Governor Spitzer Proposes Changes to Brownfield Tax Credits

Client Advisory

June 19, 2007

The Brownfield Law of 2003 created the Brownfield Cleanup Program, through which applicants can become eligible for the brownfield redevelopment tax credit. The credit covers costs for site preparation, construction of tangible property and on-site groundwater remediation.  Currently, applicants to the Brownfield Cleanup Program that  receive a certificate of completion can receive 10 to 22 percent of these costs back as tax credits, which may be “refundable” to the taxpayer if the credits exceed the tax liability to the state. The tax credit percentage varies depending on whether the applicant is an individual or corporation, the location of the site and the level of remediation chosen. As many applicants know, the credits can be quite lucrative.

Applicants are eligible for the brownfield redevelopment tax credit regardless of whether they are a volunteer (i.e.,  not responsible for contamination) or a participant (i.e., a responsible party) in the Brownfield Cleanup Program. Site preparation may include remediation, excavation and other site work to prepare for redevelopment.  Tangible property may include buildings erected on the site. 

The Governor's Proposal

Governor Elliot Spitzer has proposed an amendment to the tax credit sections of the Brownfield Law to take effect on July 1, 2007.  The amendments, which are unlikely to be approved before the state legislature goes out of session early in the summer, address several widespread complaints about the permissiveness of the brownfield redevelopment tax credit.[1] Even if the law is not amended in this session, however, the legislature is likely to address the brownfield redevelopment tax credit in the future.

If the amendments were enacted immediately, applicants to the Brownfield Cleanup Program that receive approval from the New York State Department of Environmental Conservation (DEC) of their remedial work plan on or after July 1, 2007 or that receive a certificate of completion from another taxpayer (a transfer) on or after July 1, 2007 would be subject to the new tax credit provisions.  Volunteers would be eligible to receive 100 percent of their site preparation costs[2] and on-site groundwater remediation costs back as tax credits, which would decline to 25 percent for participants.  This would substantially expand the available tax credits for these two components, which under the existing law range from 10 to 22 percent for both volunteers and participants.

The amendment, however, would impose a sharp limitation on the tangible property component, which has been widely criticized for being too permissive and often unrelated to the costs of site remediation.   The tangible property tax credit would be limited to the lesser of (A) five million dollars or  (B) 100 percent of the costs of site preparation and groundwater remediation for a track one clean-up; 50 percent of the site preparation and groundwater remediation costs for a track two clean-up; or 25 percent of the site preparation and groundwater remediation costs for a track three clean-up.  Those choosing a track four remediation would not be eligible for the tangible property tax credit.   

The amendment would also impose an entirely new limit on the transfer of the certificate of completion for tax credit purposes.   An applicant would be able to transfer the certificate of completion once and only if the applicant was not eligible for the tangible property tax credit.  (The applicant could claim credits for site preparation and groundwater remediation.) The transferee, who presumably would carry out the actual site redevelopment and thus become eligible for the tangible property tax credit, would not be able to transfer the certificate of completion in the future. 

In sum, this amendment would expand the tax credits for site preparation and groundwater remediation for both volunteers and participants.  It would also place a cap on tax credits for tangible property improvements and tie those tax credits to the costs of remediation.  This would prevent sites that have very low remediation costs but high redevelopment costs from receiving a windfall through the Brownfield Cleanup Program. 

Applications to the Brownfield Cleanup Program Going Forward

Regardless of whether these amendments pass, the DEC is already applying its more stringent eligibility guidelines to applicants to weed out sites that are not substantially contaminated and that would likely be developed without the benefits of the Brownfield Cleanup Program.   Even with the amendments, however, the program will remain quite lucrative, particularly for sites with large remediation costs.

Questions regarding this client advisory should be directed to Christopher Rizzo (212-238-8677, or Christine A. Fazio (212-238-8754,


[1]At the time this advisory was written, the Governor’s proposal is not before the New York legislature. Senate bill 6177 was introduced to the Senate on June 12, 2007 and proposes amendments to the environmental restoration program, the brownfield opportunity area program and a new brownfield “shovel-ready” program. The legislative session ends June 21, 2007 but it is expected that lawmakers will return in mid-July for an extra session.

[2] N.Y. Tax Law § 21 defines the brownfield redevelopment tax credit and its three components. If the amendment passes, the site preparation would include actions specified in the remedial work plan approved by DEC. 

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