Reforming New York State's Brownfield Tax Credit Programs ("BCP") to include additional sites and eliminate site preparation credits may soon be one of many options Governor Andrew M. Cuomo will consider to help relieve State residents and businesses of their heavy tax burden. The proposed changes could have a potential $35 million annual fiscal impact on the State and end the current BCP credit structure in 2015.
The New York State Tax Reform and Fairness Commission (the "Commission"), co-presided by H. Carl McCall and Peter J. Solomon, presented its final report to Governor Andrew M. Cuomo on November 11, 2013 recommending various revenue-neutral tax reforms including changes to the BCP to streamline the ten-year old program. Specifically, the Commission proposed changes to the BCP eligibility criteria for the refundable state tax credit to include only actually or functionally abandoned sites:
- Sites that have been abandoned for ten years;
- Sites that would unlikely be redeveloped without State assistance, to be determined by the Empire State Development Corporation; or,
- Sites where the cleanup cost is greater than the site's value after cleanup.
The Commission also recommended scaling back or eliminating site preparation costs that go beyond the actual cost of remediation, currently allowed in the computation of the Brownfield Tax Credit.
The BCP, enacted into law in 2003 and amended in 2008, provides tax credits in return for voluntary cleanup and redevelopment of Brownfield sites within New York State. The BCP balanced a rigorous if not daunting approach to remediating sites by the granting of otherwise unavailable tax incentives. Although, since its inception, the BCP has to date paid out approximately $3.3 billion in tax credits to developers, the balance struck has led to only 13 cleanups occurring each year under the BCP.
The BCP was amended in 2008 to modify the payment structure of the credits – the goal being reconciling remediation and redevelopment credits. Some of the changes, including a 2015 deadline for certifying completion of the remedy in order to collect tax credits, led to speculation that the BCP was effectively being discontinued because there was very little reason to accept its daunting approach to remediation if the counterbalancing credits were no longer available. The loss of the tax credit would likely reduce the number of sites cleaned up under the BCP to substantially less than 13 sites per year.
The 2015 deadline required a volunteer to have obtained its Certificate of Completion from the New York State Department of Environmental Conservation ("NYSDEC") on or before December 31, 2015 in order to claim their tax credits, (This requirement is mandatory regardless of whether the delayed completion is NYSDEC's or the volunteer's fault). Implementation of the Commission's recommendations could potentially spur volunteer program participation by curbing concerns over effects of the December 31, 2015 "expiration" date.
However, to the extent the Legislature limits access to the refundable state tax credit to abandoned sites, there may be an opening to renew efforts to enact in New York a voluntary cleanup program similar to those programs enacted in Pennsylvania and Massachusetts. The Legislature could then assert that, on the whole, it was spurring the cleanup of waste sites in New York.
Under Pennsylvania's Act 2, approximately 250 sites are being cleaned up each year. Approximately 19,300 sites in Massachusetts were addressed from 1998-2008. While the Massachusetts' remedial program is likely including oil spill remediations within its numbers, the Pennsylvania numbers are not. Pennsylvania is actually cleaning up comparable State Superfund sites at 20 times the rate of New York. The economic impact of returning these sites to beneficial use has been calculated to have added 98,000 jobs.
Besides the BCP, the Commission's 2013 report detailed other revenue-neutral means that could simplify the State's complex tax code and thus help reduce the tax burden on New Yorkers and businesses. Recommendations include reforming and repealing certain existing Business Tax Incentives including reforming the Investment Tax Credit; repealing the Financial Services Investment Tax Credit; and reducing the Empire State Film Production Tax Credit Allocation. Other reform/repeal areas covered included Sales Tax, Estate and Gift Tax, Corporate Tax Reform, Real Property Tax and Tax Simplification.
If you require further information regarding the information presented in this Legal Alert and its impact on you or your organization, please contact Thomas F. Walsh, Chair of the Land Use Practice Area, at (585) 295-4414 or twalsh@hblaw.com, or Jemeli E. Tanui, at (315) 425-2876 or jtanui@hblaw.com.