Brownfield redevelopment tax credit rule changes

• Costs paid or incurred to prepare site to qualify for COC allowed in tax year in which COC is issued
• For other qualified site prep costs, component allowed for tax year in which improvement to which the costs apply is placed in service
• Allowed up to 5 tax years after the COC has been issued*
• No credit allowed for costs paid or incurred before execution of BCA
• Costs include excavation, temporary electric wiring, scaffolding, demolition, fencing and services related to security
• Does not include cost of acquiring site or amounts included in basis of tangible property or on-site groundwater remediation components

• Eligible costs are limited to those necessary to obtain a COC (i.e. those needed for effective cleanup)

• • Costs for remediation and disposal of asbestos, lead, or PCBs are added in the site preparation credit component costs
  • Costs for foundations in excess of costs for protective site cover requirements are disallowed for the site preparation component and are instead allowed in the tangible property component
• Site preparation includes all costs paid or incurred within 60 months (84 months if the COC was issued on or after July 1, 2015, and prior to June 25, 2021*) after the last day of the tax year in which the COC is issued.
  • • Site preparation includes all costs paid or incurred within 180 months if the COC was issued on or after January 1, 2017, and prior to December 31, 2017, if the qualified site is located in a city with a population greater than 205,000 and less than 215,000 within a county with a population greater than 1,000,000 but less than 1,010,000.*
• The period to claim the site preparation credit component has been extended to 7 taxable years after the COC was issued for qualified sites issued a COC on or after July 1, 2015, but on or before June 24, 2021.
  • • The credit component is allowed for up to 15 taxable years if the COC was issued on or after January 1, 2017, and prior to December 31, 2017, and the qualified site is located in a city with a population greater than 205,000 and less than 215,000 within a county with a population greater than 1,000,000 but less than 1,010,000.

*Applies to all sites accepted into program time periods

• Costs paid or incurred after execution date of BCA and up to date on which COC is issued are allowed in tax year in which COC issued
• For costs paid or incurred in tax years occurring after COC issued, credit is allowed in tax year in which costs are paid or incurred, up to 5 years after COC is issued*
• Component includes all costs properly charged to a capital account that are paid or incurred in connection with a site’s qualification for a COC; the remediation of on-site groundwater contamination; and the implementation of a requirement in the remedial work plan.
• Costs do not include amounts included in site preparation credit component or tangible property credit component

• Eligible costs are limited to those necessary to obtain a COC, including costs of:

• • • environmental consulting; engineering; legal costs; transportation, disposal, treatment or containment of contaminated groundwater; sheeting, shoring, and other engineering controls required to prevent off-site migration of groundwater contamination from the qualified site or migrating onto the qualified site; and the costs of fencing, temporary electric wiring and security facilities until such time as the COC is issued
• On-site groundwater remediation costs include all costs paid or incurred within 60 months (84 months if the COC was issued on or after July 1, 2015, and prior to June 25, 2021*) after the last day of the tax year in which the COC is issued.
• The period to claim the on-site groundwater remediation credit component has been extended to 7 taxable years after the COC was issued for qualified sites issued a COC on or after July 1, 2015, but on or before June 24, 2021.*

*Applies to all sites accepted into program time periods

• Is allowed for qualified tangible property in the tax year the qualified tangible property is placed in service on a qualified site
• May be claimed for qualified tangible property placed in service for up to 10 years after year COC is issued*
• No credit is allowed for any costs paid or incurred before the execution of the BCA
• Includes the cost of qualified tangible property that includes buildings and structural components of buildings
• Taxpayer may transfer benefits/burdens of COC, however:
  • The tangible property component does not include costs of acquiring an interest in the site and any amounts included in cost of qualified tangible property already claimed by previous taxpayer
• Costs may include those incurred for leased property:
  1. If lessee was not the party legally responsible for disposal of hazardous waste or the discharge of petroleum at qualified site; or
  2. If the lessee is legally responsible, but only because the lessee operated the site after the disposal of the hazardous waste or the discharge of petroleum

• Component for a qualified site limited to lesser of $35 million or 3x costs included in the calculation of site preparation and on-site groundwater components.
• Qualified sites used primarily for manufacturing activities credit is limited to lesser of $45 million or 6x the costs included in calculation of site preparation and on-site groundwater components.

• Sites located in NYC must meet one of five standards to be eligible for the TP component:

1. 1. 1. At least half the site is located in an En-Zone;
      2. The property is upside down (property value is less than cleanup costs) or underutilized;
      3. The project is an affordable housing project;
      4. The project is within a disadvantaged community, within a designated brownfield opportunity area, and meets the conformance determinations pursuant to subdivision 10 of section 970-r of the general municipal law; or
      5. The project is being developed as a renewable energy facility site

• Related party service fees are added to costs allowed, however they are restricted to the TP component and are only allowed in the TY in which the property to which the fee is attributable is placed in service and the fee is actually paid
• Other costs for the TP component are limited to:
  1. 1. Property with a 15 year or longer depreciable life;
     2. Demolition, excavation, and foundation costs not included in the SP component; and
     3. Costs for non-portable equipment and machinery used exclusively on the site, notwithstanding the depreciable life requirement
• To figure appropriate credit base attributable to an affordable housing project where the project may be mixed used, total costs for TP component are multiplied by square footage of affordable housing units dedicated to residential occupancy/total square footage of building.
• The DEC’s definition of affordable housing for sites accepted into the BCP on or after January 1, 2023, was amended to include a brownfield site that demonstrates it will qualify for benefits or be eligible under an affordable housing program.  A project must provide a certificate of compliance or other evidence of eligibility issued by a federal, state, or local government affordable housing agency to qualify for the 5% affordable housing rate bonus.
• In the case of eligible affordable housing projects, condominiums, and cooperative housing corporations, TP is considered placed in service when a certificate of occupancy (CO) is issued which can be a CO other than the final CO.  However, costs used when calculating the credit:
  • • May only be claimed once (placed property in service once),
    • Cannot include costs for repairs, replacements, and improvements to property previously placed in service, and
    • May not include costs incurred after the issuance of the final CO.
• There are three timing changes for tangible property component:
  1. The tangible property component is only allowed for the tax year in which the property is first placed in service.
  2. Property placed in service prior to the issuance of a COC by DEC is allowed to generate credit in the tax year in which COC is issued.
  3. The post-COC window for additional tangible property component is changed to 120 months (180 months if the COC was issued on or after March 20, 2010, and prior to December 31, 2015*) from date of COC issuance.
     • The credit component is allowed for up to 180 months if the COC was issued on or after January 1, 2017, and prior to December 31, 2017, and the qualified site is located in a city with a population greater than 205,000 and less than 215,000 within a county with a population greater than 1,000,000 but less than 1,010,000.*
• The calculation of TP component cap, which is a multiple of the amount of SP and GW remediation component costs, is amended to include costs that were expensed at the federal level and thus not part of those component bases
• Starting in taxable year 2022, for sites complying with track one remediation standards, athletic facilities and their components will be considered buildings and structural components under the Internal Revenue Code for purposes of this credit.
• The tangible property component rate for new applicants is up to a maximum of 24 percent
  1. Two new enhanced credit project categories have been added for sites accepted into the BCP on or after January 1, 2023. Each project category permits a 5% increase to the credit rate.
     • Disadvantaged community
     • Renewable energy facility

*Applies to all sites accepted into program time periods