DEC Issues Revised Regulations to Enable More Properties to Qualify for BCP Tax Credits

Authors: Matthew A. Dombroski and Ted Wolff

On Wednesday, March 9, the New York State Department of Environmental Conservation (DEC) proposed to amend New York State's Brownfields law's implementing regulations to enable more properties to qualify for BCP tangible property tax credits. To qualify for tax credits under the Brownfields law, a site must (1) be in an environmental zone, (2) be "upside down" or "underutilized," or (3) constitute an "affordable housing project." The proposed regulation expands the definition of "underutilized."

The Brownfields law directs DEC to define the term "underutilized" (and certain other terms). In June 2015, DEC proposed a narrow definition for same, drawing widespread skepticism of whether any property in New York City would qualify as "underutilized." To qualify, a property had to be one hundred percent nonresidential, with fifty percent or less of the floor area having been used during the prior five years (as certified by the applicable municipality). Furthermore, to qualify, the municipality would have to certify that the property "could not be developed without substantial government assistance" and that one or more of the following conditions exists: (a) property tax payments are at least five years in arrears, (b) a building is presently condemned or exhibits structural deficiencies that present a public health or safety hazard, or (c) the proposed use is at least in substantial part for "industrial uses."

Under the new definition, mixed-use properties can qualify (properties that are "at least seventy-five percent for industrial uses" or "seventy-five percent for commercial or commercial and industrial uses"), provided fifty percent or less of the floor area has been used during the prior three years (as certified by the applicant). Note, however, that even under the newly proposed definition, developments with any proposed commercial use are subject to two additional tests that are not applicable to 75%-industrial-only properties: (1) the proposed development could not take place without substantial government assistance and (2) one or more of the following conditions exists, as certified by the applicant: (a) property tax payments are at least five years in arrears, (b) a building is presently condemned or exhibits structural deficiencies that present a public health or safety hazard, or (c) there are no structures.

The comment period for the proposed regulation is open until Friday, April 8, 2016.