1. MAXIMIZING NEW YORK STATE AND LOCAL FINANCIAL INCENTIVES FOR CROSS-BORDER TRANSACTIONS September 19, 2012 Pietra G. Lettieri, Esq. Public Finance / Economic Development and Tax Law Practice Groups Harris Beach PLLC 726 Exchange Street, Suite 1000 Buffalo, New York 14210 plettieri@harrisbeach.com (800) 685-1429 (716) 200-5112 (Direct) (716) 200-5215 (Fax)

2. Financial Incentives Planning  Structured Correctly–  Obtain tax exempt bond financing  Significantly reduce or eliminate NYS Income Tax Liability  Eliminate NYS Sales Tax liability for project related costs  Significantly reduce or eliminate NYS Real Property Taxes for a fixed amount of time  Obtain NYS refundable credits of 10% to 50% of certain remedial costs and capital investments on “contaminated” property  Obtain grants and low-cost financing through NYS programs 2 Pietra G. Lettieri, Esq. (716) 200-5112 © Harris Beach PLLC, 2012

3. Pietra G. Lettieri, Esq. (716) 200-5112 © Harris Beach PLLC, 2012 Financial Incentives – The Usual Suspects  Federal and New York state Incentives  Industrial Development Agency Incentives  New York state Excelsior Program Incentives  NYS Brownfield Cleanup Program Incentives  Historic Tax Credits – Federal and State  NYS ESD Capital Grant  New York Power Authority and NYSERDA incentives  Enterprise Communities  Empowerment Zone/Renewal Community Program  New Markets Tax Credit Program 3

4. Pietra G. Lettieri, Esq. (716) 200-5112 © Harris Beach PLLC, 2012 Financial Incentive Planning Tip  Plan early – Get a team in place ASAP and Establish Timelines  Attorney  Accountant  Architect/Engineer  Lobbyist  Project Manager/Owner’s Representative  Community Relations Consultant  Identify All Incentives Up-Front – Best to identify/analyze all benefits together  Overlap: Overlap financial incentive planning with site acquisition, permitting, lending considerations and timing  Project description for permits and incentives need to match  Need to tell a good story and get Community and NYS buy-in Job Creation Investment New Real Property Taxes Wealth Creation 4

5. Pietra G. Lettieri, Esq. (716) 200-5112 © Harris Beach PLLC, 2012  Note:  Empire Zone program sunset in June of 2010 and has been replaced by Excelsior Jobs Program  Industrial Development Agencies no longer have the ability to undertake civic facility projects  All existing Business Tax Credits are deferred for taxpayers with greater than $2 million in credits 5

6. Pietra G. Lettieri, Esq. (716) 200-5112 © Harris Beach PLLC, 2012 Local Incentives: Industrial Development Agency  Straight Lease or Bond Financing (Federal Tax Exempt Bonds)  Use of Local Development Corporations for Not-for-profits  Sales Tax Exemption (local and state) on Build-Out Only  Mortgage Recording Tax Exemption  Tax Abatement – Payment in Lieu of Taxes (“PILOT”)/tax stability 6

7. Pietra G. Lettieri, Esq. (716) 200-5112 © Harris Beach PLLC, 2012 New York State Incentives – ESD  Empire State Development ("ESD") is the trade name under which New York state offers benefits that have been statutorily authorized under the Office of Economic Development, Job Development and Urban Development Corporation (d/b/a Empire State Development Corporation)  Through ESD, the State can provide direct loans, capital grants or interest rate subsidy grants that result in low-cost financing for the acquisition, construction, renovation or improvement of real estate, including both land and buildings, as well as the acquisition of machinery and equipment and related soft costs. Direct loans are provided at below-market rates to provide a lower overall blended rate with conventional sources. Interest rate subsidy grants that reduce the costs of borrowing from a conventional lender are also available.  Eligible recipients of these loans and grants include industrial companies such as manufacturers, service providers, assemblers, and distributors, and local development entities on their behalf, as well as headquarter facilities for a broader spectrum of businesses  ESD has implemented the New York State Consolidated Funding Application (CFA), a single application for multiple sources of state funding. New York state is soliciting grant applications for funding to advance the priorities of the Regional Economic Development Councils (REDC). The CFA can be found at https://apps.cio.ny.gov/apps/cfa/index.cfm (Note that at press time, the CFA was being revised) 7

