Cherrytree Group LLC Blog

The U.S. Environmental Protection Agency (EPA) estimates that there are 450,000 brownfields sites throughout the country. To some commercial property owners, brownfields are seen as a major expense. To others, they are a potential financial windfall.

That is because of a tax credit included in the Brownfields Act: Chapter 206 of the Act of 1998, which was created as an incentive for developers to reclaim polluted property, as well as to stimulate economic growth by restoring abandoned properties, putting them back into use, and thereby creating jobs and generating property, excise, and income taxes from land that otherwise would lie fallow.

Under Mass. General Law Chapter 21E, if you buy (or control) polluted commercial property or if someone contaminates commercial property you own, you are responsible for cleaning it up. What many owners don't know is that they may be able to get the Commonwealth of Mass. to split the cost of that cleanup.

How the Brownfields Tax Credit Works
To use a real-life example, a developer wants to determine if they qualify for the credit. They spent in excess of $2 million to clean up the site of a commercial office building. If successful, they could receive a tax credit in excess of $1 million. They have the ability to offset 50% of their taxes in the current year, or carry the credit forward for an
additional 4 years (for a total of 5 years) in order to use the credit to offset taxes. The credit is also transferable, so the developer may choose to sell it.

Practically any costs "directly" relating to an environmental clean-up can qualify for the credit, including the cost to assess, contain, remove or otherwise respond to the contamination. Covered expenses may include the costs of LSP services, engineering, contractors, laboratory analyses and testing, legal fees, DEP and other agency fees.

For a project to qualify, it must meet all of the following criteria:

• The environmental damage must have been reported to the Mass. Department of Environmental Protection (DEP) and a permanent solution to clean the property and keep it clean must have been achieved. If the source of the pollution continues to contaminate the property, it will not qualify for a tax credit,
• The implementation must be conducted based on the Mass. Contingency Plan, generally under the direction of a licensed site professional, * The property must be located in an economically distressed area (EDA), as determined by the DEP. Mass. alone has 351 cities and towns, of which 233 of them are either completely or partially in an EDA, including Boston,
• The cost of the clean up must exceed 15% of the appraised value of the property at the time of clean-up,
• The owner must be in good standing with the DEP, with no violations of any environmental restrictions, orders or mandates, and
• The property must be used for business purposes.

If a project fails to qualify for the 50% credit, it may still qualify for a 25% credit if the cleanup uses an activity and use limitation, which specifies allowable and prohibited uses for the property.

According to Warren Kirshenbaum, president of Cherrytree Group, LLC, a tax credit consultant and syndicator, "The market for brownfields tax credits is very strong. We have sustained demand for these credits, and have recouped millions of dollars of our clients expenditures by using this credit."

Take Advantage Before Credits Expire
In 2010 the deadline for applying for the credit was extended to January 1, 2014. The tax credit is transferable and can be carried forward for up to five years. Therefore, even if the taxpayer does not qualify for the credit they can lower their tax burden by purchasing credits from other companies at a discount.

The state brownfields tax credit can also be used in conjunction with other grants and tax credits, such as the federal historic rehabilitation tax credit, which is for projects listed on the National Register of Historic Places. Anyone who owns a brownfield site that may qualify should seek professional advice quickly, while the act is still in place.

If you think your project qualifies for a brownfields tax credit, contact Warren Kirshenbaum to help gather and document expenses, and to file the necessary paperwork.

This article was written by Robert Calzini, DiCicco, Gulman & Co. LLC with whom we often work.

By Warren Kirshenbaum

Expiration of the payroll tax deduction, changes to the capital gains tax rates, expiration of the Bush-era tax cuts, health insurance mandates, and diverging opinions between Democrats and Republicans on how to reform the Tax Code are creating much anxiety for both business and individual taxpayers alike. Tax issues are of paramount importance to businesses when faced with investment, expansion, or hiring decisions, and in the case of smaller businesses these decisions often flow through to the principals’ tax planning strategies.

