> IDA Incentives
Overview
The Bethlehem Industrial Development Agency is charged with increasing the Town’s commercial tax base through economic development initiatives that actively promote, encourage, attract and develop job opportunities and economically sound businesses for the Town.
The IDA can provide four basic forms of financial assistance to qualified applicants in order to promote the economic welfare for residents of Bethlehem:
Real Property Tax Abatement (PILOT)
Sales and Use Tax Exemption
Mortgage Recording Tax Exemption
Issuance of Bonds
Projects that may be eligible for IDA assistance include: manufacturing, warehousing, commercial, industrial, research, industrial pollution control and recreation. For full details on the tax incentives offered by the Bethlehem IDA, please refer to the Uniform Tax Exemption Policy found in the Bethlehem IDA Policy Manual.
To learn more about IDA assistance and if your business and project would qualify please contact John Taylor, Senior Economic Developer at 518-439-4955 ext. 1189 or jtaylor@townofbethlehem.org.
Real Property Tax Abatement (PILOT)
The Town of Bethlehem IDA offers real property tax abatements on enhancements to a property that result in an increase in the property assessment by the taxing jurisdiction (County, Town and School District). The IDA PILOT (Payment In Lieu of Taxes) consists of an agreed-upon percentage of the improvements that would be otherwise due on the property if the project was completed without IDA tax abatements. The IDA offers a Standard and an Enhanced Abatement and each are awarded on a case-by-case basis.
The Standard Abatement commences at 50% of the increase in assessed valuation resulting from a project and then declines by 5% per year for a ten year period. This abatement is designed for projects that are eligible for IDA assistance and meet a standard level of economic impact including job creation, business development and tax generation. This program provides abatement for the Town, County and School District taxes throughout the Town.
The Enhanced Abatement is designed to enhance the regional competitive position of the Town in attracting high quality business development that meets very specific economic benefit criteria.
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General
Pursuant to section 874 of the act and Section 412-a of the Real Property Tax Law, property owned by or under the jurisdiction or supervision or control of the IDA is exempt from general real estate taxes (but not exempt from special assessments and special ad valorem levies). However, it is the general policy of the IDA that, notwithstanding the foregoing, every non-governmental project will be required to enter into a payment in lieu of tax agreement (a “PILOT Agreement”), either separately or as part of the project documents. Such PILOT Agreement shall require payment of PILOT payments in accordance with the provisions set forth below.
PILOT Requirements
Unless the applicant and/or project occupant and the IDA shall have entered into a pilot Agreement acceptable to the IDA, the project documents shall provide that the applicant and/or the project occupant shall be required to make PILOT payments in such amounts as would result from taxes being levied on the project by the taxing jurisdictions if the project were not owned by or under the jurisdiction or supervision or control of the IDA. The project documents shall provide that, if the IDA and the applicant and/or project occupant have entered into a PILOT Agreement, the terms of the PILOT Agreement shall control the amount of PILOT payments until the expiration or sooner termination of such agreement.
Property Tax Abatements
The IDA offers a Standard and an Enhanced Abatement and each are awarded on a case-by-case basis.
The Standard Abatement commences at 50% of the increase in assessed valuation resulting from a project and then declines by 5% per year for a ten year period. This abatement is designed for projects that are eligible for IDA assistance and meet a standard level of economic impact including job creation, business development and tax generation. This abatement program provides abatement against the Town, County and School District taxes throughout the Town.
The Enhanced Abatement is designed to enhance the regional competitive position of the Town in attracting high quality business development that meets very specific economic benefit criteria.
As with all IDA PILOT programs, the abatement is against the increase in assessed valuation resulting from the completion of the project. It also assumes that the abatement program begins after the completion of construction and a Certificate of Occupancy (CO) has been issued for the project.
A separate application will be used for the Enhanced Abatement program. To be eligible for the enhanced abatement, an applicant must demonstrate the project’s ability to substantially meet the following criteria:
Extraordinary new job creation or capital investment
Net new business investment in the Capital Region
Reuse or redevelopment of abandoned or underutilized real estate
Consistency with the Town’s comprehensive plan recommendations
Market penetration; potential for catalytic effect for subsequent projects
Consistency with regional target industries
Business development that promotes economic diversification
In addition, applicants will be required to submit an economic impact analysis in a form that is acceptable to the BIDA that demonstrates the project’s economic benefits based on the enhanced abatement schedule. In addition, the application should include information that demonstrates the applicant’s relevant experience in undertaking similar projects, as well as their credit worthiness and financial strength. Also, applicants will be required to indicate that in the absence of the enhanced abatement incentive, the project will not proceed.
