Development License and Brownfields Tax Credits
Q: Does a Holder of a Development License Qualify for Brownfields Tax Credits?
A: In some cases, a municipality that owns property may enter into a license agreement with a for-profit or not-for-profit developer that allows the licensee (developer) to construct housing (typically) on the city-owned property. Following completion, the housing would be transferred into a newly-created entity (e.g., condominium association) that would become the owner of the real estate.
Often, especially for parcels in Boston or other long-developed cities (Salem, New Bedford, Gloucester, and many others), site development necessarily includes an environmental component and remediation.
In such a scenario, the question arises as to whether the developer may file for a state Brownfields Tax Credit upon reaching a Permanent Solution or Remedy Operation Status (ROS).
The Massachusetts Department of Revenue (DOR) has advised Cooperstown Environmental that in such a scenario the seller generally cannot qualify for tax credits because a license or development agreement typically does not convey a leasehold interest. The tax credit statute requires that the applicant be the owner or operator of the property. Therefore, in the scenario set forth here, the seller could maintain eligibility by entering into a lease with the municipality during the cleanup.
Parties contemplating the proposed arrangement would be well-advised to seek expert assistance to ensure that eligibility is maintained, especially where significant monies have already been expended on the cleanup.
To read more about the topic of whether Brownfield credits are taxable, see our extensive blog post at: http://cooperstownenv.com/tax-implications-of-buying-using-selling-massachusetts-brownfields-tax-credits/
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