Regardless of your political affiliation, the availability and usage of mechanisms that aid tax planning are important economic drivers. This article focuses on highlighting the role of tax credits as an economic engine, rather than their incorrect labeling as “subsidies”, particularly when they originate from the creation of renewable energy. The demise of companies such as Evergreen Solar and Solyndra, which received expensive loan guarantees or other subsidies only to fail spectacularly, costing taxpayers vast sums has only added to the political distaste for subsidies.

Tax credits, are an incentive that allows the outsourcing of governmental functions to the private sector. Tax credits, which allow a taxpayer an offset against taxes due, usually dollar for dollar, or are sale-able in the marketplace create a financing source for projects that otherwise would not exist. There are tax credits for remediation of environmentally contaminated properties, rehabilitation of historic buildings, producing renewable energy, and the creation of affordable rental housing, to name a few. The market for tax credits is fluid and vibrant, and it is important that the market for these tax credits remains strong. Take the conversion of biomass into renewable energy. Technologies that can perform such a conversion create energy and avoid the need to landfill industrial waste, yet these deals are difficult to finance through traditional lending channels. Generating tax credit equity for such ventures, while providing tax planning benefits to buyers of tax credits, such as large corporations, institutions, and individuals frees up businesses to invest in equipment, personnel, upgrades and other business needs that would inevitably be scrapped if these dollars were being paid as taxes.

Warren Kirshenbaum is the president of Cherrytree Group, LLC, Newton, Mass., a tax credit consultant, broker, and syndicator.

...by Warren Kirshenbaum

An interesting transactional focus for year-end which could create some much needed impetus in the renewable energy arena is the expiration of the 1603 Treasury Grant, and the solar depreciation acceleration for 2011, which expire on December 31, 2011. The possible expiration of these valuable incentives should spur, in particular, increased activity in solar installations in order to meet the spending parameters of the grant by the end of December 2011.

An experienced consultant can assist in the 1603 grant process and in tax incentive deals generally. Consultants are also able to piece together financing sources and partners in the solar development marketplace that can be strategically helpful to clients needing to take advantage of tax credit for solar installations.
 
Cherrytree is an innovative real estate and business consulting company that advises business and real estate owners, developers, property managers, and landlords.  

Our services include the representation of clients in the renewable energy area, particularly solar installations and tax credits as well as providing sophisticated value added services to green development projects, i.e. developments that utilize energy efficient development incentives.

For information, assistance or questions regarding the 1603 Tax Credit, Solar Energy Credits, Brownfields Tax Credits or other Commercial Real Estate transactions, contact the Cherrytree Group.

“Sophistication, Value and Follow-Through”

...by Warren Kirshenbaum

As part of $3.5 million in Brownfields grants that EPA is making available for Massachusetts communities, EPA has provided $600,000 for Somerville to clean up the former Kiley Barrel Property site. The funding is part of more than $76 million in EPA Brownfields investments across the country announced this week by EPA Administrator Lisa Jackson to protect health and the environment, create jobs and promote economic re-development in American communities.

EPA Brownfields grant money assists work to reclaim sites including old textile mills, sites containing hazardous substances and petroleum products and other abandoned industrial and commercial properties.  EPA’s Brownfields program encourages redevelopment of America’s estimated 450,000 abandoned and contaminated waste sites.

 “This EPA funding will help strengthen the economic foundation of these communities,” said Curt Spalding, regional administrator of EPA New England’s office. “Cleaning and revitalizing contaminated sites helps create jobs, providing a solid foundation for a community to create new businesses and neighborhood centers, while making our environment cleaner and the community healthier.”

"These federal funds will help transform the Kiley Barrel site, eliminating old contaminants and revitalizing it so that the land can be used for future development. Brownfields grants have had a tremendous impact here in Somerville and all over the country, giving communities the resources they need to revitalize old industrial sites," stated Congressman Michael Capuano.

