Tax Abatement Programs

Once a project is determined eligible, you can apply for tax abatement programs administered by the Amherst IDA (please keep in mind state and local entities often provide additional investment incentives -- these can be found on the Other Incentives Page). Eligible companies frequently use installment sales and lease transactions to [1] purchase and improve land, [2] construct new facilities, [3] acquire, renovate and expand existing buildings, and [4] acquire and install new machinery/equipment. The benefits of entering into these transactions include:Sales Tax Exemption, Mortgage Recording Tax Exemption, Industrial Revenue Bonds, and Property Tax Abatement.

For An Estimate of Potential Benefits, use the Erie County Benefits Calculator

SALES TAX EXEMPTION

The combined New York State and Erie County sales tax is eight percent (8.75%) on the price of goods and services subject to such tax. Approved projects assisted through the Amherst IDA are exempt from payment of sales tax. Thus, construction materials, equipment and fixtures purchased through the agency in connection with an approved project will not be subject to state and county sales tax.

MORTGAGE RECORDING TAX EXEMPTION

The New York State Mortgage Recording Tax for commercial property is one percent (1% of the principal amount of the bond/mortgage). Approved projects assisted through the Amherst IDA are exempt from payment of mortgage recording tax.

INDUSTRIAL REVENUE BONDS

The Amherst IDA has statutory authority to issue industrial revenue bonds (IRB). Financial institutions such as banks, pension funds, and insurance companies may purchase the bonds issued by the Amherst IDA. The interest rates and other term/conditions of the transaction are all established by the purchasing institution and are backed by the credit of the borrower, not the Amherst IDA. The Amherst IDA does not lend money.

There are two types of IRBs:

Tax-Exempt IRBs - These bonds are exempt from federal income tax. Tax-exempt bonds can only be issued for manufacturing facilities and facilities operated by not-for-profit organizations.

Taxable IRBs - Although not exempt from federal income tax, these bonds are exempt from state and local taxation.

Before an IRB can be issued, the following requirements must be met by the applicant or beneficiary:

• The project applicant must establish a demonstrable need for the project and services to be offered by the project occupant.
• The project applicant must establish how the project would not be economically feasible without Amherst IDA assistance.
• The project must not cause any substantial disruption of existing employment in facilities of similar nature in the area.
• Project applicant must demonstrate the project creates and/or retains substantial employment in the area.
• If the project occupant(s) is/are relocating from another municipality in New York State, it must be clearly established that Amherst IDA assistance is necessary to: [1] discourage the project applicant/occupant(s) from moving out of New York State or [2] is reasonably necessary to preserve the project applicant/occupant's competitive position within its industry.

Supplemental Bonds may also be used when additional funds are needed for cost over-runs or other unanticipated construction costs. They are typically used for projects that are less than one year old and involve the original lender.

PROPERTY TAX ABATEMENT

In New York State, real property owners are generally subject to a real property tax that is based upon the assessed valuation of such real property and the improvements thereon. Because an industrial development agency (IDA) is a public benefit corporation, it is exempt from payment of real property taxes levied upon any real property to which it holds title (GML §874 and RPTL §412-a). However, such IDA-owned property remains subject to special district taxes.

When an IDA takes title to real property as the result of a project, that property immediately becomes exempt from sales tax, mortgage tax, and real property tax. However, despite the tax exemption, in order to generate the revenue necessary to cover the costs of basic services delivered by the community, an IDA will usually enter into a Payment in Lieu of Taxes (PILOT) Agreement with a project developer in regard to real property tax. Typically, such PILOT Agreement will require the developer (and its successors) to make payments to a municipality and/or school district in accordance with a graduated scale over a certain period of time, based upon a percentage of the taxes which would otherwise be due on the value-added portion of the tax assessment. The real property tax abatement for each project classification applies only to the assessed value added by construction or renovation of the project. There is no real property tax abatement on the pre-improved assessed value of the real property. Such PILOT Agreement will also require a project developer to pay any and all special district assessments.

