For the second year in a row, Governor Andrew Cuomo proposed sweeping changes to the New York State Brownfield Cleanup Program (“BCP”) as part of his executive budget proposal, which was released on January 21, 2015. The proposal comes less than a month after Governor Cuomo vetoed legislation extending the sunset date for tax credits under the current BCP program, which did not include the reforms proposed in the Governor’s budget.
The BCP provides liability protection and tax credits for the remediation and development of properties where redevelopment or reuse “may be complicated” by the presence of contamination. Under the current program, however, any party seeking BCP-related tax credits must obtain a certificate of completion (“COC”) documenting a finished cleanup by December 31, 2015 – a deadline that would be difficult or impossible for many already accepted or BCP-eligible sites to meet.
Governor Cuomo’s budget would extend that deadline for current BCP sites to December 31, 2017, contingent upon a series of eligibility changes and other programmatic reforms moving forward. These proposed changes would affect sites accepted into the BCP after April 1, 2015, as well as those that miss the extended December 31, 2017 COC deadline. They include:
- Changes to BCP eligibility criteria: The budget proposal would amend the definition of “brownfield site,” restricting BCP eligibility to those sites where contamination exceeds applicable soil cleanup objectives or other health or environmental standards, based upon the reasonably anticipated future use of the property. The proposal would also expand BCP eligibility to cover more “orphan” New York State Superfund sites, where the responsible parties cannot be identified or are unable to pay for the investigation and cleanup.
- Separation of BCP acceptance from tangible-property tax credit eligibility. Currently, all BCP sites are eligible for “tangible-property tax credits” covering qualifying building and improvement costs. Under the Governor’s budget, sites that are accepted into the BCP after April 1, 2015 or that receive a COC after December 31, 2017 would qualify for tangible property tax credits only if: (1) the appraised property value is less than the projected investigation and cleanup cost, (2) at least half of the site falls within an “environmental zone” with a poverty rate of at least 20% and an unemployment rate at least 25% above the state average, or (3) the project is classified as an “affordable housing project.”
- Provision of additional tax credits for certain BCP projects: The budget proposal provides additional tangible property tax credits for BCP sites located within environmental zones or designated “Brownfield Opportunity Areas,” as well as BCP sites developed for affordable housing or manufacturing uses.
- Creation of a “fast track” BCP-EZ option: The budget proposal would establish a “BCP-EZ” program, creating an expedited review and approval process for applicants seeking liability protection and state oversight without the benefit of BCP tax credits.
- Changes to tax credit time frames and eligibility: The budget proposal would impose new limits on (1) the period of time for which BCP tax credits for site preparation and on-site groundwater remediation may be claimed and (2) the categories of expenses that may be claimed as site preparation or groundwater remediation costs.
- Expanded exemption from hazardous waste fees and assessments: The budget proposal would extend the exemption from hazardous waste program fees and assessments to cover sites remediated under the New York City Brownfield Cleanup Program. Currently, state BCP sites are exempt from those fees and expenses, but City BCP sites are not.
The impact of the proposed changes would vary depending upon timing of a site’s BCP acceptance and COC. Sites that have been accepted into program will be eligible for the currently existing tax credits as long as they receive their COC by December 31, 2017. Sites that are accepted into the BCP on or after April 1, 2015, or that receive their COC after December 31, 2017, would be subject to the amended tax credit eligibility requirements and other BCP reforms. Finally, in the absence of an additional extension, no tax credits would be available for sites that are accepted into the BCP after December 31, 2022 or that receive their COC after December 31, 2025.
The governor’s budget proposal is subject to change based on negotiations with the New York State Senate and Assembly, both of which considered their own of BCP reform bills last year and are likely to do the same over the months ahead. Further updates will be provided as the proposed budget moves through the legislative process. For more information about the BCP and the potential impacts of the proposed changes, call Sive, Paget & Riesel.