IT-223: Innovation Hot Spot Deduction (2024)
New York · NY DTF · Used for tax years 2024
Form IT-223 reports income or gain attributable to a New York innovation hot spot for the Innovation Hot Spot Deduction. It lists the hot spot and qualified entity information, the tax year being claimed, and the income or gain used to claim the subtraction modification on Form I
Who files this form
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.
Submit one Form IT-223 with your return. Include all entities from which you receive income or gain attributable to an innovation hot spot.
- A partnership must submit Form IT-223 with Form IT-204, showing its total income or gain attributable to the hot spot. It must also provide partners with their shares of that income or gain.
- A New York S corporation does not file Form IT-223. It files Form CT-223 instead. Its shareholders use their shares of hot spot income to claim their modifications as directed on Form IT-223.
What you'll need
Have the following information ready:
- Your name and identifying number as shown on your tax return.
- Your certificate letter, which provides the innovation hot spot name, identification code, and business participation number.
- The employer identification number (EIN) of the qualified business certified in the hot spot.
- The deduction year you are claiming, numbered 1 through 5.
- The amount of hot spot income or gain included in your federal adjusted gross income.
- If you are a partner or New York S corporation shareholder, your share of hot spot income or gain provided by the entity.
A qualified entity operating both inside and outside a hot spot must keep books and records showing the income, gain, loss, and deductions attributable to its hot spot operations.
How to file
Submit Form IT-223 with Form IT-201, IT-203, IT-204, or IT-205, as applicable.
- Enter your name and identifying number as shown on your return.
- Complete columns A through C using the hot spot name, code, and business participation number from your certificate letter.
- In column D, enter the EIN of the qualified entity certified in the hot spot.
- In column E, enter one number, 1, 2, 3, 4, or 5, to identify the deduction year being claimed.
- In column F, enter the income or gain attributable to the hot spot that was included in your federal adjusted gross income.
Total column F amounts received as the qualified entity located in a hot spot. Transfer that total to Form IT-225, line 10, in the Total amount column, and enter S-216 in the Number column.
Separately total column F amounts received as a partner or shareholder of a qualified entity. Transfer that total to Form IT-225, line 14, in the Total amount column, and enter ES-216 in the Number column.
The supplied text does not provide a mailing address or e-filing directions.
Common mistakes
- Leaving out an entity: Submit one Form IT-223 that includes all entities from which you receive hot spot income or gain.
- Using the wrong EIN: If you receive income through a partnership, New York S corporation, estate, or trust, column D still requires the EIN of the qualified entity certified in the hot spot.
- Making multiple entries in column E: Enter only one number, 1 through 5.
- Including income not in federal adjusted gross income: Column F calls for hot spot income or gain that was included in your federal adjusted gross income.
- Claiming overlapping New York State tax benefits: Taxpayers claiming the listed hot spot benefits cannot claim other New York State exemptions, deductions, credits, or refunds to the extent they relate to the same hot spot business operations. Claiming a hot spot benefit is an irrevocable election, meaning it cannot be reversed.
Questions people ask
How long are the innovation hot spot tax benefits available?
Qualified entities are eligible for five tax years, starting with the year the entity became a tenant in or part of an innovation hot spot.
What income can an eligible individual deduct?
Eligible sole proprietors, partners, LLC members, and New York S corporation shareholders may deduct income or gain attributable to hot spot operations. Column F requires the amount included in federal adjusted gross income.
What should I do if I am a New York S corporation shareholder?
Obtain your share of the corporation’s income attributable to the hot spot from the corporation. Follow Form IT-223’s directions for claiming your modification on Form IT-225. The corporation itself files Form CT-223, not IT-223.
Where can I learn more about the Innovation Hot Spot Program?
The form directs readers to www.esd.ny.gov for more information about the New York Innovation Hot Spot Program.