Exemption Administration Manual, Part 2: Industrial, Commercial, and Public Service—Section 4.06 - RPTL 489-bbbbbb: Industrial and Commercial Properties in New York City (Project certified by New York City Department of Finance after June 30, 2008)

Assessor Manuals

Section 4.06 - RPTL 489-bbbbbb: Industrial and Commercial Properties in New York City (Project certified by New York City Department of Finance after June 30, 2008)

Exemption code(s):

Not applicable. (See Coding of abatement on assessment roll.)

Year originally enacted:

2008

Related statutes:

None.

Summary:

If allowed by local option, industrial, commercial, and mixed-use buildings which are erected, modernized, rehabilitated, renovated, expanded or otherwise physically improved and which (1) are located in certain areas of New York City as designated either in statute and by the Temporary Commercial Incentive Area Boundary Commission, (2) are certified by the New York City Department of Finance and (3) meet certain minimum required expenditures are eligible to receive partial abatement of taxes. No abatement is allowed for special assessments.

Abatements are available for varying terms (8 to 25 years), depending on the type and location of project. Mixed-use projects may include retail activities, but are subject to varying abatement schedules, depending on the percentage of property devoted to retail activities. No benefits are permitted for utility property, which includes all property used by a utility in the ordinary course of business, as well as land and buildings owned by a utility ("peaking unit" generators are not considered utility property). No benefits will apply to residential construction work. Once the abatement is granted, no additional benefits may be granted for construction work that is substantively a part of construction work on which the abatement was granted.

Application for abatement may be made following the effective date of a local law enacted under this law and continuing until March 1, 2019. A preliminary application for a certificate of eligibility must be filed before obtaining a building permit, or, if no permit is required, before starting construction. Applications filed after construction commencement or building permit issuance will automatically be denied.

This abatement is not allowed for any project receiving an exemption or abatement of real property tax under any other law, except where a beneficiary is currently receiving an exemption under RPTL § § 420-a, 420-b, 459-b or any other exemption allowed by local law where the property must be the primary or legal residence of one or more of the owners of the property, (including such exemption which may be granted whenever an owner is absent from the residence while receiving medical benefits), and except the exemption/abatement/tax deferral granted under RPTL §489-bbbb for a separate project involving separate parts of the building or structure that was completed prior to application for benefits.

Note: This program replaces the Industrial and Commercial Incentive Program (ICIP), as authorized in RPTL §489-bbbb. No application for a certificate of eligibility for the ICIP program was accepted by the Department of Finance after June 30, 2008. (See the exemption/abatement/deferral profile in Section 4.06, RPTL Section 489bbbb ).

Eligibility requirements

Ownership requirements:

Facility must be owned or operated by a private individual or organization.

Property location requirements:

Property must be located in New York City. Industrial projects, including projects eligible for an additional abatement, may be located anywhere within the city. Eligible commercial construction projects may not be located in the "commercial exclusion area" (Manhattan south of the center line of 96th Street). Any parcel partly located in an excluded area is considered to be entirely located in such area for purposes of this abatement. Commercial projects receiving the 25-year abatement must be located in "special commercial abatement areas," so designated by the Temporary Commercial Incentive Boundary Commission as suitable for tax abatement under this statute (excluding the "commercial exclusion area"). Eligible renovation construction projects may be located in any area of the city, except in that portion of Manhattan between the center line of 59th Street and the centerline of 96th Street. Projects eligible for abatement on new construction that meets certain technological requirements must be located in a district in Lower Manhattan south of an area bounded by Murray, Franklin and Dover Streets.

Property use requirements:

Property eligible for abatement must undergo the construction of a new building or structure or the modernization, rehabilitation, expansion or improvement of an existing building or structure for use as a commercial or industrial property. For purposes of this abatement program, commercial construction work must consist of nonresidential property on which will exist after completion of construction a building or structure used for buying and selling or otherwise providing of goods or services including hotel services, or for other lawful business, commercial, or manufacturing activities.

Industrial construction work includes nonresidential property on which will exist after completion of construction a building or structure, or portion thereof, with at least 75 percent of the total net square footage of the property used or immediately available and held out for manufacturing activities involving the assembling of goods or the fabrication of raw materials, exclusive of manufacturing conducted for the purpose of retail sale on the premises.

