New York State Brownfield Cleanup Program: Moving Ahead Under the 2015 Reforms. Presented By Philip S. Bousquet, Esq. Bousquet Holstein PLLC

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1 New York State Brownfield Cleanup Program: Moving Ahead Under the 2015 Reforms Presented By Philip S. Bousquet, Esq. Bousquet Holstein PLLC November 2015

2 Agenda Overview of the NYS BCP Tax Credits BCP 1.0 (Accepted before 6/23/08) BCP 2.0 (Accepted between 6/23/08 and 7/1/15) BCP 3.0 (Accepted after 7/1/15) New BCP Sunsets for All Sites

3 OVERVIEW OF THE NYS BCP TAX CREDITS The Incentive Side of the BCP

4 Overview of NYS BCP Tax credits available to NYS taxpayers (residents and nonresidents) Refundable treated like an overpayment of tax Claimed on a NYS income or franchise tax return when certain trigger events occur during the tax year (e.g., Certificate of Completion is issued, property is placed in service, etc.)

5 Overview of NYS BCP Three tax credits: Brownfield Redevelopment Tax Credit (BRTC) (Tax Law 21) Site Preparation credit component On site groundwater remediation credit component Tangible property credit component Credit based on real property taxes (Tax Law 22) Credit based on qualified policies of environmental remediation insurance (Tax Law 23)

6 Overview of BRTC BRTC credit components are product of certain qualified costs and applicable percentage Applicable percentage varies based on: Credit component Taxpayer (individual vs. corporation) Site location (Environmental Zone, Brownfield Opportunity Area) Cleanup track and soil cleanup objectives attained Qualified Costs Applicable Percentage Credit Amount

7 Overview of BRTC under BCP 1.0 and 2.0 Site Preparation credit component Based on costs paid or incurred in connection with (1) preparing site to qualify for CoC, AND (2) preparing site for construction of building First claimed in year CoC is issued, then up to 5 taxable years after CoC On site groundwater remediation credit component Based on groundwater remediation costs First claimed in year CoC is issued, then for up to 5 taxable years after CoC Tangible property credit component Based on costs of depreciable property with situs on brownfield site used for construction or redevelopment Claimed in year the asset is placed in service, for up to 10 taxable years after year CoC is issued

8 Overview of Credit Based on Property Taxes Credit available for a developer (taxpayer who received a CoC or acquired site from unrelated party within 7 years of CoC) Claimed starting in the year CoC is issued and is available each year for a period of up to 10 years Credit is product of several factors: Real property taxes paid or PILOT payments (not special assessments) Factor of 100% if site is located in En Zone, otherwise factor of 25% Employment number factor based on FT employees or equivalents employed on the site by developer or lessees Average # FTE Factor % % % % %

9 Overview of Credit Based on Remediation Insurance Based on premiums paid by taxpayer on qualified environmental remediation insurance policy after the date the BCA is signed Available only once and claimed on tax return for year the CoC is issued Equal to the lesser of $30,000 or 50% of premiums paid

10 BCP 1.0 Accepted before 6/23/08

11 BCP 1.0 (Accepted before 6/23/08) BRTC applicable percentage is the same for all credit components: Base percentage of 10% (individuals) or 12% (corporations, etc.) + 2% for Track 1 (unrestricted) cleanups +8% for site in En Zones Credits for property taxes and environmental insurance available

12 BCP 1.0 (Accepted before 6/23/08) Assumptions: Article 22 taxpayer (individual) Track 2 residential cleanup Site not in En Zone or BOA Costs: Site preparation: $1,000,000 Tangible property: $35,000,000 On site groundwater: $0 Credit Component Applicable Percentage Credit Amount Site Preparation 10% $100,000 Tangible Property 10% $3,500,000 On Site Groundwater 10% $0 Total BRTC $3,600,000

13 BCP 2.0 Accepted between 6/23/08 and 7/1/15

14 BCP 2.0 (Accepted between 6/23/08 and 7/1/15) BRTC applicable percentages changed: Site preparation/on site groundwater: Use Unrestricted Residential Commercial Industrial Track 1 50% N/A N/A N/A Track 2 50% 40% 33% 27% Track 3 50% 40% 33% 27% Track 4 N/A 28% 25% 22% Tangible property: same base percentages of 10% (individuals) or 12% (corporations, etc.) with enhancements + 2% for Track 1 (unrestricted) cleanups +8% for sites in En Zones +2% for sites in BOA

15 BCP 2.0 (Accepted between 6/23/08 and 7/1/15) Cap on tangible property credit component Non manufacturing sites: lesser of $35M or 3x site preparation costs Manufacturing sites: lesser of $45M or 6x site preparation costs Credits for property taxes and environmental insurance available

