8-24-15 New York Brownfield Law

Extended With Reforms

By: Greta K. Kolcon, Esq.

Despite a significant amount of press and earlier uncertainty regarding its future, New York State’s Brownfield Cleanup Program (“BCP”) has been extended. The program was originally established approximately ten years ago with the goal of incentivizing private sector cleanup of industrial sites where potential contaminants such as hazardous waste or petroleum pose significant hurdles to redevelopment. The program provided tax credits associated with cleaning up and redeveloping sites that qualified.

Despite lofty goals, New York’s program, like similar programs in other states, was attacked. Critics claimed that some projects received unnecessary and excessive tax credits.Other critics complained that the program was not user friendly.Reform advocates were sharply divided in how best to proceed, and for a time, there was real concern that the program would not be extended due to a lack of agreement on necessary amendments. The BCP tax credits were originally scheduled to expire on December 31, 2015. If that had happened, economic incentives and development opportunities may have been lost and the state funded Superfund Cleanup Program could have ended up being responsible for many of these properties, without private sector interest in voluntary cleanup programs.

Ultimately, BCP reforms were ultimately passed, and are codified at Chapter 56 of the Laws of 2015, Part BB - S.2006-B/A3006-B. Under the new law, the program was extended until March 31, 2026 as the new deadline by which sites must receive a certificate of completion. There are a significant number of changes to the qualification process. Perhaps the most significant change is carving out different eligibility requirements in New York City. With respect to New York City property, the reform limits eligibility for redevelopment credits to the following:

• properties which are located in Environmental Zones which are areas with high poverty and/or unemployment levels;
• “upside down” properties, where the cost of cleaning up the property is 75% or more of the property value in an uncontaminated state, or “underutilized” properties which will need to be defined further through subsequent regulatory action by the DEC; or
• sites that will be redeveloped for affordable housing projects, a term which also will be further defined by the DEC in consultation with the Division of Housing and Community Renewal.

Outside of New York City, these new eligibility tests will not apply.

Another aspect of the reforms limits eligible costs for site preparation credit to costs connected to remediation activities. Costs that are related to site preparation but not specifically connected to remediation efforts will be excluded, which will also reduce the redevelopment credit cap because the cap is based on the site’s eligible site preparation costs. The reforms also limit eligible costs for the Tangible Property Redevelopment Credit and restructure the credits. These credits will only be available to property with a “useful life of at least 15 years” and non-portable equipment, machinery, and associated fixtures and appurtenances on the site.

General information on brownfields in New York is available at the New York State Department of Environmental Conservation’s website, at http://www.dec.ny.gov/chemical/brownfields.html.For specific questions or legal assistance, contact your Woods Oviatt lawyer.