Special District Taxes
As indicated above, the IDA is not exempt from special assessments and special ad valorem levies, and accordingly these amounts are not subject to abatement by reason of ownership of the Project by the IDA. The PILOT Agreement shall make this clear and shall require that all such amounts be directly paid by the applicant and/or project occupant.
Payee
Unless otherwise determined by resolution of the IDA, all PILOT payments payable to an affected tax jurisdiction shall be assessed, billed and collected directly by the same officials which assess, bill and collect normal taxes levied by such affected tax jurisdiction. Pursuant to section 874(3) of the Act, such PILOT payments shall be remitted to each affected tax jurisdiction within thirty (30) days of receipt.
Enforcement
An affected tax jurisdiction which has not received a PILOT payment due to it under a PILOT Agreement may exercise its remedies under Section 874(6) of the Act. In addition, such affected tax jurisdiction may petition the IDA to exercise whatever remedies that the IDA may have under project documents to enforce payment and, if such affected tax jurisdiction indemnifies the IDA and agrees to pay the IDA’s costs incurred in connection therewith, the IDA may take action to enforce the PILOT Agreement.
Recapture of Tax Exemptions
If the IDA's approval of a project is predicated upon achievement by the project of certain minimum goals such as minimum employment levels, the PILOT Agreement may provide that the tax exemptions granted to the project will be reduced, eliminated or re-captured if, in the sole judgment of the IDA, the project fails to achieve such minimum goals.,
Required Filings
As indicated in above, no real estate tax exemption with respect to a particular project shall be effective until an exemption form is filed with the assessor of each county, city, town, village and school district in which project is located (each, a “Taxing Jurisdiction”). Once an exemption form with respect to a particular project is filed with a particular Taxing Jurisdiction, the real property tax exemption for such project does not take effect until (1) a tax status date for such Taxing Jurisdiction occurs subsequent to such filing, (2) an assessment roll for such Taxing Jurisdiction is finalized subsequent to such tax status date, (3) such assessment roll becomes the basis for the preparation of a tax roll for such Taxing Jurisdiction, and (4) the tax year to which such tax roll relates commences.
Appraisals
Since the policy of the IDA is to base the value of a project for payment in lieu of tax purposes on a valuation of such project performed by the Assessor of the applicable Taxing Jurisdiction, normally a separate real property appraisal is not required. However, the IDA may require the submission of a real property appraisal if (1) the assessor of any particular Taxing Jurisdiction requires one or (2) if the valuation of the project for payment in lieu of tax purposes is based on a value determined by the applicant or by someone acting on behalf of the applicant, rather than by an assessor for a Taxing Jurisdiction or by the IDA. If the IDA requires the submission of a real property appraisal, such appraisal shall be prepared by an independent MAI certified appraiser acceptable to the IDA.
Sales and Use Tax Exemption
The Town of Bethlehem IDA has the ability to provide a Sales and Use Tax Exemption to eligible projects. This exemption ensures that all purchases made by the IDA or its agent are exempt from sales and use taxes. The exemption covers the acquisition or lease of construction material, machinery and equipment and is not to be applied to cover operational costs. In New York State, sales and use taxes generally range between 7%-8.5%.
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General
State law provides that purchases of tangible personal property by the IDA or by an agent of the IDA, and purchase of tangible personal property by a contractor for incorporation into or improving, maintaining, servicing or repairing real property of the IDA, are exempt from sales and use taxes imposed pursuant to Article 28 or the Tax Law.
The IDA has a general policy of abating sales taxes applicable only to the initial acquisition, construction, re-construction and/or equipping of each project with respect to which the IDA grants financial assistance. The IDA has no requirement for imposing a payment in lieu of tax arising from the exemption of a project from sales and/or use taxes applicable to the initial acquisition, construction reconstruction and/or equipping of such project, except as described in below or in the circumstance where (a) a project is offered sales tax exemption on the condition that a certain event (such as the issuance of bonds by the IDA with respect to the project) occur by a certain date and (b) such event does not occur, in which case the IDA may require that the applicant make payments in lieu of sales tax to the New York State Department of Taxation and Finance.
