New Economic Transformation and Facility Redevelopment Tax Credits Provide Additional Economic Incentives for Areas of New York State Affected by Prison Closures

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The New York State FY 2011-12 budget provides targeted, location-based tax incentives for areas affected by the closure of prison and juvenile justice facilities. Eligibility for the benefits is confined generally to the footprint of the facilities involved (in the immediate New York City area) or to a to-be-determined area within a given radius of the closed facilities (outside of the New York City area).

Governor Andrew Cuomo recently announced the imminent closing of seven prison facilities statewide. As discussed later in this piece, the areas in and around these facilities within a given radius will be eligible for the credits. In addition, areas around juvenile justice facilities which may be shuttered by the Office of Children and Family Services during the current state fiscal year will also be eligible.

These benefits have many of the same characteristics as the existing Excelsior Jobs program and the expiring Empire Zones program, including:

• A jobs tax credit of 6.85% of wages for each net new job;
• An investment tax credit based on a given percentage (depending on location of the facility) of a qualified investment in tangible property;
• A training tax credit of 50% of qualified training expenses of newly hired employees previously laid off from the facility;
• A real property tax credit of as much as 50% of real property taxes (or Payments in Lieu of Taxes subject to certain restrictions);
• A state sales tax refund available for both the company undertaking the project and its contractors; and
• At the option of a municipality, a graduated exemption from increased real property taxes tied to the improvements on property located in the area.

The aforementioned benefits are available for a five-year period beginning in the year in which five net new jobs have been created.

The business must be located in an Economic Transformation Area, i.e. within a given radius of the closed facility (in some cases, only the footprint of the facility proper is eligible). Empire State Development has designated the areas as follows:

  • Allen Residential Center (Delaware County)  - 5-mile radius
  • Arthur Kill (Staten Island)  - Facility only
  • Buffalo Work Release (Erie County) -  5-mile radius
  • Camp Georgetown (Madison County)  - 10-mile radius
  • Fulton Work Release (Bronx)  - Facility only
  • Industry Secure Center (Monroe County) -  10-mile radius
  • Mid-Orange (Orange County)  - 5-mile radius
  • Oneida (Oneida County)  - 15-mile radius
  • Summit Shock (Schoharie County)  - 15-mile radius
  • Tryon Girls Center (Fulton County)  - 15-mile radius
  • Tubman Residential Center (Cayuga County)  - 5-mile radius

As with most New York-based tax credits, eligibility is based on an application made to and approved by Empire State Development, and the business eligible for the credits must be a “new business” to the area, demonstrate a cost-benefit ratio of 10:1 for its project, and comply with all federal and state labor, environmental and tax laws. Certain types of businesses and business arrangements are excluded from certification under the program (unless the use at the site of the facility proper is subject to an adaptive reuse plan). These include primarily retail businesses that will sell to customers who personally visit such facilities, licensed professional services, and real estate holding companies and landlords leasing space to retail businesses or licensed professionals.

A business must submit its application for certification on or before January 1, 2015, or within three years after the closure of the facility.

In addition, capital projects that leverage private sector investment and create jobs and are consistent with the strategic plan being prepared by the Governor’s Regional Economic Development Councils are eligible to receive grants from a dedicated fund, provided such projects are located within an Economic Transformation Area.

For further information on the Economic Transformation and Facility Redevelopment Program, please contact Donald T. Ross at dross@phillipslytle.com or (518) 472 1224 ext. 1255.