HLS-04-07-00002-A Security Guard Training Tax Credit

3/28/07 N.Y. St. Reg. HLS-04-07-00002-A

NEW YORK STATE REGISTER

VOLUME XXIX, ISSUE 13

March 28, 2007

RULE MAKING ACTIVITIES

OFFICE OF HOMELAND SECURITY

NOTICE OF ADOPTION

 

I.D No. HLS-04-07-00002-A

Filing No. 274

Filing Date. Mar. 13, 2007

Effective Date. Mar. 28, 2007

Security Guard Training Tax Credit

PURSUANT TO THE PROVISIONS OF THE State Administrative Procedure Act, NOTICE is hereby given of the following action:

Action taken:

Addition of Part 1000 to Title 9 NYCRR.

Statutory authority:

Executive Law, section 709(2)(n); and Tax Law, section 26(e)

Subject:

New York State Office of Homeland Security—security guard training tax credit.

Purpose:

To provide for a process by which applicants can apply for the tax credit.

Text of final rule:

Pursuant to the authority contained in subdivision (e) of Section 26 of the New York State Tax Law and subdivision (n) of subsection (2) of Section 709 of the Executive Law, the Director of the Office of Homeland Security hereby proposes to make and adopt the following amendments, as published in Title 9 of the Official Compilation of Codes, Rules and Regulations of the State of New York, by adding the following:

§ 1000.1 Purpose and general description.

These rules and regulations set forth the application process for the New York State Office of Homeland Security ‘Security Officer Training Tax Credit Program’ as set forth in subsection (e) of Tax Law Section 26 as added by Chapter 537 of the Laws of 2005. A taxpayer, which is subject to tax under article 9, 9-A, 22, 32 or 33 of the Tax Law and is a qualified building owner, shall be allowed a tax credit in the amount of $3,000 for each full-time qualified security officer who has been trained according to the Office of Homeland Security Certified Training Program. The Director of the Office of Homeland Security has the authority to promulgate regulations to establish procedures for the application and allocation of such credits and any other provisions necessary and appropriate to implement this program per Tax Law subdivision (e) of Section 26 and paragraph (n) of subdivision (2) of Section 709 of the Executive Law.

§ 1000.2 Definitions.

As used in this regulation, the following terms shall have the following meanings:

(a) “Qualified Building Owner” means a building owner whose building entrances, exits and common areas are protected by security officers, registered under article 7-A of the General Business Law, whether or not such security officers are employed directly by the building owner or indirectly through a contractor.

(b) “Building” means any commercial building under ownership of a qualified building owner that contains at least 500,000 square feet whose entrances, exits and common areas are protected by security officers licensed under article 7-A of the General Business Law.

(c) “Security Officer” means a security guard registered and subject to Article 7-A of the General Business Law.

(d) “Qualified Security Officers” means security officers who: (i) are employed in positions which are under a legally binding written agreement, including a service contract between qualified building owners and security contractors, enforceable by employees, that provides for a minimum hourly wage rate of at least nine dollars fifty cents for the calendar year two thousand five; nine dollars eighty-five cents for the calendar year two thousand six; and ten dollars eighty-five cents for the calendar year two thousand seven and thereafter; and (ii) have completed the Office of Homeland Security certified security training program as set forth in this section.

(e) “Qualified Security Training Program” means a program certified by the New York State Office of Homeland Security for residential and commercial building security officers, which is designed to: improve observation, detection and reporting skills; improve coordination with local police, fire and emergency services; provide and improve skills and working knowledge of advanced security technology including surveillance systems and access control procedures; require at least 40 hours of training, including 3 hours of training devoted to terrorism awareness.

(f) “Application” means a document issued by the Office of Homeland Security and submitted by a qualified building owner that contains information concerning the Homeland Security, Security Officer Training Tax Credit. Such application shall include, but is not limited to, the following information: the New York State Department of State issued unique identification number of each qualified security officer applied for which the tax credit is being sought and the employment status; the specific work locations; the address and square footage of each eligible building secured by the same qualified security officers; a certification that the employment records remain on file and readily available upon request by the Office of Homeland Security; and any other information necessary to properly evaluate the application.

(g) “Complete Application” means a properly completed and executed application where all questions on the application itself were fully answered by the qualified building owner and that all supporting documents or information required in the application were fully furnished to the Office of Homeland Security to review and approve the application.

(h) “Method of Transmittal” means that all applications containing original forms and supporting documentation must be mailed to the New York State Office of Homeland Security located at 1220 Washington Avenue, Building 7A, 7th Floor, Albany New York 12242, via a mail carrier service that provides proof of date of mailing.

