Governor Andrew Cuomo has proposed major revisions to the New York State Brownfield Cleanup Program (BCP) in the budget he submitted to the state legislature last week. These changes, if enacted, will have a major impact on the types of projects that will be attracted to and accepted into the Program, and the extent to which they are eligible for tax credits. Among the proposed revisions are the following:
- Redefining “brownfield site” by eliminating the subjective definition in the current statute (“may be complicated by the presence or potential presence of a contaminant”) and replacing it with the more objective standard of a site “where a contaminant is present at levels exceeding soil clean-up objectives or other . . . standards promulgated by the [New York State Department of Environmental Conservation (DEC)];”
- Extending the expiration date for tax credit eligibility to December 31, 2025, for projects entering the BCP on or after July 1, 2014; and to December 31, 2017, for projects entering from June 23, 2008, through June 30, 2014. Projects which entered the BCP prior to June 23, 2008, would be terminated unless they receive their Certificates of Completion by the current sunset date of December 31, 2015.
- Restricting the availability of tangible property (development) credits to sites:
- which have been vacant for 15 years or more;
- which have been vacant and tax delinquent for 10 years or more;
- where the cost of investigation and cleanup exceeds the value of the property if clean; or
- which are priority economic development projects, as determined by the state’s Economic Development Corporation;
- For sites which qualify for tangible property credits, increasing the extent of those credits (to a maximum of 24%) by allowing an additional
- 10% credit for sites within an En-Zone;
- 5% credit for strategic sites within a Brownfield Opportunity Area; and a 5% credit for affordable housing projects;
- Tightening the types of expenses that can qualify for site preparation (cleanup) tax credits by restricting them to those specified in a Decision Document issued by DEC and are “directly associated with actual site preparation-related construction.” However, costs for addressing asbestos, lead and PCBs in buildings remaining onsite would now be able to qualify for tax credits;
- Adding a BCP-EZ Program, under which DEC can exempt volunteers from procedural requirements of the BCP in exchange for a waiver of eligibility for tax credits;
- Allowing sites on the state Superfund list to be eligible for the BCP if owned or under contract for sale to a volunteer, and DEC has not identified a responsible party having the ability to pay for site investigation or cleanup;
- Allowing sites to have long-term institutional and engineering controls to address soil vapor intrusion without making them ineligible for Track 1 status;
- Allowing sites to qualify for tangible property credits even if they are placed in service after the issuance of a Certificate of Completion;
- Providing that cleanup costs that were expensed under Section 198 of the Internal Revenue Code can be counted for purposes of calculating the caps on tangible property credits;
- Clarifying the transferability of Certificates of Completion; and
- Allowing DEC to establish flat fees for oversight costs of projects in the BCP.
These proposed changes adopt many of the suggestions that have been made by a broad spectrum of community groups, environmental activists, real estate and business interests and legal commentators, such as the Environmental Law Section of the New York State Bar Association.
These recommendations, and other proposals, will no doubt be extensively debated in the coming weeks. They will likely be acted upon by the Legislature between now and the April 1 deadline for approval of the State budget.
David J. Freeman is a Director in the Gibbons Real Property & Environmental Department.