Robert S. Altman, Esq., PLLC
NYC TAX BREAK
Robert Altman is an experienced real estate attorney. He has represented buyers and sellers in the purchase of commercial properties in the millions of dollars. Moreover, Robert has assisted many landlords and tenants with the leasing of their commercial properties. Robert only provides services for residential sales and leases for current clients or referrals from current clients. Because of Robert’s expertise in government tax incentives, he can also advise you of potential benefits and tax breaks before and after purchase or leasing, these benefits include:
THE INDUSTRIAL AND COMMERCIAL ABATEMENT PROGRAM (ICAP).
Begun in 1984 under a different name, ICAP provides real property tax relief for capital improvements to real property. The tax break for all properties is an abatement on any taxes greater than 115% of your initial tax due to the capital improvements that are made and this break can run for up to 25 years. To qualify, a building owner and/or tenant must be planning to make capital improvements to the property equal to thirty (30%) percent or more of the building’s taxable assessed value. If this is your plan, then you should file an ICAP application before you “pull” a building permit. (If you pull the permit, and then apply, you will not qualify for the abatement.) If you are a manufacturer, and you are planning on making capital improvements to your property equal to at least 40% of the taxable assessed value, then you can receive an actual reduction in your real estate taxes up to one half of what you are currently paying on the building portion of your taxes in addition to the abatement on any increase in taxes.
If you are a tenant, you should be aware that Owners most typically file for ICAP benefits and that the savings may already be a part of your lease. However, if they are not and you are a tenant planning to perform improvements, you should seek the cooperation of your landlord before beginning the application process as the landlord must be a co-applicant with you. If you are negotiating a lease with a landlord and you will be applying for ICAP after the commencement of the lease, you should ensure that language is within the lease insuring that all benefits are passed onto you and that the Landlord will cooperate with your application.
Some small business owners attempt to file an ICAP application by themselves. While this is possible, the legal requirements for filing have become much more complicated over the past few years due to compliance requirements with EEO rules and minority and women owned businesses. Moreover, the final application will require some expertise and unless you wish to spend significant time figuring out all the paperwork, you should hire a consultant to file the application or at least to guide you through the process. Most consultants can complete the application and assist you with other benefit applications. Moreover, because of certain eligibility criteria related to formerly manufacturing properties and ICIP properties, some buildings may not be eligible. However, unlike the remaining programs, retail firms and hotels are eligible for this program, although the amount of the benefit for retail properties is limited in certain instances.
THE ENERGY COST SAVINGS PROGRAM (ECSP).
You may apply for ECSP if you qualify for ICAP or are a tenant in a building that has qualified for ICAP. Moreover, if you are a tenant relocating from Manhattan south of 96th Street to another part of the City (a “relocating tenant”), you qualify for ECSP even if you are not in a building that has qualified for ICAP. The benefit is equal to 45% reduction in the electricity delivery costs and a 35% reduction in the gas delivery costs (both for non-heating purposes). The benefit lasts for eight full years with a four year phase out. You may use any energy provider since the reduction is for delivery costs, which are most often through Con Edison or National Grid. Applications for ECSP must be made contemporaneously with the ICAP application. If you are a relocating tenant, you must submit your application BEFORE signing a new lease or signing a contract to purchase your relocation building. Moreover, your lease should state that the Landlord will cooperate with you in your application. Retail firms and hotels are not allowed to participate in this program.
THE RELOCATION AND EMPLOYMENT ASSISTANCE PROGRAM (REAP).
If you are a business relocating from outside of New York City or Manhattan south of 96th Street to another part of the City, you may be eligible for the Relocation and Employment Assistance Program. The benefits under this program are equal to a $3,000 tax credit per employee and lasts for twelve years (the first five of which could produce a refund check). Not all relocating businesses qualify because you must relocate into a REAP eligible building. REAP eligible buildings include buildings under the ownership of the Industrial Development Agency (IDA) or the City of New York, commercial buildings that have received benefits under the Industrial and Commercial Incentive Program (ICIP, which is not the same as ICAP) and spent 50% of their assessed value as part of their ICIP application, or industrial buildings that have received ICIP and spent 25% of their assessed value as part of their ICIP application. It is very important that you determine if a building is REAP eligible in order to receive this credit. Otherwise in order to qualify, you will need to make your premises REAP eligible by spending $25 per square foot on the build-out. In any event, your new lease should again state that the Landlord will cooperate with your REAP application. Please note that retail firms and hotels are not allowed to participate in this program.
Many businesses are also eligible for benefits under the Commercial Expansion Program (CEP) or the Commercial Revitalization Program (CRP). Better benefits are available under CEP. To qualify, you must be leasing space in a building consisting of at least 25,000 square feet in certain areas of the City and spend money on tenant improvements that vary with the length of the lease and the size of the business. For manufacturers who relocate into special zones, the benefit under CEP is equal to the amount of real estate taxes in the first year of the lease and this amount is given, unabated, for ten years and there is no size requirement for the building into which you move. For non-manufacturers, the benefit is equal to the amount of real estate taxes in the first year of the lease and this amount is given for three years, then there is a two-year phase-out period. If the area of the City in which you are leasing is not eligible for CEP, it may be eligible for CRP. The qualifications and restrictions are quite similar. Most owners or real estate leasing agents will know under which program the building qualifies. And of course, your lease should state that the Landlord will cooperate with your application for these programs. Retail firms and hotels are not allowed to participate in this program. The benefit itself is limited to $2.50 per square foot.
REAL PROPERTY TAX LAW 421-a.
Tax incentives are also available for the new construction of residential housing through the 421-a program. Over the years, 421-a has become more complicated with a decrease in tax benefits and the creation of exclusionary areas, which require that twenty (20%) percent of the dwelling be used for affordable housing. Moreover, while many focus on exclusionary area which are based on geography, even if a site is not included within an exclusionary area, the site itself must qualify. For example, tearing down a 25 unit dilapidated dwelling and replacing it with a new 25 unit dwelling will NOT result in the granting of 421-a benefits. Because each site is different, it is best to seek a consultation first. While Robert is knowledgeable on 421-a, he no longer files applications under the program.
Each program has its little quirks so as mentioned above, you may wish to use a consultant, even if just to determine the eligibility of a particular property.