16 BCP 2.0 (Accepted between 6/23/08 and 7/1/15) Assumptions: Article 22 taxpayer (individual) Track 2 residential cleanup Site not in En Zone or BOA Costs: Site preparation: $1,000,000 Tangible property: $35,000,000 On site groundwater: $0 Component Applicable % Preliminary Credit Cap Credit Amount Site Preparation Tangible Property On Site Groundwater 40% $400,000 $400,000 10% $3,500,000 $3,000,000 $3,000,000 40% $0 $0 Total BRTC $3,900,000 $3,400,000

17 BCP 3.0 Accepted after 7/1/15

18 BCP 3.0 (Accepted after 7/1/15) Eliminates credit based on on site employment and property taxes and credit based on environmental insurance premiums Significant changes to BRTC Changes related to tangible property credit component: Sites are not eligible for the TPCC if either: Contamination is solely emanating from property other than the site itself, OR DEC has determined that the property has previously been remediated under other programs such that it may be developed for its then intended use, including: RCRA Corrective Action Program, Inactive Hazardous Waste Disposal Site Program (State Superfund), BCP, Environmental Restoration Program, and Navigation Law

19 BCP 3.0 (Accepted after 7/1/15) Changes related to tangible property credit component: Separate gates for BCP 3.0 sites in NYC only in order to be eligible to claim TPCC: At least 50% in En Zone (newly defined areas based on 2010 Census) Upside down (the projected cost of investigation and remediation exceeds 75% of the appraised value of the site without contamination) Underutilized (defined in regulations) Developed as an affordable housing project (defined in regulations)

20 BCP 3.0 (Accepted after 7/1/15) Changes related to tangible property credit component: New statutory definition of qualified tangible property : Depreciable property with a useful life of 15 years Costs associated with non portable equipment, machinery, associated fixtures and appurtenances used exclusively on the site, regardless of length of useful life Costs associated with demolition, excavation, and foundation in excess of amount included in site preparation credit component Related party service fees, only in year actually paid (related party service fees cannot be included in SPCC at any time)

21 BCP 3.0 (Accepted after 7/1/15) Changes related to tangible property credit component: Includes IRC 198 costs in TPCC caps Taxpayers may claim TPCC for up to 120 months after the date the CoC is issued Modified applicable percentage: 10% base, up to 24% total +5% for BOA sites +5% for affordable housing +5% for manufacturing sites +5% for sites within an En Zone +5% for sites remediated to Track 1

22 BCP 3.0 (Accepted after 7/1/15) Changes related to site preparation credit component: New definition of site preparation costs : Capitalized costs necessary to implement the site s investigation, remediation, or qualification for a CoC Post CoC costs that are necessary for compliance with the [CoC] or the remedial program defined in such [CoC] incurred up to 60 months after the year the CoC is issued Statute includes enumerated list of potential site preparation costs Limits claims for site preparation credit component on foundation costs to cost of cover system

23 BCP 3.0 (Accepted after 7/1/15) Changes related to on site groundwater remediation credit component: New definition of on site groundwater remediation costs : Capitalized costs necessary to implement the site s ground water investigation, remediation, or qualification for a CoC Post CoC costs that are necessary for compliance with the [CoC] or the groundwater remedial program defined in such [CoC] incurred up to 60 months after the year the CoC is issued Statute includes enumerated list of potential on site groundwater remediation costs

24 BCP 3.0 (Accepted after 7/1/15) Assumptions: Article 22 taxpayer (individual) Track 2 residential cleanup Site not in En Zone or BOA Not affordable housing Meets eligibility for TPCC Costs: Site preparation: $800,000 Some costs would have qualified under old in connection with definition, do not qualify under necessary definition, so shifted to tangible Some foundation costs shifted to tangible and only include cost of cover system Tangible property: $35,200,000 On site groundwater: $0

25 BCP 3.0 (Accepted after 7/1/15) Component Applicable % Preliminary Credit Cap Credit Amount Site Preparation 40% $320,000 $320,000 Tangible Property 10% $3,520,000 $2,400,000 $2,400,000 On Site Groundwater 40% $0 $0 Total BRTC $3,900,000 $2,720,000 BCP 1.0 BCP 2.0 BCP 3.0 $3,600, & 23 credits $3,400, & 23 credits $2,720,000

26 New BCP Sunsets for All Sites BCP tax credit structure: Must receive a CoC by: BCP 1.0 December 31, 2017 BCP 2.0 December 31, 2019 BCP 3.0* March 31, 2026 Failure of a BCP 1.0 or 2.0 site to obtain a CoC by the dates above will not disqualify a site from credits, but will force the site into the BCP 3.0 (post 2015) credit scheme ( soft sunset ) Failure of a BCP 3.0 site (or BCP 1.0 or 2.0 site that does not obtain CoC by applicable soft sunset) to obtain a CoC by March 31, 2026 will disqualify a site from credits * Including BCP 1.0 and 2.0 sites that do not obtain a CoC by applicable soft sunset

27 THANK YOU!