(i) “Filing Period” means the date specified by the Office of Homeland Security on the tax credit application for credit in the calendar year for which the tax credit is being sought.

(j) “Application Filing Date” means date which the application was postmarked by the mail carrier used by applicant regardless of the date the application is received by the Office of Homeland Security, provided that the date is within the filing period specified above.

(k) “Untimely Application” means an application that has been postmarked either before or after the filing period specified.

(l) “Certificate of Tax Credit” means a certificate issued by the Office of Homeland Security that states the amount of the Security Officer Tax Credit that the building owner has qualified for, based on the office's receipt of the complete application and subject to the process set forth in these rules and regulations. The certificate shall include, but not be limited to the following information and any information necessary: name and address of qualified building owner; certificate serial number; amount of tax credit approved; and the calendar year in which such credit was awarded; and any other information as deemed necessary by the Office of Homeland Security.

§ 1000.3 Application Process.

In the event that subtraction of the credit allocations of all the eligible applications received on a given day would result in a zero or negative balance of the legislative cap, the tax credits shall be allocated among such qualified building owners for that day on a pro rata basis. Each qualified building owner's request shall be allowed at a reduced rate equivalent to the percentage created by dividing the unallocated tax credits by the aggregate tax credits requested on such date. Untimely applications will not be considered for the tax credit.

(a) Application. A qualified building owner shall file a complete application according to the specified method of transmittal to the Office of Homeland Security within the filing period. The qualified building owner shall file with application such information, deemed necessary for the application process, as requested by the Director of the Office of Homeland Security, which includes, but is not limited to, affirmation by the qualified building owner that the certified training has been provided to each security officer; dates and places of training; hours worked by each qualified security officer for which the taxpayer is applying; and verification that all information has been provided to the best of the qualified building owner's knowledge. The Office of Homeland Security may request additional supporting documentation, as necessary.

All applications postmarked on the first day of the filing period by the required method of transmittal shall be treated as having been filed on the first day of the application period and shall be given priority with all other applications filed on the same day in the awarding of tax credits over all applications postmarked on subsequent days. Applications postmarked on subsequent days shall be given priority based on the date of the postmark.

(b) Criteria for Review of Application. A committee appointed by the Director shall evaluate all applications received by the Office of Homeland Security in accordance with paragraph (a) above. The Office of Homeland Security shall use the following criteria to determine the eligibility of a qualified building owner to receive a certificate of tax credit:

(1) the application is a complete application;

(2) the application is submitted within the filing period and is not untimely;

(3) the applicant is a qualified building owner; and

(4) the qualified building owner certifies and offers proof that the qualified security officers have, in fact, been trained according to an OHS Qualified Security Officer Training Program.

The Director of the Office of Homeland Security shall approve or disapprove the applications based upon criteria set forth by the Office of Homeland Security in order of priority based upon the application filing date of a complete application for allocation of Security Officer Training Tax Credit.

(c) Notification of Determination. If the Office of Homeland Security determines that a qualified building owner is eligible for the Security Officer Training Tax Credit, the Director of the Office of Homeland Security shall issue a certificate of tax credit to the qualified building owner after verification of the information submitted by the qualified building owner. If the application is disapproved, the Office of Homeland Security shall provide the qualified building owner with a notice of disapproval. Any security officer determined not to be a qualified security officer, shall be rejected for the purpose of calculating the qualified building owner's tax credits and any such reduction in tax credit shall be reallocated in conformity with the process specified in these regulations.

Upon a successful verification of eligible and timely applications, the Office of Homeland Security shall, within 45 days of the end of the filing period, issue certificates of tax credit and/or letters of disapproval, as appropriate.

(d) Eligibility in Subsequent Years. Any qualified building owner who is allocated a credit in the first calendar year and who applies for credit in the second calendar year shall, upon successful application, have priority of their percentage amount awarded in the previous year over all other taxpayers who file a complete application in the succeeding calendar year.

(e) Unallocated Tax Credits. If at the end of the calendar year, the aggregate amount of Security Officer Training Tax Credits applied for is less than the calendar year's allocation, then the amount permitted with respect to subsequent taxable years shall be augmented by the amount of such excess.

(f) Audit of Information. The qualified building owners who receive Security Officer Training Tax Credits in any given year shall, upon request by the Director of the Office of Homeland Security, immediately provide or make available any information necessary, including copies of supporting documentation to verify the information submitted in applications for such credit, including verification of training of security guards, the existence of a required contract, the payment of the mandatory wage provision as set forth in paragraph (4) of subdivision (b) of Section 26 of the Tax Law, and any other information deemed necessary by the Director of the Office of Homeland Security.

