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Resources and Capabilities for:
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Institutions
Communities |
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Tax
reduction activities and programs |
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Click below to find information on
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Real property tax abatement/reduction via a
Payment-in-Lieu-of-Taxes (PILOT)
Sales and use tax exemptions
Mortgage recording tax reduction
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Real Property Tax Abatement |
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I n the State, property owners pay
a real property tax based on the assessed value of improvements
to a site. Any real property owned or controlled by an IDA is
not subject to ad valorem real property taxes, under GML § 874
and RPTL § 412-a. However, real property owned or controlled by
an IDA continues to be subject to special assessments and user
fees. When an IDA takes title to or a leasehold interest in real
property, the property becomes 100% exempt from ad valorem real
property taxes. To accommodate the needs of the local taxing
jurisdictions, however, the IDA generally negotiates a
Payment-In-Lieu-Of-Tax Agreement ("PILOT Agreement") with the
company. The IDA will then direct, or receive and forward, these
payments-in-lieu-of-taxes to the affected taxing jurisdictions.
By law, IDAs have the authority to negotiate any PILOT Agreement
they deem reasonable. There is no required formula for
calculating the payments to be made under a PILOT Agreement.
They are, however, required to have specific policies outlining
the types of PILOT Agreements they are offering and procedures
for deviation from those stated policies. If the IDA deviates
from its uniform policy, it must notify the affected taxing
jurisdictions. Although there is no statutory limit to the
period or amount of the abatement, IDAs generally limit the
period to between 10 and 20 years, with the assumption that the
abatement generally results in more revenue for the taxing
jurisdictions than was generated by the property before the
IDA's involvement.
This benefit is generally referred to as a "real property tax
abatement" rather than a real property tax exemption, given the
interplay between the 100% exemption from real property taxes
and the IDA policy of requiring a payment in lieu of taxes. Some
PILOT Agreements provide a specific dollar amount to be paid
each year for the term of the PILOT Agreement. The mere
predictability provided by such a PILOT Agreement can be
invaluable to a developer. Since each PILOT Agreement is
negotiated on a project-by project basis, it is difficult to
estimate the exact savings from the Real Property Tax Abatement.
There is little doubt, however, that the abatement can provide
significant savings. As a reminder, certain projects may already
qualify for a partial exemption from real property taxes for new
improvements under RPTL §§ 485-b or 485-e. A company in an
Empire Zone may benefit from a refund of real property taxes
paid on payments made under a PILOT Agreement. Where companies
qualify for a 100% refund from the State, the IDA will often
negotiate a payment in lieu of tax equal to full taxes and allow
the increment (difference between full taxes and otherwise
negotiated amount) to be used to repay debt service
related to
certain infrastructure improvements (referred to as "PILOT
Increment Financing" or "PIF").
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Sales
and Use Tax Exemption |
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The sales and use tax in the State generally ranges from 7% to
9.5%. Under GML § 874, all purchases made by an IDA or its
agents are exempt from sales and use tax. The IDA can issue a
sales tax exemption letter to a company, authorizing it to act
as an agent for the IDA. The company can then acquire the
equipment, materials and services needed to acquire, construct,
reconstruct and/or equip the project without
having
to pay sales or use taxes. The exemption is generally limited to
the construction, reconstruction or installation period and
cannot cover ongoing operational costs. However, tax exemptions
for operational costs are now available through the New York
State Empire Zones program. (See discussion, below.) A company
in an Empire Zone can benefit from both the IDA sales tax
exemption (exempts both the local and State portions for
purchases of equipment and materials) and the Empire Zone sales
tax exemption (exempts State portion only, but also exempts
operational costs for up to 10 years).
Depending on the size of the project, the cost savings for the
company under this arrangement can be significant. On a project
where $1 million of the costs are subject to sales and use tax,
the exemption can result in a savings of $70,000 to $85,000.
When the lease or installment sale agreement expires, the IDA
transfers any personal property that is involved in the project
to the company without the payment of any sales or use tax.
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Financing your
investment with our tax reduction capabilities
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Whenever a county clerk records a mortgage in the State, the
mortgagor must pay a .75% to 1.5% (of the mortgaged amount)
mortgage recording tax – a significant expense on projects
involving substantial financing. The IDA, however, can qualify a
company for a mortgage recording tax exemption. If an IDA is in
title (either fee title or leasehold interest) at the time the
mortgage is recorded, the IDA will mortgage its interest in the
property (exempt from the mortgage recording tax under GML §
874) and the company will simultaneously mortgage its interest
in the property (exempt from the mortgage recording tax under
New York State Tax Law ("Tax Law") § 255). As an alternative,
the IDA and the company can execute one mortgage with the IDA
agreeing to pay the mortgage recording tax (which triggers a
single exemption under GML § 874). Either arrangement can save a
substantial amount of money for the company – from $7,500 to
$15,000, for example, on a $1 million mortgage.
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