8. Pietra G. Lettieri, Esq. (716) 200-5112 © Harris Beach PLLC, 2012 New York State Incentives – Excelsior Program Incentives  Replaces the Empire Zone Program (Expired June, 2010)  Purpose – to encourage the expansion in, and relocation to, New York of businesses in certain growth industries  Credits against personal, corporate, bank and insurance franchise tax  10 year benefit period JOB GROWTH TRACK To Be Eligible – a business must predominately operate in one of the following Strategic Industries and meet job creation thresholds: 1. Financial Services center/back office [100 Net New Jobs (“NNJ”)] 2. Manufacturing (25 NNJ) 3. Software development (10 NNJ) 4. Scientific R&D (10 NNJ) 5. Agriculture (10 NNJ) 6. Back office expansion (150 NNJ) 7. Distribution center (150 NNJ) 8. Significant growth industry (to be designated by the Commissioner) 9. Regionally Significant Project - a business making significant capital investment in the state creating 20-500 net new jobs (not limited to any particular industry) 8

9. Pietra G. Lettieri, Esq. (716) 200-5112 © Harris Beach PLLC, 2012 INVESTMENT TRACK If a business operating in an industry above cannot meet the job creation requirements, it can still qualify if: 1. It has, and will retain, at least 50 FTEs, 2. Makes a significant capital investment and 3. Passes a cost-benefit ratio of 10:1 (ratio of total investment, wages and benefits/tax credits) 9 New York State Incentives – Excelsior Program Incentives

10. Pietra G. Lettieri, Esq. (716) 200-5112 © Harris Beach PLLC, 2012 Excelsior Jobs Tax Credit  Based on salary paid for each net new job  6.85% of wages per NNJ  New to the state  Refundable Excelsior Investment Tax Credit  Equals 2% of cost basis of a qualified investment  Refundable Excelsior Research and Development Tax Credit  Equals 50% of Federal R&D tax credit  Refundable Excelsior Real Property Tax Credit  Must be located in an Investment Zone or be an RSP  Credit equals 50% of RPT paid in year prior to year accepted into Excelsior Program  Credit is 40% in year 2, 30% in year 3, 20% in year 4, and 10% in year 5  Refundable 10 New York State Incentives – Excelsior Program Incentives

11. Pietra G. Lettieri, Esq. (716) 200-5112 © Harris Beach PLLC, 2012 BCP Tax Benefits Three Refundable New York State Tax Credits: 1. Brownfield Redevelopment Tax Credit (BRTC)  Refundable investment credit based on cleanup and build out and equipment costs (site prep, groundwater treatment, tangible property) 2. Tax Credit for Remediated Brownfields (TCRB)  Refundable Real Property Tax Benefit 3. Environmental Remediation Insurance Credit (ERIC)  Refundable insurance premium credit 11

12. Pietra G. Lettieri, Esq. (716) 200-5112 © Harris Beach PLLC, 2012 BCP: BRTC is the Most Significant Refundable NYS Tax Credit  2008 BCP Brownfield Redevelopment Tax Credit Amendments  Recall BRTC consists of (1) Site Preparation, (2) Tangible Property, and (3) Groundwater Remediation Component For Projects Accepted After June 23, 2008: 1) Amendments to calculation of BRTC Site Preparation/GW Component 2) Amendments to calculation of BRTC Tangible Property Component 12