Final rule as compared with last published rule:

Nonsubstantive changes were made in section 1000.2(i).

Text of rule and any required statements and analyses may be obtained from:

Linda Shkreli, Office of Homeland Security, 633 Third Ave., 32nd Fl., New York, NY 10017, [phone], e-mail: [e-mail]

Regulatory Impact Statement, Regulatory Flexibility Analysis, Rural Area Flexibility Analysis and Job Impact Statement

A revised statement on the above is not required since the amendment in the text of the rule Section 1000.2(i) reflected a non-substantive change in application period to allow for administrative flexibility between when the rule is published and when the applications are made available to eligible applicants. This administrative change in no way affects the JIS/RAFA/RFA/RIS.

Assessment of Public Comment

The 45 day comment period on the Office of Homeland Security's Security (OHS) Guard Tax Credit draft regulations began on January 24, 2007 and will end on or about March 11th. OHS has taken every step to fulfill legal requirements of filing a regulation. A notice of adoption of the final rule has been submitted to the Department of State on March 13, 2007 for final publication in the State Register two on March 28, 2007.

The Office of Homeland Security received comments on two occasions from SEIU 32BJ. Below are summaries of 32BJ's comments and the Office of Homeland Security analysis of the comments.

Issue #1: The union proposes the use of a random lottery drawing for awarding of credits.

Response: The law specifically calls for the assignment of tax credits on a first-come-first-serve basis. The use of a random drawing will increase the potential for challenges from those applicants whose applications were received contemporaneously with all others. “Such aggregate amount of credits shall be allocated by the state office of homeland security among taxpayers in order of priority based upon the date of filing an application for allocation of security training tax credit with such office, and any taxpayer who is allocated such a credit in a taxable year shall receive such credit for the succeeding two taxable years and shall have priority over all other taxpayers who file an application therefore in such succeeding two taxable years.

Issue #2: 32BJ raises issue with the fact that the credit program will be issued in two years, at $10 million and $5 million In terms of the union's issue limiting the program to two years rather than extending it to three years.

Response: A sunset provision acts to terminate all provisions of the law after a specific date, unless further legislative action is taken to extend it. The bill states that, “This act shall take effect immediately and shall apply to taxable years beginning on and after January 1, 2005 …”

Issue #3: 32BJ raises the with respect to OHS verification of the ability of an employee to enforce their employment contract and the addition of a requirement that the applicants notify security guards of the existence of a contract.

Response: OHS fully acknowledges the provision in the legislation which defines an eligible guard as among other things, “employed in positions which are under a legally binding written agreement, including a service contract between qualified building owners and security contractors, enforceable by employees …” 32BJ proffers that a notification provision should be read into the legislation and included in the application. OHS intends to require signed stipulations by applicant that, among other things, there are legally enforceable contracts in existence, including wage provisions and other requirements spelled out in the law, which will also be one of several items verified by random spot audits.

Issue #4: 32 BJ requests that OHS issue advanced certifications of credit.

Response: This issue is a prospective approach that would give estimates to taxpayers on how much they would receive if they followed through on their applications rather than after the fact. Since those applicants who receive credits in the first year jump to the front of the line in the following year, so it will serve to ensure advance notification. If there are a substantial number of unused credits from the 2006 calendar year, OHS may issue a preliminary application utilizing the prospective approach.

Comments of SEIU Local 32BJ regarding the Security Officer Training Tax Credit, Chapter 537 of the Laws of 2005

The following comments are submitted on behalf of Service Employees International Union, Local 32BJ (“SEIU Local 32BJ”). We have over 65,000 members in New York State, including over 5,000 security officers. Several provisions in the proposed regulations should be modified to conform to the intent of the legislature as embodied in the statute.

1) Eligibility in Subsequent Years

The proposed regulations provide at Section 3(e) that any qualified building owner who is allocated a credit in the first calendar year shall be given priority in the second calendar year. This provision should be modified to conform to the statute, which requires that any building owner that receives a credit in a given year should receive priority over other applicants for the two subsequent years.

2) Distribution of Credits

Section 3 of the proposed regulations would reduce the amount of the credit received by each qualified building owner if applications received on a given day would exceed the legislative cap. This means that if there is widespread demand for the program, the value of the credit could be diluted to the point where it does not provide a reasonable economic incentive to building owners to continue their commitment to utilize qualified security officers for three years as intended.

If the eligible applications exceed the legislative cap, the State should utilize a lottery system to allocate the credits, with those qualified owners who are chosen through the lottery receiving the full credit. The State of Ohio utilizes a similar system to distribute training tax credits. The advantage of a lottery is that the winners would receive a sufficient incentive to encourage their participation for all three years.

