On March 29, 2013, legislation was signed into law as part of the New York State 2013-2014 Enacted Budget that provides various requirements applicable to the grant by an industrial development agency of exemptions from certain taxes including the New York State portion of the sales and use tax. This legislation is much less restrictive than the legislation originally proposed in the 2013-2014 Executive Budget.
Retail Projects
The 2013-2014 Enacted Budget reinstates the prohibition on granting "financial assistance" in the form of exemptions from mortgage recording tax, sales and use tax and real property tax for retail projects, and provides:
- No more than one-third of a project's cost can be facilities used for retail sales to customers who personally visit the facility, unless the project:
- attracts a significant number of visitors from outside the region, or
- will make available good or services not otherwise reasonably accessible, or
- is located in a highly distressed area.
- In the latter two instances, the IDA must make a finding that the project creates or preserves permanent, private sector jobs and the chief executive officer of the municipality for whose benefit the IDA was created must confirm the IDA's proposed grant of financial assistance.
Recordkeeping, Reporting and Documentation
The 2013-2014 Enacted Budget contains new IDA recordkeeping, reporting and documentation requirements:
- An IDA must keep records of the amount of State sales and use tax exemptions granted to each project and each agent or project operator and make such records available to the New York State Commissioner of Taxation and Finance (the "Commissioner") upon request.
- Within 30 days of granting an exemption from the State sales and use tax, an IDA must report to the Commissioner the amount of the benefits, the applicable project, and any other information the Commissioner prescribes, either in conjunction with the submission of an ST-60 form or separately, at the Commissioner's determination.
- An IDA that fails to make such records available or to file such reports will be prohibited from providing an exemption from any State sales and use tax until the IDA complies with its reporting obligations.
- All resolutions and documents related to a project must include the terms and conditions of this new section, and the agreement of the agent or project operator to comply with such terms and conditions.
Recovery of State Sales and Use Tax
- An IDA must recapture from a project operator or agent and pay to the Commissioner the amount of any State sales and use tax exemption to which the project operator or agent was not entitled, which is in excess of the amount authorized, which is for property or services not authorized, or if the agent or operator fails to comply with a material term or condition regarding the use of the property or services as provided in its agreement with the IDA.
- The failure of the agent or project operator to pay such amounts to the IDA will be grounds from the Commissioner to collect sales and use taxes from such agent or project operator under Article 28 of the Tax Law, together with interest and penalties.
Annual Compliance Report
- An IDA must prepare an annual compliance report detailing the terms and conditions to which an agent or project operator must agree prior to receiving an exemption from the State portion of the sales and use tax, its recapture activities and efforts, and any other information required by the Commissioner and the Commissioner of Economic Development.
- The IDA must file the annual compliance report with the Commissioner, the Director of the Division of the Budget, the Commissioner of Economic Development, the State Comptroller and the governing body of the municipality for whose benefit the IDA was created.
- An IDA will be prohibited from granting an exemption from the State portion of the sales and use tax unless and until it files or substantially completes the required report.
Document Availability
- An IDA must make available on the internet and to any person who asks for it in writing or in person, without charge, copies of its resolutions and agreements related to any project it establishes.
- If requested by the agent or project operator, the IDA may delete from such publicly available documents certain information exempt from disclosure under New York State's Freedom of Information Law.
Miscellaneous Provisions
- The Commissioner may audit any IDA to ensure compliance with the provisions provided in the new State sales and use tax exemption section of the General Municipal Law.
- The ST-60 form filed by an IDA reporting the appointment of an agent or project operator is not sufficient to document the grant of a State sales tax exemption and the IDA must not represent it as such. Rather, the sales tax appointment letter from the IDA is the appropriate documentation of such grant of exemption.
- The Commissioner is granted authority to develop rules and regulations to implement the new legislation.
- Within 30 days of any amendment, termination, revocation or invalidation of a grant of State sales and use tax exemption, the IDA must file in a prescribed form a statement related thereto with the Department of Taxation and Finance.
Legislation Effective Date and Projects Affected
This legislation takes effect immediately and applies to:
- Any IDA project established, agent or project operator appointed, financial assistance provided or agreement regarding payments in lieu of taxes entered into, on or after March 29, 2013 or which is amended or revised on or after March 29, 2013 (including an extension of the sales tax exemption period); and
- Any State sales tax exemption or payments in lieu of State sales and use taxes recovered, recaptured, received or otherwise obtained by an IDA on or after March 29, 2013.
If you would like further information or have any questions with respect to the impact of the new legislation on IDAs, please feel free to contact Connie Cahill, at (518) 429-4296 or mcahill@hblaw.com, Garrett DeGraff at (518) 429-4235 or gdegraff@hblaw.com, Jean Everett at (202) 582-0601 or jeverett@hblaw.com or Susan Katzoff at (315) 425-2880 or skatzoff@hblaw.com.