Period of Exemption
Except as set forth in subsection (A) above, the period of time for which a sales tax exemption shall be effective (the “tax exemption period”) shall be determined as follows:
Unless otherwise determined by the IDA, the tax exemption for sales and use taxes shall be for the tax exemption period commencing with the issuance by the IDA of bonds, notes or other evidences of indebtedness with respect to the project and ending on the date of completion of the project.
Early Commencement. The tax exemption period may, at the discretion of the IDA, commence earlier than the date of issuance by the IDA, of the IDA’s debt relating to the project, provided that (a) the IDA has complied with the requirements of Section 859-a of the Act, (b) the IDA thereafter adopts a resolution determining to commence such period earlier, said resolution to be substantially in the form of Appendix A attached hereto, (c) the applicant agrees to the conditions of such resolution and supplies to the IDA the materials required to be supplied to the IDA thereunder, and (d) the (Chairman) (Executive Director) (General Counsel) of the IDA acknowledges satisfaction of all conditions to the granting of such tax exemption set forth in such resolution.
The tax exemption period will normally end upon the completion of the project. On construction projects, the parties shall agree on the estimated date of completion of the project, and the tax exemption shall cease on the earlier of (a) the actual date of completion of the project or (b) the date which is six (6) months after the estimated date of such project. On non-construction projects, the parties shall agree on the estimated date of completion of the project, and the tax exemption shall cease on the earlier of (a) the actual date of completion of the project or (b) the date which is three (3) months after the estimated date of completion of the project. If the IDA and the applicant shall fail to agree on a date for completion of the project, the IDA shall on notice to the applicant make the determination on the basis of available evidence.
The IDA, for good cause shown, may adopt a resolution extending the period for completion of the project and/or extending the tax exemption period.
Items Exempted
The sales and use tax exemption granted by the IDA shall normally extend only to the following items acquired during the tax exemption period described above:
Items incorporated into the real property;
Tangible personal property including furniture, furnishings and equipment used to initially equip the project or otherwise forming part of the project, if purchases as agent of the IDA;
The rental of tools and other items necessary for the construction, reconstruction and/or equipping of the project, if rented as agent of the IDA; and
Office supplies, fuel and similar items consumed in the process of acquiring, constructing, reconstruction and/or equipping the project, if purchased as agent of the IDA.
Items Not Exempted
A sales and use tax exemption shall not be granted for the following:
Purchases occurring beyond the tax exemption period described above
Repairs, replacements of renovations of the project, unless such repairs, replacements or renovations constitute major capital-type expenses approved by the IDA as a separate project in the manner contemplated by the Act; or
Operating expenses, unless such operating expenses constitute major capital-type expenses approved by the IDA as a separate project in the manner contemplated by the Act.
Percentage of Exemption
Unless otherwise determined by resolution of the IDA, the sales and use tax exemption shall be equal to one hundred percent (100%) of the sales and/or use taxes that would have been levied if the project were not exempt by reason of the IDA’s involvement in the project. If an exemption of less than one hundred percent (100%) is determined by the IDA, then the applicant shall be required to pay a PILOT to the IDA equal to the applicable percentage of sales and/or use tax liability not being abated. The IDA shall remit such PILOT within thirty (30) days of receipt by the IDA to the affected tax jurisdictions in accordance with Section 874 (3) of the Act.
Confirmation Letter
The final act of granting a sales and/or use tax exemption by the IDA shall be confirmed by the execution by an authorized officer of the IDA of a confirmation letter by the IDA. Such confirmation letter shall be in the form of either Appendix 17B (where the exemption is permanent, because the IDA is satisfied that any conditions precedent to such tax exemption, such as the issuance of bonds by the IDA, have been satisfied) or Appendix 17C (where such exemption is tentative, because there remain conditions precedent to such tax exemption which have not been satisfied). Each such confirmation letter shall describe the scope and term of the sales and use tax exemption being granted.
Required Filings
The New York State Department of Taxation and Finance requires that proper forms and supporting materials be filed with a vendor to establish a purchaser’s entitlement to a sales tax exemption. For example, TSB-M-87(7) outlines the materials that must be filed to establish entitlement to sales tax exemption as “agent” of the IDA. It is the responsibility of the applicant and/or project occupant to ensure that the proper documentation is filed with each vendor to obtain any sales tax exemptions authorized by the IDA.