Commercial and industrial construction work located within special commercial abatement areas (see Location Requirements above) and eligible for receiving the 25-year abatement may not have more than 10 percent of the structure devoted to retail purposes. For purposes of this abatement retail purposes are defined as any activity that consists primarily of (1) the final sale of tangible personalty or services by a vendor as defined in Section 1101 of the Tax Law, (2) the sale of services that generally involve the physical, mental, and/or spiritual care of individuals or the physical care of the personal property of individuals, (3) retail banking services, or (4) the final sale of food and/or beverage by a vendor as defined in Section 1101 of the Tax Law, including the assembly, processing or packaging of goods, provided that sales of such tangible personalty or services are predominately to purchasers who personally visit the facilities at which such sales are made for such property and services are provided, exclusive of hotel use.

Property eligible for the renovation abatement must undergo modernization, rehabilitation, expansion or improvement of an existing building or structure where such modernization or rehabilitation, expansion or improvement is physically or functionally integrated with the existing building or structure, or portion thereof, and increases neither the bulk of the existing building or structure nor its height by more than 30 percent. Renovation may be undertaken for hotel use. Renovation projects located in renovation areas in Manhattan (see Location Requirements above) may not have over five percent of any such building or structure used for retail purposes, except for projects located in lower Manhattan, bounded generally by Murray Street, South Street, Battery Place, and West Street.

Commercial new construction work receiving the 8-year abatement in the area south of Murray, Franklin and Dover Streets is subject to standards regarding minimum floor heights, availability of fiber-optic telecommunications, minimum floor area, maximum limits on the number of structural columns, electrical capacity density, and emergency backup power. (For more details visit: New York City Department of Finance.)

Also qualifying for abatement is mixed-use property, defined as property on which exists, or will exist upon completion of construction work, a building or structure used for both residential and nonresidential purposes. However, no abatement benefits may be granted for residential construction work, or for work on a structure or building where 20 percent of the total rentable square footage of the property is or will be dedicated to residential purposes, provided however, that if less than five percent of the property's rentable square footage is or will be residential, that level of use is considered de minimus, and as such is not considered in determining abatement benefits. For purposes of this abatement, hotel uses are not considered residential. Where a building or structure is under condominium ownership, and where an application for abatement includes more than one property in the same condominium, then the above stated 20 and five percent thresholds pertaining to rentable square footage will be based on the aggregate usage of all such properties.

No abatement benefits are available for utility property, which for purposes of this abatement includes all property used by a utility in the ordinary course of business, as well as land and buildings owned by a utility. This restruction does not include "peaking unit" generators, as defined in RPTL §489-aaaaaa(17). Furthermore, no part of the property may be used for "restricted activity," defined as any entertainment activity that the New York City Department of Finance has determined is an activity that, in the public interest, should not be encouraged through abatement benefits.

The burden of proof will at all times be on the recipient of the abatement to show by clear and convincing evidence that property receiving this abatement be used as stated in the preliminary and final application for abatements filed with the New York City Department of Finance. Recipient must also file amendments to the latest statement of continuing use prior to conversion of use for which a certificate of eligibility has been granted. Such conversions may alter or nullify eligibility for abatement (see Calculation of Abatement).

Certification by state or local government:

Project must be certified for eligibility by the New York City Department of Finance.

Required construction start date or other time requirement:

Except for industrial construction projects receiving an additional abatement, beneficiaries must make a minimum required expenditure (MRE) equal to at least 30 percent of the taxable assessed value of the project in the year of the issuance of the building permit, or if no permit is required, the start of construction. For the additional tax abatement benefit for industrial construction projects, the MRE is increased, to at least 40 percent. Expenditures for residential construction work may not be included in the MRE of any project eligible for this abatement; however, in the case of mixed-use property, expenditures for construction work related to the common areas and systems of such property may be included to the extent that they are allocated to the nonresidential portion of the property.

The MRE must be made no later than four years from the date of issuance of the first building permit, or, if no permit is required, four years from the start of construction. Construction of buildings or structures receiving this abatement must be completed no later than five years from the date of issuance of the first building permit, or of no permit was required, the start of construction. Failure to meet this requirement will result in loss of inflation protection available for any tax year that begins following the date by which completion of construction is required (see Calculation of Exemption below).

If a property has received or is currently receiving this abatement, the applicant may not file a preliminary application for new abatement benefits for an additional construction project on the same portion of property currently receiving abatement benefits until at least four years have elapsed since the first day of the first tax year of abatement benefits under the prior abatement. In the event the new abatement benefits are granted, then the initial tax for any such new abatement will be determined without regard to the prior abatement and any other abatement or exemption granted to the property.

