3 Takeaways From Tax Provisions In NY’s $220B Budget
Herrick Real Estate partner Brett J. Gottlieb spoke to Law360 Tax Authority about New York State's $220 billion budget for the 2023 fiscal year, which includes a local-level pass-through tax and higher SALT deductions for S corporation shareholders, but does not include a replacement to the 421-a property tax abatement program. The article stated that "the Legislature rejected a plan from Democratic Gov. Kathy Hochul to retool a tax abatement program known as 421-a, which offers property tax abatements to projects that meet certain affordability standards. As a result, the program is still slated to sunset in June, leaving developers uncertain about future projects[.]"
Gov. Hochul's proposed 485-w program "would require certain developments to be more affordable to obtain property tax exemptions, and in some cases require permanent affordability for certain units," according to the article.
Brett explained that New York real estate developers are eager to complete their projects before the 421-a expiration date, saying, "Everybody at this point is in a sprint to the finish line to make sure that they can start the work timely[.]"
He reflected how a prior tax incentive program ended before 421-a was enacted, which caused many developers to pause their affordable housing projects. The article stated that Brett "would foresee a similar stalling of construction work should lawmakers be unable to reach an agreement before June 15" and that "the fact that the real estate sector and the unions have teamed up to support some version of 421-a signaled that the program's benefits have broad appeal, despite the criticisms of their effectiveness."
Brett observed, "Typically these two parties don't have interests that are aligned... But in this particular case, I think there's a well-founded fear that construction jobs are going to dry up if the program lapses for any significant period of time."
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