On January 22, 2008, Governor Eliot Spitzer submitted a Budget Bill to the New York State Assembly and Senate that included proposed amendments to the 2003 Brownfield Cleanup Program Act ("BCP Act"). In an effort to achieve substantial savings to the State Financial Plan, the proposed bill seeks to "reform" existing law primarily by tightening eligibility standards for tax credits and limiting the amount of those credits available under the program.

The Governor’s bill is structured for implementation in two parts. The proposal contemplates initial enactment of a "fiscal proposal" (Part D of the Budget Bill) to be followed by permanent “programmatic" changes to the BCP Act (Part E of the Budget Bill). The initial Part D provisions would no longer be in effect after enactment of the Part E provisions.

The initial "fiscal" enactment would provide statutory basis for the current (disputed) practice of the Department of Environmental Conservation ("DEC") and narrow BCP eligibility by authorizing the agency to reject an application whenever it determines "that reuse or redevelopment of the site for which the applicant is requesting participation would likely occur in the absence of the tax credits." For sites that are, nevertheless, accepted into the program, Part D caps the total tangible property tax credit at ten million dollars.

More extensive changes to the BCP Act are proposed in Part E, which would, upon enactment, supersede Part D. According to explanatory material provided by DEC, these amendments are intended to expand brownfield cleanups and redevelopment, while simultaneously limiting the amount of tax credits available under the program. Several intricate and complicated provisions materially alter the existing program:

• The definition of "Brownfield site" would be revised to focus on the presence or expected presence of contaminants at levels which exceed health-based or environmental standards; however the bill does not address whether sites where such exceedances are attributable to historic fill would qualify;
• Program eligibility would be broadened to allow in sites that do not need tax credits but would receive liability protection;
• Tax credit eligibility would be limited to applicants that are not potentially responsible for contamination (current law permits potentially responsible parties to be eligible for tax credits);
• Tax credits would be available only when "reuse or redevelopment of the site for which the applicant is requesting participation is unlikely without such tax credits";
• Significant financial disclosure would be required to establish eligibility when a party applies to the program, and also during subsequent points of the cleanup process;
• Calculation of tax credits would be restructured to promote certain environmental and development objectives. Credits for site preparation (which include remediation costs) would range from 25% to 75% of qualified costs, depending on the level of cleanup achieved, and would not be limited by a cap. Tangible property credits would range from 15% to 50% of qualified costs, depending on a variety of factors, and would be subject to a fifteen million dollar cap;
• The revisions would restrict the transferability of certificates of completion ("CoC") and the tax credits that accompany them.

The amendments include clauses grandfathering certain applicants into the existing program, generally based on a determination of eligibility or receipt of a CoC via transfer before July 1, 2007. The grandfathering provisions, however, may be subject to other requirements that could result in sites accepted into the program before that date to become subject to elements of the new legislation. In addition, DEC has not indicated whether under the bill it could attempt to "reopen" previously accepted BCP applications and, if so, when such a "reopener" might be expected. These and other ambiguities require clarification by the Legislature.

If you have any questions about the proposed amendments and their impact on your business, please feel free to contact us.