The Industrial and Commercial Abatement Program (“ICAP”) provides real estate tax benefits for commercial property development within New York City. The program is authorized by State law but managed by the New York City Department of Finance. The City recently issued a proposed set of rules for the ICAP program and the public comment period for those rules has just been completed (Link). The ICAP law went into effect after the sunset of the former ICIP benefit (“Industrial and Commercial Incentive Program”) in 2008. The law authorized the City to adopt rules for the administration of the program but the Department of Finance has not proposed any rules until now.
As a general overview, ICAP allows a tax abatement for industrial and commercial buildings that are built, modernized, expanded, or otherwise physically improved. In order to qualify for the program, the applicant must meet the Minimum Required Expenditure (“MRE”) which is set at 30% of the building’s taxable assessed value. The benefits are calculated using a formula that references the change in taxable value for the building before construction is started versus the taxable value after construction is completed. The length of benefit period and whether the benefit can increase over time as the property’s assessment increases (“inflation protection”) are dependent upon a host of factors including the intended use of the building (commercial or industrial), how much (if any) retail space is in the structure, and the property’s location within the City.
The most important rule for anyone considering ICAP benefits for their property is that the preliminary ICAP application must be filed BEFORE obtaining a building permit or beginning construction if no permit is required. Failure to file the preliminary application prior to receipt of the first building permit (or start of construction) will disqualify the property from receiving ICAP benefits.
If you are considering any type of commercial property development in New York City and are interested in learning more about ICAP benefits, I am available to discuss the matter at your convenience. Even if your property is not within the City of New York, your project may qualify for tax benefits under another program such as 485-b. Regardless of the location of the property, you should contact counsel before obtaining any work permits or beginning construction so that you benefit options can be discussed.