Municipal Law

City Tax Benefit Programs for Industrial and Commercial Real Estate Users

Every small and medium business owner sees the corporate deals that the City makes for large businesses, like Citigroup, and wonders, “why can’t I receive some of those tax breaks?”  The truth is that you can.  New York City has four programs to benefit small and medium sized businesses and you don’t need an army of lawyers to negotiate with the City to obtain them.

THE INDUSTRIAL AND COMMERCIAL INCENTIVE PROGRAM

The first and most important program to be aware of is the Industrial and Commercial Incentive Program (ICIP).  Begun in 1984, ICIP provides real property tax relief for capital improvements to real property.  The tax break for all properties is an exemption on the increase in assessment 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 ten (10%) percent of the building’s taxable assessed value.  If this is your plan, then you should file an ICIP application before you “pull” a building permit. (If you pull the permit, and then apply, you will not qualify for the exemption.)  If you are a manufacturer, and you are planning on making capital improvements to your property equal to at least 25% 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.

You should be aware that Owners most typically file for ICIP 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 ICIP 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 ICIP application by themselves.  While this is possible and the preliminary application is quite easy, the final application will require some expertise and unless you wish to spend significant time figuring out all the paperwork, you may wish to 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, some buildings may not be eligible.  However, unlike the remaining programs, retail firms and hotels are eligible for this program.

THE ENERGY COST SAVINGS PROGRAM

The second most important program is the Energy Cost Savings Program (ECSP).  You may apply for ECSP if you qualify for ICIP or are a tenant in a building that has qualified for ICIP.  Moreover, if you are a tenant relocating from Manhattan south of 96th Street to Long Island City (a “relocating tenant”), you qualify for ECSP even if you are not in a building that has qualified for ICIP.  The benefit is equal to 45% reduction in the electricity delivery costs and a 35% reduction in the gas delivery costs.  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 Keyspan.  Applications for ECSP must be made contemporaneously with the ICIP application. If you are a relocating tenant, you must submit your application BEFORE signing a new lease or purchasing 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

If you are a business relocating from outside of New York City or Manhattan south of 96th Street to Long Island City, you may be eligible for the Relocation and Employment Assistance Program (REAP).  The benefits under this program are equal to a $3,000 tax credit per employee and lasts for eight full years with a four year phase out.  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 ICIP 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 building REAP eligible through your own ICIP application… a potentially expensive proposition, especially if you are not leasing the entire building. In any event, your new lease should again state that the Landlord will cooperate with your REAP and/or ICIP applications.  Please note that retail firms and hotels are not allowed to participate in this program.

LEASING PROGRAMS

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 and most areas of Long Island City will qualify for this program.  To qualify, you must be leasing space in a building consisting of at least 25,000 square feet and spend money on tenant improvements that vary with the length of the lease and the size of the business.  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 for three years, then there is a two-year phase-out period. If the area of Long Island City in which you are leasing is not eligible for CEP, it may be eligible for CRP.  The qualifications and restrictions are quite similar, but the benefit is half that of CEP.  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. 

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. 

AND FOR REALLY BIG PROGRAMS…..

If you are purchasing a property and or engaging in massive repairs (costing from $500,000 to the tens of millions of dollars) to your current one, you may wish to inquire about programs available through the Industrial Development Agency (which administers the programs most often read about in the newspapers).  While the up-front costs of participating in these programs are generally higher than the above programs and the paperwork involved is much more extensive, the benefits are greater, making the extra effort beneficial.  Either way, the City does have programs that you can access and receive real financial savings.

Robert S. Altman is a member of the Board of Directors of the  Long Island City Business Development Corporation and is the former Counsel to the City Council’s Committee on Economic Development, which has jurisdiction over these programs.  He participated in the revisions of the ICIP program in 1991, 1992 and 1995, including the ICIP manufacturer’s abatement.  He is experienced with filing applications for all of the above programs.