USA - NEW YORK Law and Practice Contributed by: Adam S. Walters, Erin C. Borek, Timothy P. Moriarty and Kelly E. Marks, Phillips Lytle LLP
8.5 Tax Benefits Benefits include depreciation deductions for tax - payers with respect to improvements made to real property. In addition, to the extent that the owner of the real estate used in a trade or business financed the acquisition of, or improvements to, the prop - erty with debt, the interest is deductible. Gener - ally, the amount of interest that can be deducted is limited to 30% of the taxpayer’s adjusted taxa - ble income, but real estate businesses that meet certain requirements can elect to fully deduct their entire interest expense. Individuals who own real estate directly or through a pass-through entity pay tax on any long-term capital gain recognised at significantly lower rates than other types of income. Real property owners who hold property for investment, or for use in a trade or business, may dispose of that property in tax-efficient ways not available to other types of property, such as through Section 1031 of the Internal Revenue Code as discussed above. Historic Tax Credits Federal and New York State historic tax credits may be available in connection with the substan - tial rehabilitation of certain historic buildings. If various requirements are satisfied, a taxpayer that holds title to a rehabilitated historic build - ing (or has an ownership in a pass-through entity that holds the title) may claim a nonrefundable federal tax credit equal to 20% of “qualified reha - bilitation expenditures” incurred with respect to the building. The federal tax credit is claimed on a pro rata basis over a five-year period beginning in the tax year in which the rehabilitated building is placed in service.
New York State’s historic tax credit is available to a taxpayer that is allowed the federal historic tax credit with respect to a historic building located in New York State, provided that the building is located in a census tract at or below 100% of the state’s median family income. The state tax credit is currently equal to 100% of the fed - eral tax credit claimed, but does not need to be claimed over a five-year period. Property owners can receive this enhanced state credit of 100% of the qualified rehabilitation expenditure (QRE) up to USD5 million, if the property placed-in- service date is after 1 January 2010 and before 1 January 2030. A credit of 30% of QRE is avail - able for a property placed-in-service date after 1 January 2030, so long as the total QREs do not The New York State established the Brownfield Cleanup Program (BCP) in 2003 to encourage private sector cleanup of contaminated prop - erty, known as Brownfield sites, and redevel - opment and reuse of those sites. The program offers certain legal, financial, and tax incentives to encourage this private sector cleanup, rede - velopment, and reuse. Provided that a variety of requirements are met, taxpayers that remediate and redevelop Brownfield sites are eligible to receive refundable tax credits against their New York State income tax liability. exceed USD100,000 per structure. The Brownfield Cleanup Program Under the current program, the amount of the credit may be between 10% and 24% of eligible costs paid or incurred to clean up and redevelop the site, with certain components capped. The amount and type of tax credits available vary by individual sites depending on location, type of use, and when the site was accepted into the BCP, amongst other factors.
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