Governor Cuomo Proposes Sweeping Amendments to Brownfield Program

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[Note: This post will be periodically updated as new information becomes available about the proposed legislative changes ]

Governor Andrew Cuomo unveiled his budget legislation today. As expected, the legislation proposed sweeping changes to the state Brownfield Cleanup Program (BCP). The proposed legislation adopts the recommendations of the New York State Tax Reform and Fairness Commission to limit the availability of BCP tax credits to sites and areas of the State that need incentives for redevelopment. It also establishes a so-called fast-track cleanup program similar to the old voluntary cleanup program that would provide liability relief but no tax credits.

Following are some of the highlights of the proposed changes to the BCP. If adopted by the legislature, the amendments would become effective on July 1, 2014. This means that applicants would have to be accepted into the BCP prior to that date to remain eligible for the site preparation and tangible property tax credits as a matter of right.

1. Brownfield Site-The proposed legislation changes the definition of brownfield to a site where contaminants exceed applicable soil cleanup objectives for the reasonably anticipated use. This means that applicants will probably need to have completed phase 2 reports prior to submitting applications. The proposed changes would allow class 2 superfund sites owned by parties determined to be volunteers to be enrolled in the BCP. If a volunteer is under contract to purchase a class 2 site, the site will be eligible for the BCP only if the NYSDEC has been unable to identify a PRP with the ability to pay for the cleanup (§2 of Part Q of the Revenue Article VII Legislation).

2. Tangible Property Tax Credit Eligibility Changes-After July 1, 2014, applications will only be eligible for the tangible tax credit if the site qualifies for one of the following: (i) it is  vacant for at least 15 years or vacant and tax delinquent for 10 years or more; (ii)  the projected costs of the investigation and cleanup based on reasonably anticipated use exceeds the certified appraised value of the property in a “clean” condition; or (iii)the project has been identified as a “priority economic development” (PED) project. To qualify as a PED, a project must make a “significant capital investment”  as determined by the Department of Economic Development (DED) (§3) and fall within one of the following categories:

      • manufacturers, agribusiness, scientific R&D, or corporate HQs creating 100 or more  net new jobs in  NYS;
      • financial service, distribution, or back office operations creating 300+ net new jobs in NYS;
      • software development or new media businesses creating 50+ net new jobs in NYS, and,
      • other businesses creating 300+ net new jobs in NYS and determined by DED to be a PED Project.

The reference to creating jobs in New York State suggests that the new jobs may not necessarily have to be created solely at the brownfield site but might include jobs as part of an state-wide expansion. It will be interesting to see if this requirement is clarified by the legislature of the DED.

Applicants seeking to qualify for the tangible property tax credit will have to submit information sufficient to establish that the site qualifies for one of the three categories of eligible sites. DEC will notify the applicant upon acceptance into the BCP if the project meets the criteria for qualifying for the tangible property tax (§ 13).

Notwithstanding the foregoing, sites are not eligible for the tangible property tax credit where the contamination is SOLELY from an off-site source or the on-site contamination was previously remediated and the cleanup is suitable for the proposed development (§3).

Other changes to the tangible property tax credit include:

        • the base tangible tax credit now begins at 10% (current corporate tax payers may claim a base credit of 12% while individuals begin with 10% base)(§25);
        • For purposes of calculating the  tangible property tax, applicants could use costs typically used for site prep (see below) if those costs are not used for the so-called “soft cap” calculation (i.e., no double dipping)(§21);
        • Eligible tangible property eligible costs shall not include payments made to “related” parties(§21);
        • Eligible tangible property costs are limited to costs associated with actual construction of tangible property incorporated into the physical structure and costs associated with the preparation of the site for erection of building or part of building that are not included in the site preparation cost bucket(§21);
        • In calculating the so-called “soft cap” ( 3x site preparation costs), applicants may use on-site groundwater remediation costs and costs that would not have been  “expensed” and deducted for purposes of the IRS 198 brownfield tax credit (§22);
        • Only applicants seeking to qualify for the tangible property tax will be required to prepare two remedial alternatives with one being a track 1 cleanup (§9);
        • If the property was put into use prior to the issuance of the COC, the tangible property tax credit may be claimed for up to five years from start of the “redevelopment of the site provided the redevelopment starts within ten years of the issuance of the COC(§21);
        • An extra 5% tax credit would be available for projects with affordable housing (based on square footage of the total affordable housing units(§25);
        • An extra 10% for sites location in an Environmental Zone(§25), and
        • A bonus of 5% for strategic sites located in and conforming with a Brownfield Opportunity Area (BOA) plan(§25);

