Tax Policy

Breaking Down Amazon’s $1.7 Billion New York Tax Incentive

Amazon announced HQ2 will be located in Long Island City, NY.

Amazon’s announcement to move its headquarters to Long Island City has garnered both praise and criticism. Proponents of the plan cite Amazon’s announcement to add 25,000 new jobs with an average wage of $150,000 over the next decade. This move would be one of the biggest development plans in NYC’s history and would inject billions of dollars into Long Island City’s economy.

One of the major reasons Amazon gave for choosing Long Island City for one of its two new Headquarters was the area’s highly skilled workforce and its proximity to New York City. 

“Located just across the East River from Midtown Manhattan and the Upper East Side, Long Island City is a mixed-use community where arts and industry intersect.” Amazon said in it’s press release announcing the locations of its new headquarters. 

Although the plan to welcome Amazon into Long Island City was praised by both past and present mayors and governors of New York City and New York State, other prominent political figures vocalized their hesitations.

As part of the deal to bring 25,000 jobs into Long Island City, New York offered Amazon $1.7 billion in tax incentives. Alexandria Ocasio-Cortez, Congresswoman-Elect of New York’s 14th District, was quick in her response to Amazon’s announcement calling the deal “extremely concerning to residents.”

Kristen Gillibrand, United State Senator representing New York, also expressed her concerns with the plan which would give one of the country’s wealthiest companies billions of dollars in tax breaks. 

The debate surrounding Amazon’s move to Long Island City has been politically driven with progressive lawmakers staking their claims to the 2020 Democratic presidential primaries. Although the debate has been politically substantive in regards to Amazon’s overall impact to the region, specific conversations about the tax incentives has been superficial at best. 

It’s only been a little over a month since Amazon announced it’s plan to move to Long Island City and political buzz has already fallen off sharply. Seemingly, news headlines of Amazon’s move will be long forgotten and replaced with the endless number of headlines from today’s 24 hour news cycle.

However, this is a perfect opportunity to revisit the debate and have a more substantive conversation about the specific tax breaks offered to Amazon.

What’s In The Proposal?

The details of the $1.7 billion incentive package is spelled out in a joint memorandum of understanding between Amazon, New York State Urban Development Corporation, New York City Economic Development Corporation, and City Hall.

The package is a mix of tax incentives as well as grants to subsidize the massive $3.6 billion construction project. Here are some highlights of the proposal:

  • Amazon is expected to create 25,000 jobs with average wages of $150,000 annually over the next decade (with expansion potential of 40,000 jobs over 15 years).
  • Initial design, development, construction, renovation and ultimate operations will encompass 4 million square feet of commercial space.
  • Development site is located in the Borough of Queens on a mix swath of public and private land. 
  • New York State is offering as much as $1.7 billion in post-performance incentives if Amazon reaches the 40,000 job creation mark in 15 years.
  • $1.2 billion of the $1.7 billion is through the Excelsior jobs program as a refundable credit based on actual wages of the net new jobs created.
  • The remaining $505 million is a grant paid out over 15 years to offset more than $3.6 billion in development cost.
  • The grant is broken up as a $75 per square foot reimbursement not exceeding $480 million and a $25 million site preparation and infrastructure improvement reimbursement. 

Excelsior Jobs Program

The Excelsior Jobs Program is a post-performance based program which offers refundable tax credits to encourage businesses to expand in and relocate to New York.

Businesses who qualify for the Excelsior Jobs program may claim up to four distinct refundable tax credits:

  • Excelsior Jobs Tax Credit:  A credit of 6.85% of wages per net new job.
  • Excelsior Investment Tax Credit:  Valued at 2% of qualified investments.
  • Excelsior Research and Development Tax Credit:  A credit valued at 50% of the Federal R&D credit up to six percent of research expenditures in NYS.
  • Excelsior Real Property Tax Credit: Available to firms locating in certain distressed areas and to firms in targeted industries that meet higher employment and investment thresholds (Regionally Significant Project…I.E. Amazon).

Below is a schedule of projected tax benefits to be paid out to Amazon over the next 10 years if they add 25,000 new jobs at an average wage of $150,000 per annum.

New Job Commitments in NYS
Excelsior Jobs Credit (Maximum Available)
Year Net New Jobs Added  Cumulative Jobs Created   Maximum Tax Credit 
2019  700  700  $6,117,465
2020  2,200  2,900  25,343,785
2021  3,000  5,900  51,561,493
2022  2,000  7,900  69,039,965
2023  4,000  11,900  103,996,910
2024  4,000  15,900  138,953,855
2025  2,000  17,900  156,432,327
2026  2,889  20,789  181,679,980
2027  2,361  23,150  202,313,317
2028  1,850  25,000  218,480,903
Total  25,000  25,000  $1,153,920,000

Additionally, below is a schedule of the projected tax benefits to be paid out to Amazon if they make $2.3 billion in qualified investments over the next decade.