13. Pietra G. Lettieri, Esq. (716) 200-5112 © Harris Beach PLLC, 2012 BCP Amendments to BRTC Tax Credits Changes to BCP Site Prep/Ground Water Tax Credit  Site Preparation and Groundwater Remediation Component increased from 10% - 22% of such costs to 22% - 50% Cleanup to Soil Cleanup Objectives as follows: Use Unrestricted Residential Commercial Industrial Track 1 50% N/A N/A N/A Tracks 2 and 3 N/A 40% 33% 27% Track 4 N/A 28% 25% 22% RESULT – More tax credit available/generated for cleaner cleanups 13

14. Pietra G. Lettieri, Esq. (716) 200-5112 © Harris Beach PLLC, 2012 Message – Under the New BCP, the Key is Understanding and Maximizing Site Preparation Costs  Note: Site Preparation Costs Definition Remains Unchanged: The term "site preparation costs" shall mean all amounts properly chargeable to a capital account, (i) which are paid or incurred in connection with a site's qualification for a certificate of completion, and (ii) all other site preparation costs paid or incurred in connection with preparing a site for the erection of a building or a component of a building, or otherwise to establish a site as usable for its industrial, commercial (including the commercial development of residential housing), recreational or conservation purposes. Site preparation costs shall include, but not be limited to, the costs of excavation, temporary electric wiring, scaffolding, demolition costs and the costs of fencing and security facilities. Site preparation costs shall not include the cost of acquiring the site and shall not include amounts included in the cost or other basis for federal income tax purposes of qualified tangible property, as described in paragraph three of this subdivision. NY Tax Law Section 21(b)(2). 14

15. Pietra G. Lettieri, Esq. (716) 200-5112 © Harris Beach PLLC, 2012 BCP: Site Preparation (level of cleanup) Component is KEY: List of Activities Potentially Qualifying as Site Preparation Activities  Barricades/Fencing  Erosion Control  Post work/signs  Protection of existing utilities  Demolition or removal of utilities  Removal of debris  Demolition of structure  Demolition of Foundation  Remove and relocate rail lines  Dust Control  Demolition of roadways  All soft and hard costs (engineering, architectural, consulting, legal, accounting) related to BCP  New Roadway construction/access Roads  Brush removal and disposal 15  Topsoil fill, stripping and stockpiling  Handling processes related to earth materials  Rough site grading  Disposal of regulated waste  Interim remedial measures  Final remediation measures  On-site management of solid non-hazardous wastes  Community is monitoring during earthwork phases  Stormwater management during construction

16. Pietra G. Lettieri, Esq. (716) 200-5112 © Harris Beach PLLC, 2012 BCP Amendments to BRTC Tax Credits Changes to BCP Tangible Property Credit Component 1) BRTC for Tangible Property Credit Component increased by additional 2% to maximum 24% of eligible costs if project is within a BOA (Range 10 to 24%) 2) BRTC Tangible Property Credit Component calculated in same manner 3) BRTC Cap – BRTC that is claimed cannot exceed lesser of: i) For non-manufacturing project: $35mm or Product of (Site Prep and groundwater remediation costs) x (3) ii) For manufacturing project: $45mm or Product of (Site Prep and groundwater remediation costs) x (6) SUMMARY - 22% - 50% refund of site prep/cleanup - $3 or $6 refund for every $1 spent on site pre/cleanup 16

17. Pietra G. Lettieri, Esq. (716) 200-5112 © Harris Beach PLLC, 2012 New York Historic Rehabilitation Tax Credit  Used with Federal Historic Tax Credit  Equals 20% of Qualified Rehabilitation Expenditures (20% for Federal purposes and 20% for State purposes)  Capped at $5,000,000  Building must be listed on State or National Register of Historic Places or listed as a building contributing to the character of the historic district in which it resides  Must be located in a Distressed Federal Census Tract 17

18. Pietra G. Lettieri, Esq. (716) 200-5112 © Harris Beach PLLC, 2012 Thank You Pietra G. Lettieri Public Finance Practice Group For more information, visit www.harrisbeach.com and download our Economic Development Handbook 18