability measures" to mitigate the "project's greenhouse gas emissions impact over its lifetime." The Hochul administration contends state and local taxes generated will more than pay for the cost of the incentives.

States across the country are lining up to court chip manufacturers as Congress debates passage of a $52 billion subsidy program, which would provide companies with billions of dollars to build new domestic chip factories.

The House and the U.S. Senate are still reconciling differences in their proposals, though lawmakers of both parties support combating China's growing influence in the global chip sector.

For potential projects in New York to land some of the expected federal $52 billion, the Hochul administration says, New York, like other states, will have to offer :"some form of state support" to the chip manufacturers.

Krueger said she'd expressed concern to Schumer that he was encouraging "range wars between the states" resulting in New York giving away even "more of our tax dollars" to attract companies that might have been "perfectly happy to come to us just on the federal program." Schumer, the Senate majority leader, is the author of the Senate's bill.

Kaehny, with Reinvent Albany, notes that the state tax break takes effect immediately and is not contingent on the passage of the Schumer's bill. If Hochul signs the "Green CHIPS" bill — but Schumer's effort in Congress fails — the tax break here would remain.

Concerning the state bill's labeling it a "green" initiative, Kaehny argues that chip manufacturers would naturally seek to become more energy efficient over time, regardless of the state incentive.

Devoe, the ESD spokeswoman, said the two chambers of Congress were actively negotiating differences between the bills they've individually passed. The Hochul administration expects a compromise.

"As soon as Congress passes CHIPS legislation, we expect many companies to finalize their location decisions in order to 'get in line' to secure federal incentives," Devoe said. "By creating an incentive for these companies right now as they make location decisions, we can position New York as the best home for many semiconductor manufacturers."

The office of state Sen. Jeremy Cooney, the bill's Senate sponsor, said the bill was not introduced on behalf of a specific company. Hochul's office said the same.

Competition for chip fabs, which can cost between $1 billion to as much as $10 billion to build and equip, is fierce. The industry is looking to expand its domestic footprint perhaps more than any other time in its history amid chip shortages and China's growing influence.

GlobalFoundries was given about $1.5 billion a decade ago to build its Saratoga County complex. The company has spent $15 billion and has promised to build a second factory there.

E.J. McMahon, research director of the fiscally conservative Empire Center for Public Policy, said that after just a few years, the cost of the new legislation "would surpass all the direct and indirect state subsidies of GlobalFoundries."

He criticized the prevailing wage requirement benefiting building trades unions, arguing that it would "undermine the state's ability to actually compete" for chip-makers, while providing a "heavy, direct and full taxpayer subsidy for the substantial added cost of union contractors and labor."

(c)2022 the Times Union (Albany, N.Y.) Distributed by Tribune Content Agency, LLC.
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