New York state tax loophole put millions in builders' pockets
- A New York state law intended to entice property owners into making renovations and modernizing their buildings has led to a tax break boon in the millions for some who have allegedly found loopholes in the regulation, according to Syracuse.com.
- The 485-a exemption gives tax breaks for up to 12 years to developers that restore and repurpose older or underused buildings in order to pump up the local economy and encourage urban, mixed-use development. The law, which must be authorized by municipalities before local projects are eligible, is ambiguous and is left open to interpretation by local assessors, which has left the door open to abuse, argue some Syracuse, New York, officials. In one of the most extreme cases, the owner of a Syracuse apartment complex installed three vending machines in order to qualify for the break and shaved $527,000 off its annual property tax bill. Another property owner was able to create a 12-year tax savings of $1.3 million by renting two basement rooms to a massage therapist.
- Syracuse taxpayers spend about $5 million annually to subsidize 485-a properties. City officials said the economic benefits generated by developers who follow the intent of the regulation eclipse the tax revenue lost to those who stretch its meaning. However, according to Syracuse.com, investigation into 485-a abuse has led Syracuse assessors to begin reevaluating whether some developers who received a property tax exemption are truly eligible.
Many cities and states are eager to hand over property tax breaks and other incentives to developers and corporations that promise to bring jobs and other economic benefits to local communities. The prospect of strengthening local and regional manufacturing economies is especially attractive to officials who have seen that sector lose steam and who are always eager to create up to thousands of temporary construction jobs.
Earlier this month, Green Bay, Wisconsin-based Green Bay Packaging announced that it would invest $500,000 to expand its local operations through construction of a $475 million recycled paper mill and a $25 million expansion of its shipping container division.
Construction is expected to support 3,000 jobs, inject $257 million into the regional economy and generate approximately $10 million in extra revenue for the state, so the Wisconsin Economic Development Corp. is expected to provide about $60 million in tax breaks to help Green Bay Packaging's initiative along.
However, like other projects in Wisconsin and around the country, the company must first create the promised jobs and make the necessary financial investments in order to receive state incentives.
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