A bill signed by New York Gov. Andrew Cuomo last month is starting to trickle down through local municipalities, which must now decide whether to adopt a tax exemption for buildings certified by Leadership in Energy and Environmental Design (LEED) or other green initiative standards.
Senate Bill 1462, which became law on July 18, 2012, authorizes a municipal corporation to provide a real property tax exemption for certified green building improvements. Municipal corporations will now decide whether to adopt the exemption. Companies considering construction of a potentially qualifying improvement should monitor local legislative activity to see whether the relevant localities have adopted the exemption and should start planning for construction projects scheduled for 2013.
Under the authorizing statute, the exemption would apply to construction projects beginning on or after Jan. 1, 2013. Local law, however, may specify a later date. The exemption would be available only to the extent that the improvement increases the assessed value of the real property. To qualify, the real property improvement must be documented by a building report, and the value of the improvement project must exceed $10,000. Ordinary maintenance and repair projects will not qualify as eligible improvement projects.
For property that is certified by an accredited LEED professional as meeting the certified, silver, gold or platinum designations, the exemptions are equal to 100% of the increase in assessed value as a result of the improvement in the first year. The exemption is gradually phased out over 10 years, with 20% exempted for platinum buildings in year 10 and no exemption in year 10 for certified, silver and gold buildings. The LEED professional must file a copy of the LEED certification with the local assessor's office, and the assessor must approve the certification.
A more detailed analysis of the new statute can be found at Ryan.com, a global tax services firm headquartered in Dallas.