NYS Brownfield Cleanup Program Tax Credits to Sunset
Anyone who intends to utilize the tax incentives and other benefits of New York State’s Brownfield Cleanup Program (“BCP”) to help fund the remediation and redevelopment of a brownfield should act soon. The State Legislature finished its regular 2011 session without revoking the sunset date of March 31, 2015 on the tax credits of eligible BCP sites. Although 2015 seems like a long way off, prompt action is required because the remedial activities that must be completed in order to obtain a certificate of completion (“COC”) prior to the sunset date typically take three years or more.
Under the current law, the BCP tax credits will not be available for BCP sites with a COC issued after March 31, 2015. For the 92 BCP sites that have obtained COCs from the commencement of the program and through the end of 2010, it has taken an average of 3.2 years to progress from admission into the program through to issuance of a COC. It also typically takes a few months prior to admission to establish eligibility for the BCP program. Thus, it is imperative for prospective BCP participants to act soon in order to be assured that they have a good chance to complete remediation and obtain a COC before the sunset date.
In addition, prompt action will be beneficial for several kinds of sites even if the Legislature does revisit the sunset date during a future session. That is because the Legislature has been considering a number of bills that would bar entry into the BCP for certain kinds of sites that are presently eligible.
In order to qualify for the BCP presently, the site must be “real property, the redevelopment or reuse of which may be complicated by the presence or suspected presence of a contaminant.” The only present exceptions are for certain significantly contaminated properties listed on the Federal or State Superfund site lists and for sites already subject to environmental enforcement. Once a site is admitted into the BCP, the applicant signs an agreement with the NYS Department of Environmental Conservation (“NYSDEC”) committing to develop and implement a remediation program to NYSDEC’s satisfaction that will make the conditions protective of public health and the environment for its anticipated use.
Upon satisfactory implementation of the remedy and approval of the site management plan, NYSDEC issues the COC to the participant. In addition to entitling the remediating party (and/or its successor in most instances) to refundable state income tax credits for a portion of the site’s cleanup costs, environmental remediation insurance premiums, capital redevelopment costs, and local property taxes, the COC provides a limited release of liability from future environmental claims by the State. The refundable state income tax credits available under the current BCP as amended in 2008 include:
- Environmental remediation credit for eligible cleanup costs, ranging from 22% to 50% depending on the stringency of the cleanup achieved;
- Redevelopment credit for capital costs of equipment, buildings and other eligible
tangible property placed in service on a BCP site, ranging from 10% to 24% depending on the type of entity of the applicant and on whether the site is located in designated high poverty and/or high unemployment “Environmental Zone,” remediated to a Track 1 unrestricted use standard, and/or redeveloped in accordance with a community’s State-approved Redevelopment plan within a designated Brownfield Opportunity Area (“BOA”), and subject to certain maximum dollar caps;
- Environmental remediation insurance credit of up to $30,000 for the premiums on a policy insuring the applicant against excess remediation costs and/or third party personal injury or property damage claims; and
- Credit against local real property taxes at sites employing 25 or more full-time workers for up to ten tax years following issuance of the COC, ranging from 6.25% to 100%, depending on whether the site is located in an Environmental Zone and the average annual number of on-site employees, but in no event exceeding an annual credit of $10,000 per employee.
During the 2011 Legislative Session, the New York Legislature considered in committee but did not bring to the floor Senate Bill S5228, which would eliminate the BCP’s present sunset date on BCP tax credits. As proposed, the bill would also:
- Tighten eligibility standards by adding non-discretionary economic conditions;
- Allow applicants not responsible for the contamination at one of those significantly contaminated sites listed on the Federal or State superfund site lists that are currently ineligible for the BCP to enter into the BCP to remediate certain solid waste management facilities;
- Cap the program oversight fees that the State charges to the applicant at five percent of the applicant’s cleanup costs;
- Triple to $90,000 the maximum permissible environmental remediation insurance credit;
- Increase from $45 million to $150 million the maximum permissible cap on the redevelopment tax credit for sites redeveloped primarily for manufacturing activities; and
- Provide for the use of environmental covenants consistent with other state programs.
Senate Bill S5228 would also disqualify from BCP eligibility any hazardous or non-hazardous solid waste treatment, storage or disposal facility that has been issued a permit by NYSDEC. At present, the disqualification only applies to solid waste facilities that are subject to a State enforcement action.
With the fate of BCP tax credits uncertain, and the likelihood that completing the BCP process for a typical site will take three years or more, potential applicants should not wait to begin.
Hiscock & Barclay LLP will continue to monitor the status of these measures, as well as other developments related to the redevelopment of brownfield sites, as they occur.
If you require further information regarding the information presented in this Legal Alert and its impact on your organization, please contact the Chair of the Practice Area.