Required Reports and Records
Pursuant to section 874(8), the applicant and/or project occupant is required to annually file with the New York State Department of Taxation and Finance a statement of the value of all sales and use tax exemptions claimed under the Act by the applicant and/or the project occupant and/or all agents, subcontractors and consultants thereof. The project documents shall require that (1) a copy of such statement will also be filed with the IDA and (2) that the project occupant shall maintain, for a period ending seven (7) years after the last purchase made under the sales and use tax exemption, and make available to the IDA at the request of the IDA, detailed records which shall show the method of calculating the sales and use tax exemption benefit granted by the IDA.
Mortgage Recording Tax Exemption
Mortgages filed in the Town of Bethlehem carry a 1% mortgage recording tax. The Town of Bethlehem IDA has the ability to provide an exemption from the mortgage recording tax for qualified projects.
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Overview
State law provides that mortgages recorded by the IDA are exempt from mortgage recording taxes imposed pursuant to Article II of the Tax Law. The IDA has a general policy of abating mortgage-recording taxes for the initial financing obtained from the IDA with respect to each project that the IDA issues debt which will be secured by a mortgage upon real property. In instances where the initial financing commitment provides for a construction financing of the IDA to be replaced by a permanent financing of the IDA immediately upon the completion of the project, the IDA’s general policy is to abate the mortgage recording tax on both the construction financing and the permanent financing.
Refinancing
In the event that the IDA retains title to a project, it is the general policy of the IDA to abate mortgage recording taxes on any debt issued by the IDA for the purpose of refinancing prior debt issued by the IDA, and on any modifications, extensions and renewal, so long as the relative IDA fees have been paid.
Non-IDA Projects
In the event that the IDA does not hold title to a project, it is the policy of the IDA not to join in a mortgage relating to that project and not to abate any mortgage recording taxes relating to that project.
Non-IDA Financing
Occasionally, a situation will arise where the IDA holds title to a project, the project occupant needs to borrow money for its own purposes (working capital, for example), and the lender will not make the loan to the project occupant without obtaining a fee mortgage as security. In such instances, the policy of the IDA is to consent to the granting of such mortgage and to join in such mortgage, so long as the following conditions are met:
The documents relating to the proposed mortgage make it clear that the IDA is not liable on the debt, and that any liability of the IDA on the mortgage is limited to the IDA’s interest in the project;
The granting of the mortgage is permitted under any existing documents relating to the project, and any necessary consents have been obtained by the project occupant; and
The payment of the IDA fee relating to same.
Issuance of Bonds
The Town of Bethlehem IDA is authorized by New York State to issue bonds and notes to eligible projects. These bonds can be taxable or federally tax-exempt and can be used to provide low-cost financing to acquire, construct and equip a project.
While issuing bonds may be a desirable and cost-effective solution to financing a project, interested companies should inquire regarding eligibility, cost-benefit, and additional requirements.
The major activity of IDAs has been the issuance of bonds to provide low-cost financing for businesses to acquire, construct and equip their business facilities and thus create and retain jobs, and provide for economic growth and stability in the community. The borrower (e.g. a corporation, partnership or sole proprietorship) agrees to make payments to retire the bond obligations pursuant to a contractual agreement – usually a lease or installment sale agreement. Depending on the size of the bond issue and other factors, placement of the bonds may be made privately or publicly. The real property and the machinery are technically owned by the IDA. However, the borrower indemnifies the IDA against all claims and is wholly responsible for debt repayment.
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Tax-Exempt Status
The Internal Revenue Code of 1986, as amended, identifies two categories of bonds for federal purposes: private activity bonds and all other or “governmental bonds.” A bond is potentially a private activity bond if any entity other than a state or local governmental entity benefits directly or indirectly from the issuance of the bonds.A tax-exempt issuance is one in which interest on the bond is exempt from gross income for federal income tax purposes. In most instances federally tax-exempt bonds issued by IDAs are limited to $10 million and are subject to all federal regulations and prohibitions governing tax-exempt status.Bonds issued to provide facilities for 501 (c) (3) organizations such as not-for-profit corporations (Code Section 145), bonds issued to provide for manufacturing facilities (Code Section 144), and bonds issued to provide for facilities listed under Code Section 142, such as airports, docks, wharves, mass commuting facilities, and solid waste disposal facilities, to name some, qualify for tax-exempt status. Companies interested in bond financing should inquire regarding eligibility and additional requirements for tax-exempt financing. In addition, all bonds issued in New York State are exempt from State personal income tax on interest income and sales tax.