This abatement may not be granted for construction work under a building permit issued after April 1, 2019. If no building permit was required, then no abatement may be granted for construction work commenced after April 1, 2019.

Local option

Yes. The city may choose whether or not to allow the abatement. The option must be exercised through adoption of a local law.

Limitation on exemption

*Limitation on amount and duration of abatement depends on type of project. See Calculation of exemption below.

Payments in lieu of taxes

None required.

Calculation of exemption

General municipal and school district taxes:

The amount of exemption is calculated as a percentage of the exemption base, as indicated below:

1. Except for Program 6 (Additional Industrial Abatement-see B. below) the amount of abatement is calculated as a percentage of the "abatement base", which is the amount by which the post-completion tax on a building or structure exceeds 115 percent of the initial tax amount levied on a building or structure. Initial tax amount is the liability for the building or structure on the tax roll with a taxable status date preceding the building permit, or commencement of construction if no permit is required. The post-completion tax is the tax liability for the building or structure on the tax roll with a taxable status date following the earlier of completion of construction or four years from the date of issuance of the first building permit, or commencement of construction if no permit is required. For Program 6, the amount of the additional abatement is calculated as a percentage of the initial tax amount, as defined above.

   Abatement benefits granted may not in any year exceed real property taxes imposed on the property. Except for Program 6, at no time during the benefit period may the abatement reduce the initial tax liability imposed on the building or structure, nor may it reduce the amount of taxes imposed on the land portion of the assessment. Additionally, the abatement may not result in any credit or refund of real property taxes. If the taxable value is later reduced on appeal under RPTL Article 7, then the initial tax or post-completion tax will be the tax as reduced. Taxable assessed values used in the calculation of abatements under this section of law will be the lower of the actual and transitional value as provided under RPTL §1805(3).

   If the property subject to abatement is apportioned or merged and such apportionment or merger is not reflected in the assessment roll, the initial tax for the newly created tax lot or lots should be based on the initial tax of the lot or lots from which they have been created, which should be apportioned among the newly created tax lot or lots. For a mixed-use property, the initial tax and post-completion tax should be apportioned between the residential and nonresidential portions.

2. The percentage and duration of the abatement vary by type of project, as follows:

   Program 1: Commercial construction projects in special abatement areas and industrial construction projects, where 10% or less of structure is used for retail purposes:

   Program 1

   Tax year during benefit period	Percentage of abatement
   1-16	100
   17	90
   18	80
   19	70
   20	60
   21	50
   22	40
   23	30
   24	20
   25	10

   Program 1a: Industrial construction work on peaking unit generators:

   Program 1a

   Tax year during benefit period	Percentage of Abatement
   1-15	100

   Program 2: Commercial construction projects in special abatement areas and industrial construction projects, where more than 10% of structure is used for retail purposes:

   Program 2

   Tax year during benefit period	Percentage of abatement
   1 - 11	100
   12	80
   13	60
   14	40
   15	20

   Inflation protection for Programs 1, 1a and 2: For industrial construction work for years two through thirteen, if there is any increase in tax in that year that is based on an increase of taxable assessed value since the immediately prior tax year, such excess tax liability should be added to the amount of the abatement base, using the initial tax rate. For commercial construction work for years two through thirteen, if there is any increase in tax in that year that is based on an increase of taxable assessed value since the immediately prior tax year of greater than five percent, such excess tax liability should be added to the amount of the abatement base, using the initial tax rate. If during any of these years a physical change to the property (commercial or industrial) results in an increase in the taxable assessed value of more than five percent for that year, then any increase in taxes for that year should not be added to the amount of the abatement base in any year. If the construction project is both industrial and commercial, the inflation protection should be based on the predominant use of the property as determined by the Department of Finance. Also, if the taxable value is reduced in any year on appeal, then the appropriate adjustment to the abatement base should be made accordingly.

