Kramer Levin Naftalis & Frankel LLP

Governor Cuomo’s FY 2022 Budget provides relief to participants in the New York State Brownfield Cleanup Program (BCP) that risk losing their Tangible Property Tax Credit due to pandemic-related and other delays.

Background on the BCP

The BCP provides state oversight, liability protection and tax incentives for the remediation and redevelopment of contaminated real property, known as brownfield sites. Hundreds of brownfield sites statewide have been remediated through the program. Sites that are accepted into the BCP are eligible for two different types of tax credits: a Site Preparation Tax Credit (covering remediation and other costs) and the more valuable Tangible Property Credit for redevelopment costs (covering the structures built on the site). Since the passage of legislation in 2015, sites in New York City must meet additional criteria to be eligible for the Tangible Property Credit. They must be located in an Environmental Zone (En-Zone) which is an area of high poverty or unemployment; have an associated cleanup cost that is 75% or more of the property value (so-called “upside down” properties); be “underutilized” per New York State Department of Environmental Conservation (NYSDEC) regulations; or be redeveloped for affordable housing.

Currently, the law requires that the Tangible Property Credit be used within 120 months (10 years) of the issuance of the site’s Certificate of Completion by NYSDEC, which is issued after the remediation of the site is approved by NYSDEC. A Tangible Property Credit can be used only once the structure is “placed in service,” i.e., when it is depreciable under the Internal Revenue Code. In most cases, a structure is placed in service when a Temporary Certificate of Occupancy (TCO) has been issued. However, as a result of construction and entitlement processing delays attributable to the pandemic, some developments have been delayed in securing their TCO and are coming up against the 10-year deadline for being “placed in service.” The good news is that legislative relief may be on its way.

Governor Cuomo’s FY 2022 NYS Executive Budget

The governor’s budget extends by two years the period for which the Tangible Property Credit can be used for projects whose credit originally did or will expire between March 15, 2020, and Dec. 31, 2021. Thus, the proposed language provides relief to projects penalized by the 10-year limitation that may have been delayed in getting a TCO due to the COVID-19 pandemic and other reasons.

Looking Ahead to an Extension of the BCP

The BCP is set to expire on Dec. 31, 2022. The current budget does not provide for an extension of the program, and legislation extending or modifying it has not yet been proposed by the state. Given the crucial role the program has played in the revitalization of contaminated sites, an extension is undoubtedly on the horizon, but the details have yet to materialize. The Kramer Levin Environmental and Land Use departments are tracking BCP developments as they emerge.

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