The New York Brownfield Cleanup Program (BCP) is known for producing robust cleanups. One reason is the stringent cleanup standards of 6 NYCRR Part 375 but another is the BCP tax credits that reward applicants who achieve track 1 unrestricted cleanups. Applicants that achieve unrestricted (track 1) cleanups are entitled to claim 50% of their site preparation costs and an extra two percent for the tangible property tax credit (TPCC). In addition, track 1 cleanups will result in higher site preparation costs which can increase the amount of the TPCC that applicants until they hit the $35MM cap.
However, with the looming expiration of the BCP tax credits, applicants may need to implement less comprehensive cleanups to ensure that they will be able to obtain a COC by the end of the year and qualify for the BCP tax credits (BTCs). One possible approach may be to borrow from a strategy that was used during the Great Recession and simply implement track 4 cleanups that only require two feet of clean fill.
Under this strategy, applicants or their successors would be able to claim the site preparation tax credit for costs that were incurred to qualify the site to obtain a COC. They would then have five years to incur additional site prep costs such as excavation to prepare the site for development after the expiration date of the BTC. If the applicants put the building into use within five years, they would be able to use the entire site prep costs incurred for the site (i.e., those incurred to achieve the 2015 COC and those to prepare the site for vertical development) towards the cap for the tangible property tax. For example, the applicant could spend $100K to achieve a track 4 cleanup by the end of 2015. Thereafter, it incurs an additional $1MM in site prep costs for excavation, support of excavation, dewatering, etc. to prepare the site for construction of the improvements. Thus, the applicant would be able to claim 3x the total site prep costs of $1.1MM for a cap of $3.3MM.
Hopefully Governor Andrew Cuomo and the State Legislature will be able to reach an agreement that extends the BTCs. In the meantime, applicants should review their cleanup plans with their consultants and attorneys to develop contingency plans for preserving their eligibility for the BTCs.