3) Timing of Certification

The proposed regulations provide at Section 2(i) that the filing period is:

January 2nd through January 30th following the calendar year for which the tax credit is being sought. (emphasis added)

This would require building owners to expend resources on training and increased compensation before the availability of tax credits is determined. Given the limited availability of credits and the proposed system for distributing credits equally if the total numbers of applicants exceeds the legislative cap, otherwise qualified building owners may not receive any credits or receive a greatly reduced amount for money they have already spent.

The statute contemplated a certification mechanism by which building owners would be able to determine at the beginning of the calendar year whether they will be eligible for tax credits. Section (1)(D) of Chapter 537 reads:

(d) Credit certification. Upon application by a taxpayer, the state office of homeland security may issue a credit certification where the taxpayers meet the standards established in paragraph two of this subdivision and have demonstrated that they have provided the appropriate training, or, within the year, will provide the appropriate training to all employees for whom they will claim the credit. (emphasis added)

The regulations should follow the intent of statute to allow building owners to properly budget for security expenses by understanding at the beginning of the year what tax relief they will receive from the state if they comply with the program requirements.

Because many building owners made a good faith effort to provide qualified training and the necessary compensation in 2006 while the regulations were pending, there should be a special procedure for distributing the 2006 credits. Going forward however, taxpayers should have the opportunity to pre-certify their eligibility for the program.

4) Ensuring that Service Contracts are Enforceable by Employees

The statute provides at Section 1(B)(4)(I) that a building owner can meet the criteria for “qualified security officers” by employing security officers through a service contract with a security contractor that is enforceable by employees. The regulations should include a mechanism for certifying that such agreements exist, as well as a mechanism for ensuring that security officers have a meaningful opportunity to enforce the terms of those service contracts. No building owner should be eligible for the tax credit unless they provide evidence that the security officers have been notified of the terms of the service contract and their right to enforce those terms.

We thank you for the opportunity to submit comments on this important industry initiative. We welcome any feedback or discussion regarding our submission. Thank you.

We are writing to follow-up on our earlier comment regarding the absence of any proposed regulation to implement the requirement in the statute that a building owner is only eligible for the credit if certain wages are paid to security officers pursuant to a contract that is enforceable by the security officers.

Although the statute provides that the building owner's service contract may qualify as a contract enforceable by employees, the regulations ought to be based on the reality that in ordinary circumstances security officers would never see the service contract between their employer and the building owner, and they would have no reason to believe that they have any right to enforce the terms of that agreement. Furthermore, they would not even suspect that the service contract mandates any particular wages for them. In fact, the ordinary practice of building owners is not to mandate wages for their service contractors' employees for fear of becoming joint employers.

We think that it is entirely consistent with the principle that administrative agencies have “the power to fill in the interstices in the legislative product,” Nicholas v. Kahn, 47 NY 2d 24, 31 (1979) for the Office of Homeland Security to provide in the implementing regulations that in order for a building owner to rely upon its service contract with its security vendor as the contract that is enforceable by employees, the building owner must first inform the employees of the relevant terms of that agreement, and that they have a right to enforce it.

The agency could easily enforce such a requirement simply by requiring an applicant for the tax credit to provide a sworn statement that all security officers for whom it is claiming the credit have been notified of the relevant terms of the contract, and of their right to enforce the contract.

While the statute does not specifically provide that the building owner must give notice of the contract to employees, it stands to reason that an employee cannot enforce an agreement if he does not know that it exists.

The legislature specifically required that the contract providing the wages must be enforceable by employees. As the administrative agency taxed with drafting the implementing regulations, it is incumbent upon the agency to “breathe life into the guarantee” set forth in the statute. Bates v. Toia, 45 NY2d 460, 463 (1978).

Finally, any concern that adding such a notice requirement to the regulations would somehow result in invalidation of the regulations is entirely unfounded. It is well established that an agency “may promulgate regulations going beyond the statute itself as long as they are consistent with legislative intent.” Godwin v. Perales, 88 NY2d 383, 395–6 (1996). Court review of regulations is limited to inquiring whether the regulation is “so lacking in reason for its promulgation that it is essentially arbitrary.” GE Capital Corp. v. State Div. of Tax Appeals, 2 NY3d 249, 254 (2004). Here, the notice requirement could hardly be deemed arbitrary or irrational. The legislature wanted to make sure that wages were set forth in contract enforceable by security officers. If the security officers or their representatives are not parties to the contract, then security officers would have no way to enforce the contract unless they are first told that it exists.