By ADAM SICHKO
Albany Business Review

Democrats in the state Senate want to alter the changes that were made to the Empire Zone tax-incentive program in the budget.

Democrats, who are the majority party in the Senate, also want to create a 29-person panel that will develop a replacement economic-development program to take effect when Empire Zones expire in June 2010.

Legislation that would enact those initiatives will be introduced this week. Part of the legislation seems aimed at a controversial tax policy, adopted last month, which prevents businesses from claiming Empire Zone tax credits on their 2008 tax returns.

The Empire Zone program awards tax credits for businesses that create jobs and improve their facilities. Tax exemptions are given for property and sales taxes.

The $520 million program has 9,200 members. Interest groups and most politicians have assailed the program, arguing that it's filled with abuse and waste.

Businesses have been outraged at an April 15 tax policy, a by-product of the changes made to the Empire Zone program in the budget. The policy prevents companies from claiming Empire Zone tax benefits until they have received formal confirmation from Empire State Development Corp., the state's economic agency, that they meet the program's newest standard: creating at least $1 of wages and investments for every $1 received from the state.

The budget requires Empire State Development to audit all companies in the program, although there is no deadline for the audits. Department officials say they hope to complete them this summer, or by year's end at the latest.

In the meantime, companies will have to pay tens of thousands of dollars in extra taxes, since they cannot claim the credits until they get recertified.

The state will deny any credits claimed on tax returns. Businesses will have to pay the resulting balance, plus 8 percent interest.

State officials have said the policy is more efficient than the alternative: letting all companies claim credits as usual, then trying to recover money from companies later removed from the program for not meeting its minimum standards.

Monday, Senate Democrats said they want to make "technical amendments" to the program. More specific information was not immediately made available.

"These amendments have no fiscal implications (to the state), but will ensure deserving, certified businesses are not forced to jump through unnecessary hurdles to receive their tax credits," said Senate Majority Leader Malcolm Smith, D-Queens.

The 2009-10 state budget shortened the program's lifespan by a year. The program now ends in June 2010, and a new program is supposed to be in place by that time.

Democrats have proposed creating a 29-person panel, made of up representatives from business, universities, business-improvement districts and unions, as well as nonprofits and state agencies.

The panel would develop a program to replace the Empire Zone incentives. A preliminary report would be due in December, toward the goal of enacting a new program in the state's 2010-11 budget.

"The rules of the next program should be simple and should stay the same throughout the life of the program, so that businesses come to New York with that understanding that the state will maintain its commitment," Smith said.

The panel would be created through appointments by the following state leaders:

• Gov. David Paterson (9 appointments)
• Smith (6)
• Assembly Speaker Sheldon Silver (6)
• Senate Minority Leader Dean Skelos (2)
• Assembly Minority Leader Brian Kolb (2)

The remainder will be ex officio members from Empire State Development Corp., the state Department of Labor and the New York State Foundation for Science, Technology and Innovation (known as NYSTAR).

Business groups praised plans for the panel.

No deadline for naming panel members was announced.