The Employer Compensation Expense Program (ECEP) established an optional Employer Compensation Expense Tax (ECET) that employers can elect each year to pay if they have employees that earn over $40,000 annually in wages and compensation in New York State. Employees of participating employers may be eligible to claim the ECEP wage credit when filing their New York State personal income tax return.
If you elect into the ECEP for the year, you will pay the ECET on the New York payroll expense that exceeds $40,000 for the calendar year paid to each employee employed in New York State.
An employer will make an annual affirmative election to participate in the ECEP no later than December 1 to pay the optional tax in the following calendar year.
Enrollment for tax year 2026 will begin on October 1, 2025.
Employers who elect to participate in the program should:
Tell employees that they opted into the ECEP.
Notify employees making over $40,000, annually, in New York State that they may be eligible for a tax credit when filing their income tax return.
Encourage those covered employees to review their Form IT-2104 and adjust their withholding, if necessary.
Communicate to covered employees where to find the amount of wages and compensation needed to compute the tax credit. You may use thissample templateto communicate such information to covered employees.
Although the ECET return and payments are due at the same time as your withholding tax, you must file and pay the taxes separately. You must file all quarterly ECET returns and make all payments online.