NY Legislature Extends Brownfield Tax Credits

Both houses of the New York Legislature passed bills that would extend the sunset date for the brownfield tax from March 31, 2015 to December 31, 2015. Parties remediating sites in the Brownfield Cleanup Program (BCP) must obtain certificates of completion (COC) from the NYS Department of Environmental Conservation (NYSDEC) by that date to be able to claim the BCP tax credits. The Governor is expected to sign the legislaton.

The March 2015 sunset date was becoming a concern to developers since NYSDEC calculated that it was taking an average  of 3 1/2 years for BCP sites to receive a COC. This meant that any new projects were at risk of not finishing cleanups before the March 31, 2015 tax credits sunset.

Most environmental lawyers including the NY State Bar Association Brownfield Task Force (Brownfield Task Force) that I co-chair felt that a simple nine-month extension did not significantly address the concerns of developers. Given the inevitable delays associated with brownfield projects, the extra nine months does not provide much cushion for unanticipated delays and other complications.  The Brownfield Task Force is advocating a repeal of the sunset so that the tax credits become permanent along with reasonable amendments to the tax credits so that they are not as costly to the state yet still sufficiently robust to incentivize brownfield redevelopment. We have also argued that innocent purchasers of state superfund sites should be eligible for the BCP. Currently, Class 2 sites are not eligible for enrollment in the BCP.

In six years, the BCP generated approximately $750MM in tax credits. Assuming that the BCP projects that received tax credits only qualified for the minimum 10% tangible property tax credit (BCP projects may qualify for as much as 24% of the value of the improvements constructed on the brownfield site subject to a hard cap of $35MM or three times the site preparation costs), this means that the BCP attracted $7.5B in private capital investment at a time when the nation was experiencing the worst economic downturn since the Great Depression.

Given the economic importance of the BCP and the high-quality cleanups its produces, it is hoped that the Legislature and Governor Cuomo will make BCP a legislative priority for the fall and enact permanent reforms to the BCP.

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