The BCPA now includes a substantial tangible property tax creditfor sites that have received a brownfield cleanup programcertificate of completion of remediation from the New York StateDepartment of Environmental Conservation. The tangible property taxcredit is 12% (or 10% for an individual taxpayer) of the taxpayer'sfederal tax basis in qualified tangible property. This includesdepreciable tangible personal property or real property, includingbuildings and structural components of buildings, that has a usefullife of four or more years, was purchased by the taxpayer, isplaced in service within three years of the issuance of the COC andis principally used by the taxpayer for industrial or commercialpurposes (including commercial development of residentialhousing).

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The tax credit may be increased two percentage points if thetaxpayer remediates the site up to the DEC's highest remediationstandards, and may be increased by an additional eight points if atleast 50% of the site is located in an area designated by New YorkState as an "Environmental Zone," with high poverty andunemployment rates. This credit can be claimed for up to 10 taxableyears after the date the COC is issued and may be claimed by a sitelessee to which a COC has been transferred, as long as the lesseeis not responsible for the contamination at the site.

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A remediation tax credit is also available under the currentBCPA. The remediation tax credit is 12% (or 10% in the case of anindividual taxpayer) of the combined (soil and groundwater)remediation costs. Like the tangible property tax credit, it can beincreased up to an additional 10% depending on the level of cleanupand the location of the site. Under the current BCPA, largetangible property tax credits have been awarded to developers thatmay have invested relatively little in the remediation of a site.In order to control costs associated with the tangible property taxcredits, the interim and permanent amendments would cap thetangible property tax credit at $10 million and $15 million,respectively. In both cases, taxpayers accepted into the brownfieldcleanup program on or after July 1, 2007, or who have a COCtransferred to them on or after that date, would be subject to thecap.

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Both the proposed interim and permanent amendments would requireapplicants for entry into the brownfield cleanup program toidentify any other sites that may be associated with a singularreuse or redevelopment project, so that the related sites aretreated as one project for purposes of determining the amount ofeligible tax credits. In addition, the amendments would limit thetransfer of tangible property tax credits.The proposed interimamendments would allow the DEC to prohibit sites from entry intothe brownfield cleanup program if the DEC has determined that thereuse or redevelopment of the site would likely occur without taxcredits. This determination would be based on factors such as theextent, difficulty and cost of on-site remediation, the anticipatedimpact of remediation on the value of the property and localeconomic circumstances.

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The permanent amendments would separate eligibility forparticipation in the brownfield cleanup program from eligibilityfor tax credits. Persons not seeking tax credits would be able toparticipate in the program. Eligibility for tax credits would bepremised upon the need for tax credits to promote reuse orredevelopment of the site.

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Under the permanent amendments, subject to the $15-million cap,the tangible property tax credit would be 15% of the taxpayer'sfederal tax basis in qualified tangible property, but could beincreased up to 50% depending on various factors. These wouldinclude the location of the site in an Environment Zone (anadditional 10%), conformance to a local waterfront revitalizationplan (an additional 10%), and utilization of "smart growth"practices (up to an additional 10%) such as green buildingconstruction, use or generation of renewable energy sources andproximity to public transit.

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In an effort to encourage the best possible cleanup of a site,the permanent amendments would fix the amount of remediation taxcredits available. A site preparation credit for 25% to 75% of sitecleanup and preparation (soil, surface water or sediment cleanup)costs would be available depending on the extent of the cleanup. Anon-site groundwater remediation credit of 50% to 75% of cleanupcosts also would be available, and could be increased by 10% for acleanup that achieves the best possible remediation for the site,or by 25% where groundwater is remediated to unrestricted usestandards. The New York State Legislature is likely to considerthese amendments before its recess begins on June 23.

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The views expressed in this article are those of the authorsand not Real Estate Media or its publications.

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Charles S. Warren is chair of the environmentaldepartment at Kramer Levin Naftalis & Frankel LLP in the NewYork office. Karen Leo Mintzer is special counsel in theenvironmental department in Kramer Levin's New York office.

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