Qualified Investment Commitments in NYS
Excelsior Investment Tax Credit (Maximum Available)
Year Qualified Investment  Cumulative Investment   Maximum Tax Credit 
2019  64,512,000  64,512,000  1,290,240
2020  202,752,000  267,264,000  4,055,040
2021  276,480,000  543,744,000  5,529,600
2022  184,320,000  728,064,000  3,686,400
2023  368,640,000  1,096,704,000  7,372,800
2024  368,640,000  1,465,344,000  7,372,800
2025  184,320,000  1,649,664,000  3,686,400
2026  266,250,240  1,915,914,240  5,325,005
2027  217,589,760  2,133,504,000  4,351,795
2028  170,496,000  2,304,000,000  3,409,920
Total  2,304,000,000  2,304,000,000  46,080,000

These two credits combined account for the $1.2 billion of the total $1.7 billion incentive. The amounts above represent maximum tax credits and are based on actual jobs created and actual investment made during the 10 year window. Most of the benefits are accrued during the second half of the 10 year window with approximately 76% of the $1.2 billion expected to be claimed as credits during 2024 through 2028.

Empire State Development Grants

On top of the $1.2 billion in state tax credits the Empire State Development Program is offering upwards of $505 million in grants to offset Amazon’s expected $3.6 billion cost to complete the project. 

The grants are to be paid out over 15 years and is intended to reimburse Amazon for a portion of site preparation as well as the capital cost associated with the office buildout. 

The annual distribution of grant funds are to be strictly tied to net cumulative jobs added as well as annual investments. There are provisions for grant funds to be subject to recapture if the projected net cumulative jobs don’t materialize. 

Below is a schedule of projected annual disbursements along with the cumulative jobs added and annual projected investment. 

Year  Cumulative Jobs Added   Annual Investment   Annual Disbursement 
2019  700  64,512,000  33,400,000
2020  2,900  202,752,000  26,400,000
2021  5,900  276,480,000  36,000,000
2022  7,900  184,320,000  24,000,000
2023  11,900  368,640,000  48,000,000
2024  15,900  368,640,000  48,000,000
2025  17,900  184,320,000  24,000,000
2026  20,789  266,250,240  34,668,000
2027  23,150  217,589,760  28,332,000
2028  25,000  170,496,000  22,200,000
2029  26,500  138,240,000  18,000,000
2030  27,750  115,200,000  15,000,000
2031  31,750  368,640,000  48,000,000
2032  35,000  299,520,000  39,000,000
2033  40,000  460,800,000  60,000,000
Total  40,000  3,686,400,000  505,000,000

Breaking Down The Debate

When you’re looking at any major development project you often see the total tax incentive being show as a ‘giveaway’ of sorts. The total price tag is shown as an upfront outlay of government funds rather than a discounted inflow of future tax revenue.

This often creates outrage especially considering these tax incentives are being offered to multibillion dollar companies and not to small business owners.

But when you breakdown the actual mechanisms of these tax incentives you often come to find that they are performance based and are intended to create more jobs and tax revenue than would have otherwise been created.

By discounting $1.2 billion in potential new tax revenue as well as issuing upwards of $505 million in grants, New York State is able to gain $3.6 billion in investment. Even more so, New York will gain billions of dollars more in potential multiplier investment from Amazon’s presence in the state. 

Just one example, 25,000 new jobs will be created which will add billions of dollars more into the economy. Using Amazon’s ten-year projection of net new job creation at an annual average wage of $150,000 you get $19.8 billion in wages paid from 2019 to 2028. 

But some critics still have their reservations when it comes to giving tax incentives to large corporations because it furthers a ‘race-to-the-bottom’ economic climate between states and municipalities. This seemingly isn’t the case for Amazon’s move to Long Island City because the tax incentives were only secondary to the desire to relocate to the NYC area.

Proximity to a large pool of highly educated workers as well as the proximity to financial capital more than outweighs the net after tax benefit other cities could have provided. 

Simply put, Amazon may have still relocated to New York even without receiving any tax benefits. However, there were programs already in place to businesses looking to relocate to New York that the governor’s office was more than happy to showcase as another reason why Amazon should make New York its second home.


Jeremias Ramos is a CPA working at a nationally recognized full-service accounting, tax, and consulting firm with offices conveniently located throughout the Northeast. Jeremias specializes in tax and business consulting with focus areas in real estate, professional service providers, medical practitioners, and eCommerce businesses.

1 comment on “Breaking Down Amazon’s $1.7 Billion New York Tax Incentive

  1. Great article and well researched. These tax credits are being taken advantage of state by state. Our company follows this and provides cpe for further education on this topic at https://www.surgentcpe.com/tax-reform-cpe-courses

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