The schedule used to calculate PILOT payments, and the amount of such payments, is not set forth in the statute. Nevertheless, PILOT payments must be made in accordance with a written PILOT policy formally adopted by the IDAs of Erie County. Any deviation from a PILOT policy requires notice to the affected taxing jurisdictions and must be based upon a demonstrable need for such change. In addition to notifying the affected tax jurisdictions, the Agency shall provide written notice to all other IDAs of Erie County of the proposed deviation and invite written comments. Based upon the comments received from the affected tax jurisdictions and other IDAs, the Agency shall make its decision and provide a written explanation as to its decision.

The Countywide IDA PILOT policy classifies projects by use and occupancy. The PILOT policy for each classification requires payments to be made in accordance with a graduated scale, representing tax payment of increasing percentages that would have been due without abatement, based on the assessed value added to the project by new construction or renovation. Since payments are based upon the assessed value of the project, there is no need for real property appraisals to be performed as a part of an application for tax exemption.

Below is a listing of current PILOT schedules for each project classification:

Use this online calculator (hosted at Erie County IDA) to figure potential property tax, sales tax, and mortgage tax savings: www.ecidany.com/estimator.asp

Acquisition of Existing Facilities
Projects involving the acquisition, improvement or renovation of an existing facility. IDAs will separate the pre-improvement assessed value of the property from the increase in the assessment as a result of improvements or renovations. The firm acquiring the facility will continue to pay the full equivalent of tax on the pre-improved facility, including any subsequent increase in taxes resulting from revaluation and/or tax increase. The value-added assessment will be subject to the applicable PILOT schedule with respect to the use of the facility as set forth above.

Hotels/Motels
IDA assistance to hotels and motels will be restricted to capital costs associated with the renovation or rehabilitation of existing hotel/motel properties within Erie County. Hotel/motel projects are eligible for mortgage tax exemption (if applicable) and sales tax exemption on capital costs only. If renovations cause an increased assessment, then project applicant will be eligible for abatement in accordance with §485-b of the New York State Real Property Law.

Neighborhood Revitalization/Redevelopment
As a general rule, IDAs are restricted in assisting retail projects (NAICS 2-Digit Sectors 44 - 45 Retail Trade) and medical facilities such as doctor's offices, clinics and laboratories (NAICS 2-Digit Sector 62 Health Care and Social Assistance). However, in an effort to revitalize and renovate neighborhood business districts throughout Erie County, IDAs will consider such projects for assistance if they are located in (or contemplating relocating to) areas of Erie County that are designated by the respective municipal legislatures as "Neighborhood Redevelopment Areas." In order to qualify for eligibility, municipalities within Erie County must first develop neighborhood redevelopment strategies and designate those areas for which IDA assistance may be made available. It is further contemplated that such municipal redevelopment plans be coordinated county-wide to create a comprehensive Erie County Neighborhood Redevelopment Strategy. Facilities qualifying for assistance in a redevelopment area will receive a partial property tax abatement equivalent to the abatement permitted under §485-b of the New York State Real Property Law and sales tax exemption on all capital costs. The project developer must pay all special district charges. Additional benefits may be available if the redevelopment area is also an Empire Zone.

Life Care Communities
Life Care Communities (also known as Continuing Care Retirement Communities) are 501 (c)(3) corporations entitled to the standard Ten Year PILOT. A Special/Custom PILOT will be considered when such consideration is needed to obtain project approvals from New York State (including the Department of Insurance).

Special/Custom PILOT
The IDAs of Erie County will consider Special/Custom PILOTs in three limited situations. Upon completion of a comprehensive, strategic urban redevelopment plan, the IDAs may reconsider this policy:

1. Significant "high-impact" economic development projects where such consideration is needed for economic viability of the project.
2. In the Cities of Buffalo, Lackawanna, and Tonawanda, special/custom PILOTs could be utilized with projects involving substantial renovation of existing facilities or demolition of existing structures accompanied by construction of new facilities on the cleared site. This will enable urban projects involving substantial renovation/demolition to be cost competitive with other areas of Erie County.
3. Projects located in approved New York State Empire Zones (currently existing in the Cities of Buffalo, Lackawanna, and Tonawanda and the Town of Tonawanda) when the project developer has elected to not become Zone certified.