New York Innovation Hot Spot Deduction

Innovation Hot Spot Deduction
Form IT-223 Innovation Hot Spot Deduction Tax Year 2023
Department of Taxation and Finance

Innovation Hot Spot Deduction

IT-223

Tax Law – Sections 38 and 612(c)(39)
Name(s) as shown on return	

Identifying number as shown on return

Submit this form with Form IT-201, IT-203, IT-204, or IT-205.
Complete the information below if you are a qualified entity located in a hot spot, are a member, partner, or shareholder of
a qualified entity, or both. See the instructions on back before completing.
A

Innovation hot spot name

B

Code

C

Business
participation
number

D

EIN of qualified entity
located in the hot spot

E

Tax year
being
claimed

F

Income or gain
attributable to the hot spot

(enter 1, 2, 3,
4, or 5)

.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
•	 Total the amounts in column F that you received as the qualified entity located in a hot spot. Transfer this total to Form IT-225,
line 10, Total amount column and enter subtraction modification S-216 in the Number column.
•	 Total the amounts in column F that you received as a partner or shareholder of a qualified entity. Transfer this total to Form IT-225,
line 14, Total amount column and enter subtraction modification ES-216 in the Number column.

223001230094

IT-223 (2023) (back)

Instructions

General information

Qualified entities in innovation hot spots are eligible for the tax
benefits listed below for five tax years beginning with the year
the entity became a tenant in or part of an innovation hot spot:
•	 Qualified entities taxable under Article 9-A located completely
within the hot spot are liable only for the fixed dollar minimum
tax.
•	 Qualified entities located inside and outside the hot spot,
and corporate partners of qualified entities, are allowed a
deduction for the amount of income or gain attributable to
operations in the hot spot.
•	 Individuals who are sole proprietors of a qualified entity, or
are partners in a partnership, limited liability company (LLC)
members, or shareholders of a New York S corporation, that
is a qualified entity, are allowed a deduction for the amount of
income or gain attributable to operations at the hot spot.
•	 Qualified entities are also eligible for a credit or refund of sales
and use tax imposed on the retail sale of tangible personal
property or services.

Who must file

Submit one Form IT-223 with your return. Complete Form IT-223
if you are an individual, a fiduciary of an estate or trust, a partner
in a partnership, or a shareholder of a New York S corporation,
and you are a qualified entity or a member, partner, or
shareholder of a qualified entity, or both. Include information for
all of the entities from which you are receiving income or gain
attributable to an innovation hot spot.
A partnership must submit Form IT-223 with Form IT-204,
Partnership Return, showing the total income or gain attributable
to the hot spot and provide the partners with their share of the
income or gain attributable to the hot spot.
A New York S corporation does not file Form IT-223; it must
file Form CT-223, Innovation Hot Spot Deduction. If you are
a shareholder of a New York S corporation, obtain your share
of the S corporation’s income attributable to the hot spot from
the S corporation, and follow the instructions on this form for
claiming your modification on Form IT-225, New York State
Modifications.

Taxpayers claiming the above tax benefits are not eligible for
any other New York State exemptions, deductions, credits, or
refunds to the extent the exemption, deduction, credit, or refund
is attributable to the business operations in the innovation
hot spot. Claiming any such benefit represents an irrevocable
election.

Column instructions

Qualified entity means a business enterprise that is:
•	 in the formative stages of development, and
•	 located in New York State, and
•	 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 that innovation hot spot, and
•	 either A or B below:
A.	 any corporation, except a corporation which:
•	 over 50% 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 Tax Law
Article 9, sections 183, 184; Article 9-A; or Article 33; or
•	 is substantially similar in operation and in ownership to a
business entity (or entities) taxable or previously taxable
under Tax Law Article 9, sections 183, 184, or former
sections 185 or 186; Article 9-A; former Article 32;
Article 33; former Article 23; or would have been subject
to tax under Article 23 (as it was in effect on January 1,
1980); or the income (or losses) of which is (or was)
includable under Article 22.
B.	 a sole proprietorship, partnership, limited partnership,
LLC, or New York S corporation that is not substantially
similar in operation and in ownership to a business entity
(or entities) taxable, or previously taxable, under Tax Law
Article 9, sections 183, 184, or former sections 185 or 186;
Article 9-A; former Article 32; Article 33; former Article 23;
or would have been subject to tax under Article 23 (as
it was in effect on January 1, 1980); or the income (or
losses) of which is (or was) includable under Article 22.

Column B – Enter the hot spot identification code from your
certificate letter.

For more information about the New York Innovation Hot Spot
Program, visit www.esd.ny.gov.

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If you need help contacting the Tax Department or for the
Privacy notification, see the instructions for your tax return.
Column A – Enter the innovation hot spot name from your
certificate letter.

Column C – Enter the business participation number from your
certificate letter.
Column D – Enter the employer identification number (EIN)
of the business certified in the hot spot. If you are receiving
the income from another entity (partnership, New York
S corporation, estate or trust) enter the EIN of the qualified entity
certified in the hot spot.
Column E – Make only one entry (1, 2, 3, 4, or 5) to indicate
which tax year you are claiming this deduction.
Column F – Enter the amount of income or gain attributable to
the hot spot that was included in your federal adjusted gross
income.
In addition to any record keeping requirement imposed by
Empire State Development, a qualified entity that is located
inside and outside a New York innovation hot spot must keep
books and records to disclose, to the satisfaction of the Tax
Department, the amount of items of income, gain, loss, and
deduction attributable to operations at (or as part of) the
innovation hot spot.