NY Legislature Votes to Extend Cutoff Date for Brownfield Cleanup Tax Credits to 2017
On the last day of the session and late into the evening of June 20th, the New York Senate passed Assembly bill A10135 as S 7878 (collectively, “S 7878”). The bill extends the current December 31, 2015 cutoff for the Brownfield Cleanup Program (“Brownfield Cleanup Program”) refundable state tax credits under the Brownfield Cleanup Act to March 31, 2017. It also links the extension to the re-financing of the State Superfund Program by increasing the State Superfund Program’s bonding authority by $300 million and authorizes the State Superfund Program to issue those bonds until March 31, 2017. Finally, S 7878 appropriates $100 million from the State’s General Fund for immediate use by the State Superfund program.
The current Brownfield Cleanup Program is a cumbersome, costly cleanup program made bearable by the availability of the refundable state tax credits covering remediation and development costs (tangible property), a statutory liability release, and the ability to target the cleanup to the current, intended, and reasonably anticipated use. Even now, the Brownfield Cleanup Program makes the most sense for developers of expensive commercial projects where the time lost in going through the program and the burdens of remediating contaminated property are sufficiently offset by the magnitude of the refundable state tax credits for the tangible property used to build the commercial structures. Therefore, the Brownfield Cleanup Program would become a less bearable and presumably much less utilized cleanup program if the tax credits are effectively foreclosed.
The records of the Department of Environmental Conservation (“DEC”) show that it takes on average 3.77 years to remediate a site under the Brownfield Cleanup Program. The current law cuts off access to the Brownfield Cleanup Program tax credits for any site receiving a “Certificate of Completion” from the DEC after December 31, 2015, which is 1.5 years away. Although the DEC has recently taken significant steps to streamline the administrative process, a site just entering the Brownfield Cleanup Program is far from assured completion and DEC issuance of the Certificate of Completion before the current expiration date.
S 7878 would extend that cutoff until March 31, 2017, i.e., to a date which is 2 years and 9 months away, as well as the end of the 2016-2017 fiscal year. S 7878 is, therefore, more of a boon to sites already in Brownfield Cleanup Program, than it is to any new site contemplating entry into the Brownfield Cleanup Program. Although prospective participants are welcome to seek admission into the program, and certain kinds of remedial projects probably could achieve completion and obtain a Certificate of Completion by March 31, 2017, S 7878 does not extend the cutoff far enough to provide a new applicant with assurance that it will be able to secure the tax credits following a remediation process that is driven as much by the time it takes the DEC to review and approve documents as it is by the time it takes the participants to prepare and submit work plans and reports.
For S 7878 to become law, the Legislature must send the bill to the Governor for his signature. Then, under the state Constitution, the Governor has a limited time period within which to sign or veto it. The Assembly is the legislative chamber that sends bills to the Executive for final action. The Assembly usually sends bills to the Governor in batches over the summer and it is unclear when S 7878 will be forwarded to the Governor. When the Brownfields Cleanup Act tax credit was extended in 2012, the Governor did not sign the bill into law until August of that year. According to media reports, on June 24, 2014, the Governor stated his intention to sign the extension bill, although he signaled further changes are coming by noting “I think it needs an overall reform and we’re going to be working on that when we go back.”
The Governor and the DEC are on record seeking statutory changes that would make the Brownfield Cleanup Program tax credits proportional to the amount of money expended on the remediation (and not the amount spent preparing and building new structures on the site). In addition, the legislation which the Governor introduced earlier this year would have limited “expenditure” of the tax credits to no more than $50 million in any single tax year, and those credits would be linked to the development of jobs.
The Assembly, however, has a number of bills which would target the Brownfield Cleanup Program tax credits to low income areas and/or properties that had been abandoned, underutilized, are “upside down” and/or were being redeveloped for affordable housing.
We are continuing to monitor developments relating to the legislative action on the Brownfield Cleanup Program, and will issue further legal alerts as any significant developments occur.
If you or your company are contemplating entry into the Brownfield Cleanup Program, or would like to discuss the impact and use of Brownfield Tax Credits for a development project, please do not hesitate to contact the author of this Alert and chair of Hiscock & Barclay’s Land Use Practice Area, Thomas F. Walsh, at (585) 295-4414 or firstname.lastname@example.org, or you may also contact David G. Burch at (315) 425-2788 or email@example.com.