   Program 3: Commercial construction projects located outside of special commercial abatement areas:

   Program 3

   Tax year during benefit period	Percentage of Abatement
   1 - 11	100
   12	80
   13	60
   14	40
   15	20

   Program 4: Renovation projects in lower Manhattan (bounded by Murray Street, South Street, Battery Place and West Street) and the Garment Center District:

   Program 4

   Tax year during benefit period	Percentage of Abatement
   1 - 8	100
   9	80
   10	60
   11	40
   12	20

   Program 5: Renovation projects in Manhattan south of center line of 59th Street and exclusive of areas designated in program 4:

   Program 5

   Tax year during benefit period	Percentage of Abatement
   1 - 5	100
   6	80
   7	60
   8	40
   9	20
   10	20

   Program 6: Additional industrial abatement:

   Program 6

   Tax year during benefit period	Percentage of initial tax amount
   1 - 4	50
   5	40
   6	40
   7	30
   8	30
   9	20
   10	20
   11	10
   12	10

   Program 7: New commercial construction work meeting certain technological requirements in certain area of lower Manhattan:

   Program 7

   Tax year during benefit period	Percentage of abatement
   1 - 4	100
   5	80
   6	60
   7	40
   8	20

   Subsequent abatements: If a property has received or is receiving one of the above abatements, an applicant may not file a preliminary application for a new abatement for an additional construction project on the same portion of the property currently receiving the abatement until at least four years have elapsed since the first day of the first tax year of the prior abatement. If new benefits are granted, the initial tax for any such new abatement will be determined without regard to the prior abatement or exemption granted to the property.

3. Conversion of Property from a Use for Which Abatement Has Been Granted (before the expiration of the benefit period):
   1. From commercial to industrial use: such property will continue to receive benefits for commercial or renovation work.
   2. From industrial to commercial Uue (where less than 75 percent of total net square footage is used or held out for use for manufacturing activities): No further benefits for industrial construction work will be granted, except in the following situations: a) if located outside a special commercial abatement area, the property may receive any abatement such applicant would have received in the corresponding tax year for commercial construction work, from the date of such conversion and continuing until the expiration of the benefit period for commercial construction work; b) if located within a special commercial abatement area, and if the property would have been eligible to receive benefits for commercial construction work at the time applicant applied for benefits, the property may continue to receive an abatement for industrial construction work.

      If the property is receiving the additional industrial abatement, that abatement ceases effective on the date of conversion to commercial property.

   3. From commercial, industrial, or renovation construction to restricted use: Property will cease to be eligible for further abatement as of the date such property was used for any restricted activity (see Property Use requirements above).
   4. From commercial, industrial, or renovation construction to residential use: Benefits for construction work will be terminated as of the date such property was first used for residential property, as follows: a) if 20 percent or more of the rentable square footage of the property is used as residential property, then the entire building will cease to be eligible for the abatement; b) if less than 20 percent of the rentable square footage of the property is used as residential property, then only that portion of the property used as residential property loses eligibility for further abatement, however, if less than five percent of the property is used as residential property, that use is considered de minimus and as such will not be a cause for cessation of abatement. The abatement continues for the commercial, industrial, or renovation construction work for the portion of the property that continues to be used for commercial purposes. (For purposes under this type of conversion "property" means the real property contained in an individual tax lot). See Property Use Requirements for treating conversions involving buildings in condominium ownership.
   5. From commercial, industrial, or renovation construction to retail use: The abatement must be recalculated to reflect the benefit for which the current use resulting from the conversion is eligible for abatement when before the benefit period expires: a) a property receiving commercial or industrial abatement having less than 10 percent of the building in retail use is converted so that retail space comprises 10 percent or more of the building's space, or b) a property receiving a renovation construction abatement is converted so that more than five percent of the building or structure is used for retail purposes.
   6. Peaking units: Property will become ineligible for abatement benefits during any such tax year. Any such recipient of benefits must pay with interest taxes for which abatement was claimed during any portion of such tax year.

If the recipient of the abatement converts square footage within any building or structure, the Department of Finance may recalculate the benefit granted under this program to reflect the benefit for which the current use is eligible under this statute and rules that may be promulgated by the department.

Special ad valorem levies and special assessments:

No abatement allowed.

Coding of exemption on assessment roll

Assessment roll section(s)

Note: Since the abatement allowed here is a reduction in actual taxes levied rather than a reduction in assessed value, no exemption code should be used and no dollar amount should be entered in the "exempt value" section of the assessment roll.

Filing requirements (owner or occupant of property)

For filing requirements, visit: New York City Department of Finance. Note: The program is known as the Industrial and Commercial Abatement Program (ICAP).

Reporting requirements (assessor)

None.

Similar exemptions:

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