David J. Freeman, Director, Real Property & Environmental Law Gibbons P.C.
Governor Andrew Cuomo and leaders of the New York State Senate and Assembly have reached an agreement with respect to extension and reform of the state’s Brownfield Cleanup Program (BCP), a significant development in view of impending expiration of tax credit eligibility on December 31, 2015.
The essential elements of the deal are as follows:
- All sites currently in the Program, and those which are admitted prior to December 31, 2022, will be eligible for tax credits if they obtain their Certificates of Completion (COCs) by March 31, 2026.
- Sites admitted on or after the later of (a) July 1, 2015 or (b) the date on which the Department of Environmental Conservation (DEC) proposes regulations defining “underutilized” (see below) will be subject to newly-enacted limits on tangible property (development) credits.
- Sites admitted prior to June 23, 2008 will be “grandfathered” into the existing tax credit scheme if they obtain their COCs by December 31, 2017. Sites admitted from June 23, 2008 until the later of (a) or (b) above will be grandfathered if they obtain their COCs by December 31, 2019. If they fail to meet those deadlines, they can still obtain tax credits under the Program, but only under the more stringent guidelines applicable to newly-admitted sites.
- Despite efforts to restrict the types of expenses that qualify for site cleanup credits, eligibility for such credits remain broadly defined. The one major new limitation is that applicants will not be able to count expenses of foundations that exceed the cost of cover system requirements under applicable regulations.
- Sites in New York City that are newly-admitted, or that are currently in the program but fail to obtain their COCs in time to be grandfathered, will need to meet one or more of the following criteria to qualify for development credits:
– being located in an Environmental Zone;
– meeting the definition of “affordable housing”; or
– being “upside down” (i.e., with the projected cost of investigation and cleanup exceeding 75% of the value of property if uncontaminated) or “underutilized” as defined by regulations to be promulgated by DEC by October 1, 2015. Since this will be the only category under which many New York City sites can potentially qualify for development credits, how DEC defines ”underutilized” will be of critical importance to the regulated community.
- Development credits will be increased for qualifying sites that are in Environmental Zones or Brownfield Opportunity Areas, achieve Track 1 cleanup standards, provide affordable housing, or are used primarily for manufacturing activities.
- Payments to “related parties” (those with 10% or more common ownership) have been limited, but by far less than under prior proposals. Only payments of “service fees” (defined as fees calculated as a percentage of project or acquisition costs) will be disallowed, and even such fees can count toward development credits if and when actually paid.
- “Brownfield site” will be newly defined as a site which has contamination in excess of standards set by DEC based on the reasonably anticipated use of the property.
- There will be a new, streamlined cleanup program for sites willing to forego tax credits.
- Class 2 (significant threat) sites will be eligible for entry into the BCP if being cleaned up by a Volunteer (a party not responsible for the original contamination) and DEC has not identified a viable responsible party who can pay for the cleanup.
- DEC oversight fees will be waived for Volunteers, and DEC is authorized to negotiate reasonable flat fee arrangements for other BCP participants.
- State hazardous waste disposal taxes and fees are waived for U.S. Environmental Protection Agency or court-ordered cleanups under the federal Superfund law, and for cleanups under written agreements with a municipality having a memorandum of agreement with DEC.
Legislation embodying these terms expected to be passed by both houses of the legislature and signed by the Governor by April 1, the beginning of the state’s fiscal year.
Please contact the Partnership at firstname.lastname@example.org if you would like additional information.
This article is based on the blog originally posted on the Gibbons Real Property & Environmental Law Alert blog site at www.rpelawalert.com.