3. Site Preparation Tax Credit Changes– This tax credit has applied to costs incurred to prepare a brownfield site for redevelopment (i.e., erection of a building or portion of a building) and properly charged to a capital account . It includes demolition, excavation, dewatering, temporary wiring, scaffolding, sheeting, fencing and security. The definition was tightened to address perceived excess claims for site prep cost so that the costs must be paid by the applicant (not simply incurred) and relate to those activities set forth in an approved remediation plan and costs directly associated with actual site preparation-related construction.  Site prep costs exclude payments paid to “related parties”. (§27). Other site prep changes include:

  • costs to address asbestos, lead-paint or PCBs performed under supervision of the Department of Labor or Department of Health would be eligible(§27);
  • based on the way the qualifier excluding tangible property tax credits for off-site contamination migrating onto property (§3), it appears  site prep tax credit will be available for costs to address contamination migrating onto site; 
4. Hazardous Waste Generation Fee Exemption– The bill would also exempts from the state hazardous waste generator fee remediation wastes generated from sites where the cleanups are done under an agreement with EPA, pursuant to an order issued by a court or an agreement with a municipality that has entered into a memorandum of agreement with  NYSDEC such as New York City(§34).

 

5. Oversight Costs– Volunteers will no longer be required to pay oversight costs  for such costs incurred by NYSDEC or the NYSDOH on or after July 1, 2014. This exemption applies both to applications submitted after July 1, 2014 as well as sites accepted into the BCP prior to July 1, 2014. (§44). Participants will be required to pay the NYSDEC for past costs incurred prior to the effective date of the brownfield cleanup agreement but the NYSDEC may negotiate a “reasonable” flat rate fee for future oversight costs (§7);

6. Miscellaneous Changes- Other notable changes include:

  • The NYSDEC may reject an application if the person seeking to enroll in the BCP if that person had another site in a NYSDEC remedial program that was terminated by NYSDEC or a court for failing to substantially comply with an order or NYSDEC oversight agreement (§6);
  • The NYSDEC will now have 30 days to determine if an application is complete (§4). In the acceptance letters, the NYSDEC will advise the applicant if it has met the qualifying criteria for the tangible property tax credit (§5);
  • Track 1 cleanups may now include sites that are required to use engineering or institutional controls for more than five years solely to address vapor intrusion as well as for groundwater remediation where the bulk contaminant concentrations have been reduced to asymptotic levels(§10);
  • COCs may only be transferred to subsequent legal or equitable title holders of all or a portion of the brownfield site. The current law simply refers to the applicant’s successors or assigns (§ 14);
  • NYSDEC shall terminate sites that have been in the program since before June 2008 and have not completed cleanup by December 31, 2015, and sites in the program from June 2008 through July 1, 2014 that do not complete cleanup by December 31, 2017 (§33).;
  • The tax credits are extended to December 31, 2022. For sites accepted prior to that date, they must obtain a COC by December 31, 2025 to remain eligible to claim the tax credits(§31 but should be §32).;
  • The insurance remediation tax credit and the real property tax credit are repealed due to lack of interest (§31);
  • The BCP-EZ program will exempt volunteers from certain procedural requirements for implementing remedial investigations and remedial actions for sites where the contamination does not pose a significant threat, the applicant has waived rights to any tax credits and the work satisfies the technical requirements of Part 375 (§ 18);
  • COCs may be revoked or modified if DEC determines that the applicant made a misrepresentation of material fact concerning its status as a volunteer or its eligibility for the tangible tax credits as well as if the environmental easement no longer provides effective enforcement mechanism for ensuring performance of the remedy(§14);
  • Applicants must commence workplans within 90 days of approval and implement the activities in accordance with the approved schedule(§8);
  • Environmental easements must be executed at least three months prior to the anticipated issuance date of the COC (§11);
  • The Brownfield Advisory Board is abolished (§17-a);
  • Municipalities seeking to apply for funds from the Environmental Restoration Program will now have to assist NYSDEC in identifying potentially liable parties by searching local records including property tax records. The amount of any assistance provided to the municipality would be adjusted if the payments are received by responsible parties (§39).

 The BCP proposed legislation is located in Part Q of the Revenue Article VII Legislation bill. The budget legislation is available here. 

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