On July 18, 2012, New York Governor Andrew Cuomo approved legislation creating Real Property Tax Law Section 470,authorizing local jurisdictions to provide property tax incentives for commercial and residential construction projects that meet “green building” certification standards. The Assembly and State Senate passed the bill unanimously.
According to the Legislature, “New York has become proactive in bolstering efforts to reduce greenhouse gas emissions by promoting energy efficiency in homes and businesses throughout the state.” To be eligible, the construction must begin on or after January 1, 2013 (or such later date as specified by the locality) and meet LEED certification standards, the Green Building Initiative’s Green Globes Rating System, the American National Standards Institute, or similar standards for the certification of green buildings. In addition, the value of the construction must exceed $10,000 and be documented by a valid building permit, if applicable. Ordinary maintenance and repairs are not eligible for the exemption.
For construction that is certified under LEED standards as silver, gold, or platinum, the exemption will be in the amounts listed below:
The exemption applies to the increase, if any, in the assessed value of the property that results from the construction or reconstruction of a property meeting LEED certification.
The legislation is intended to encourage green building by providing an additional inducement to construct improvements in an energy efficient and conservation-minded manner. For communities that have adopted green building code requirements, the exemptions will help reduce the cost of green code compliance.
It is interesting to note that the exemption will likely be most effective in construction projects with a substantial price tag since a significant increase in a property’s value is more likely in more extensive construction projects. It will also take some time to see a local impact of this law since it requires local taxing authorities to consider the exemption and pass their own approval of it and implement it into their tax assessment system. While it seems doubtful that this law, on its own, would convince a someone to make their construction project green, the law does appear to be a significant addition in to the cumulative rewards for green building.
Elizabeth Holden is a partner in the Real Estate Development Practice at Hodgson Russ LLP. You can reach her at email@example.com.