The $12.55 million in grant and Revolving Loan Fund money awarded by EPA to a variety of New England communities and organization will provide substantial help around the region.  The EPA funding leverages over $46 million of other money to pursue brownfields cleanup and revitalization work. In New England, these projects have created 98 clean up jobs this year as well as 135 redevelopment jobs.

As of June 2011, EPA’s brownfields assistance has leveraged more than $16.3 billion in cleanup and redevelopment funding, and helped create more than 70,000 jobs in cleanup, construction and redevelopment. These investments and jobs target local, under-served and economically disadvantaged neighborhoods – places where environmental cleanups and new jobs are most needed.

Since the beginning of the Brownfields Program, in New England alone EPA has awarded 268 assessment grants totaling $67.1 million, 61 revolving loan fund grants and supplemental funding totaling $65 million and 174 cleanup grants totaling $39.3 million.  These grant funds have paved the way for more than $1.3 billion in public and private cleanup and redevelopment investment and for 8815 jobs in assessment, cleanup, construction and redevelopment.

Some of the money announced today falls under EPA’s brownfields revolving loan funding.  Since 1995, EPA RLF recipients have provided 53 loans and 63 grants in New England totaling more than $29 million for brownfields cleanup. The loan funds have paved the way for more than $189 million in public and private cleanup and redevelopment investment and for 1034 jobs in cleanup, construction and redevelopment.

Information released by the EPA 

by...Warren Kirshenbaum

On an island where the Mill River flows through New Haven sits English Station, a defunct electric power plant once teeming with contaminants.

The 9-acre plant embodies every municipality’s struggle with sites known as Brownfields, abandoned plots where commercial and industrial businesses once operated, mostly at a time when environmental laws were less stringent. Throughout New Haven County, urban and suburban areas alike are grappling with the costly process of reclaiming these eyesores, cleaning up the environmental and health hazards lurking there and finding new uses for the parcels.

English Station is one of 27 Brownfields on a list that cities and towns in Greater New Haven identified to the Connecticut Brownfields Redevelopment Authority as priority sites for reuse. Many are situated near major routes, highways and existing commercial hubs. Some are more isolated.

“It’s really a positive to be on the list because it attracts developers,” said Cynthia Petruzzello, vice president and redevelopment project manager for CBRA.

English Station was once owned by United Illuminating Co. and burned coal and oil from the 1880s until it was decommissioned in 1992. In 2000, UI paid Killingworth-based Quinnipiac Energy $4.25 million to take the plant off its hands.

Quinnipiac Energy set up a $1.9 million fund for remediation but that money has been spent.

The current owner, Evergreen Power, last summer was in talks to sell the plant to First National Development of Bridgeport. At the time, developer Garfield Spencer said his vision for the property was a mixed-use development with 200 rental units, boat slips and street-level retail space.

Spencer did not return a phone call and email seeking comment for this story and land records in the city clerk’s office show no sale has been made.

CBRA is a division of the Connecticut Development Authority. CDA President Marie O’Brien said CBRA is a starting point for entities interested in brownfield reuse projects and works on them with the state departments of Economic and Community Development, Environmental Protection and Public Health.

New Haven Economic Development Director Kelly Murphy said urban centers typically have numerous brownfield sites. Even a dry cleaning business that closes down would be considered a brownfield because of possible chemical contamination.

“The laws of brownfields have changed even since I started my career,” she said.

Robert Bell, assistant director of the state Department of Environmental Protection’s Remediation Division, said the state has 10 to 15 different laws that address the cleanup of hazardous materials.

“Not all contamination is equal,” Bell said, adding that some material stays where it is, other hazards can travel, especially if they leach into groundwater, but others might cause little to no public health risk.

Original article and a list of the Brownfields sites in the Greater New Haven Area can be found at The Register Citizen
By ANGELA CARTER