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August 13, 2012

New York Authorizes Municipalities to Enact "Green Building" Tax Exemption

Following unanimous votes in the New York State Assembly and Senate, Governor Andrew Cuomo approved legislation on July 18, 2012 which authorizes local governments and school districts to provide a real property tax exemption for construction projects which satisfy LEED or similar certification standards for green buildings.

As background, LEED is a green building rating system developed by the U.S. Green Building Council, a non-profit coalition which promotes design and construction practices which reduce negative environmental impacts. LEED certified projects, which require independent third party verification, are awarded points across five categories – sustainable sites, water efficiency, energy and atmosphere, materials and resources and indoor environmental quality. The more points a project accrues, the higher its certification – Certified, Silver, Gold and Platinum. Substantially equivalent certifications also qualify for the exemption.

Under the newly enacted Real Property Tax Law §470, tax jurisdictions may "opt-in" to the tax exemption by enacting local law, ordinance, or resolution. To qualify for the exemption, the green construction project must have commenced on or after January 1, 2013, be valued in excess of $10,000, and hold a valid building permit or other local approval. The scope of the exemption varies depending on the level of LEED or similar certification achieved on the project.

§470 provides the following schedule of real property tax exemption for any increase in assessed value resulting from the construction or reconstruction of a property or portion of property which satisfies LEED or other green building standards, intended to encourage a higher standard in return for a longer exemption:

Green Building Tax Exemption
 Year  Certified/Silver    Gold  Platinum 

1

100%

100%

100%  

2

100% 

100% 

100% 

3

100% 

100%

100% 

4

80%

100%

100% 

5

60%

80% 

100% 

6

40%

60%

100%

7

20%

40%

80%

8

0%

20%

60%

9

0%

0%

40%

10

0%

0%

20%

The exemption is effective once the certification has been filed with the local assessor. While some municipalities have indicated that they are likely to enact the new exemption, it remains unclear whether others will decide to rely on existing economic development vehicles such as Industrial Development Agencies. One factor that may influence the decision is that the new §470 exemption applies to both commercial and residential construction.

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