Locke Lord QuickStudy: The New York Legislature Ends The Guessing - Brownfield Tax Credits Extended And Modified

Locke Lord LLP
April 9, 2015

 What It’s All About
On April 1, 2015, the New York Legislature passed a budget bill for fiscal year 2015-2016, which included numerous amendments (the Amendments) to the Brownfield Cleanup Program (BCP), a state program designed to incentivize the cleanup of blighted and contaminated properties through a tax credit system.  We anticipate Governor Cuomo will sign the bill into law in the next few days.  The Effective Date of the Amendments will be the later of either July 1, 2015, or the date when the New York State Department of Environmental Conservation (NYSDEC) defines “underutilized” for Tangible Property Tax Credit Eligibility purposes.

Need-to-Know Amendments to the BCP (Other than Tax Credits)
Change to the Definition of “Brownfield Site”
The Amendments clarified this definition, which now requires applicants to demonstrate (through sampling data) that sites are contaminated above cleanup levels and will require remediation.  

BCP-EZ will be a welcome addition for New York property owners. The Amendments authorize the NYSDEC to create a user-friendly, streamlined voluntary cleanup program, which will be available for low threat sites when the property owner does not want tax credits.

Tax Credit Changes to the BCP
Site Preparation Credit and On-site Groundwater Remediation Credit
Nature of the Credit:  These credits are available to BCP participants who incur costs for the remediation or preparation of a brownfield site and are calculated by multiplying eligible costs by an applicable percentage.

Changes to Eligible Costs:  Eligible costs are those that are necessary to implement a site’s investigation, remediation, or qualification for closure.  Such costs include expenses for excavation; demolition; remediation and disposal of asbestos, lead, or PCBs; environmental consulting; engineering; legal costs; transportation, disposal, treatment, or containment of contaminated soils and groundwater; remediation to address soil vapor; cover systems; and engineering controls.

No Changes to Credit Percentages:  The Amendments did not alter the applicable percentages, which range from 22-50 percent.

Tangible Property Tax Credit
Nature of the Credit:  This credit is available to BCP participants who incur costs associated with on-site buildings and improvements, including structural components of buildings, that are placed into service within 10 years of site closure.  The credit is calculated by multiplying eligible costs of the improvements by an applicable percentage.

Changes to Eligible Costs:  These costs are now limited to expenses associated with on-site demolition and excavation; tangible property that has a depreciable life of at least 15 years; the foundation of any buildings constructed as part of the site cover; and non-portable equipment, machinery, fixtures, and appurtenances used on-site.

Changes to Credit Percentage:  The Amendments provide for a 10 percent base percentage for all applicants, with an opportunity for the percentage to be increased by an additional 5 percent in each of the following situations (up to a maximum of 24 percent total):  (a) the site is located within an environmental zone; (b) the site is located within a designated Brownfield Opportunity Area; (c) the site is developed as affordable housing; (d) the site will be used primarily for manufacturing activities; and (e) the site achieves Track 1 (unrestricted use) cleanup standard.  

Changes Applicable to Sites in New York City:  While cities with populations of less than 1 million are automatically eligible, sites in cities with populations of 1 million or more will only be eligible for tangible property tax credits if they satisfy one of the following criteria:  (a) at least half of the site area is located in an environmental zone; (b) the site is utilized as affordable housing; or (c) the site is “up-side down” (remediation is expected to cost 75 percent or more of the total value of the remediated property) or “underutilized” (to be defined by NYSDEC). 

Race to the Finish Line
Sites accepted into the BCP before the Effective Date will be grandfathered and allowed to continue under the BCP’s existing tax credit system.  A grandfathered site will have until December 31, 2017 (for sites accepted into the BCP before June 23, 2008) or December 31, 2019 (for sites accepted into the BCP between June 23, 2008 and the Effective Date) to obtain a certificate of completion or become subject to the Amendments.

The BCP and the Amendments are important to anyone seeking to redevelop sites in New York.  We are glad to help with the BCP or any environmental needs.

For more information on the matters discussed in this Locke Lord QuickStudy, please contact the authors.