Financing & Incentives

Commercial Tax Incentives

Certain NYCIDA tax benefits may be available to induce commercial companies to undertake major capital investments that result in the creation and retention of significant levels of jobs within New York City. 

Program Description

The terms and conditions pursuant to which these IDA tax benefits are provided will be evaluated on a case-by-case basis and tailored to meet the needs of both the City and the recipient.

Teams are established for each potential project, and may include: representatives from across NYCEDC; other NYC agencies; the State; and Federal program representatives.

The decision to provide benefits will be made after a series of rigorous quantitative and qualitative analyses. The NYCIDA may offer the following benefits:

  • Sales and use tax exemptions
  • Mortgage recording tax waivers
  • Real estate tax exemptions 

Eligible Projects

To qualify as a commercial project, a project must satisfy the following basic requirements:

  • Demonstration of the need for benefits
  • Substantial capital investment, together with likely retention and growth of employment as a result of the project
  • Significant enforceable commitments to the City in return for benefits. NYCIDA benefits are discretionary and viewed by the City as a last resort to encourage a desired project.

All NYCIDA transactions are overseen by the NYCEDC President and Deputy Mayor and are subject to the approval of the NYCIDA Board. 

Typical Project Attributes

A typical commercial project involves the following components:

  • Relocation of headquarters and major operations into NYC
  • Substantial job growth (in excess of 500 new jobs)
  • Large capital investment
    • Construction of new building to house growing work force
    • Fit-out of new office space to house new operations
    • Long-term commitment (in excess of 15 years) 

Sample Project

Example of a "Typical" Commercial Tax Incentives Project

  • A major banking institution relocates operations from outside New York State into the City and consolidates its new and existing operations into a Class A office facility that will be constructed for the Bank's tenancy
  • Capital expenditures
    • Construction and fit-out - $500 million
    • Annual machinery and equipment - $10 million
  • Large capital investment
    • Construction of new building to house growing work force
    • Fit-out of new office space to house new operations

Project Commitments

Jobs

    • 1,000 current jobs 
    • 500 relocated jobs
    • 700 new growth jobs within five years 

Occupancy

At least 500,000 SF of the newly constructed facility for the project term

Project term of 15 years

Pre-Application Process

Step 1: Initial Meeting

Companies seeking commercial tax incentives should schedule an initial meeting with NYCEDC staff.

Step 2: Information Submission

Following the initial meeting, staff will continue the information that must be submitted for evaluation, including:

  • Existing lease terms and status potential real estate alternatives, with detailed cost projections
  • Development and occupancy cost projections for the proposed project
  • Current and projected employment
  • Employee compensation
  • Financial condition

Additional information may be required as the analysis progresses

Step 3: NYCIDA Review

From information submitted, NYCIDA staff will determine:

  • Whether, and, if so, how the project could proceed without incentives
  • Other incentives that may be available
  • If NYCIDA benefits are required, and if so, in what amounts and pursuant to what structure

In evaluating benefit applications, NYCIDA staff will consider the following potential benefits to the City:

  • The number of full-time jobs that the company will retain, recruit, and/or create
  • The value of private-sector investment that will result from the project
  • The incremental economic impact (e.g. direct and indirect taxes) of the company's proposed project

NYCIDA staff will also consider how the proposed project will further the City's key economic development objectives:

  • Growth of key sectors
  • Diversification of the City's economic base
  • CBD development (i.e., whether the project fosters economic growth and sectoral diversification across the 5 boroughs)
  • Rebuilding of Lower Manhattan

The NYCIDA Agreement

Approval Process

Should NYCIDA make a preliminary decision that benefits are warranted, a formal application will be distributed to the applicant.

Once approved, a project will be in the form of a multiyear contractual arrangement between the NYCIDA and the company (with the company permitted to be a tenant and/or developer).

Deal will be structured to ensure company performance, with most incentives to be earned through job growth and subsequent maintenance.

Thereafter, the company will be required to report to NYCEDC annually showing:

  • City-wide employment and job growth 
  • Occupancy 
  • Capital expenditures and benefits received
  • Other information - insurance, employee compensation, etc.

Agreement Maintenance and Fees

Maintenance

During the term of an NYCIDA agreement, if the company falls below its required employment commitment due to attrition, it will be subject to:

  • A partial to full forfeiture of future benefits, and potentially recapture of previously taken benefits, depending upon the severity and timing of the job losses (with, usually, a cushion provided for minor cyclical changes in headcount).

In each year the company remains below the required commitment, there will be further forfeiture and, if necessary, recapture.

During the term of an NYCIDA agreement, if the company relocates jobs out of NYC, it will be subject to:

  • A partial to full forfeiture of remaining benefits,
  • Up to a two times recapture of benefits received, depending on severity and timing, and
  • Potential termination, depending on severity

Fees

The amount is dependent upon the complexity of the final structure of the deal and the benefits awarded.

  • For example, in Yr. 1 of a transaction that includes real estate tax benefits, such costs often exceed $1 million.
  • Meanwhile, in Yr. 1 of a small, sales tax exemption-only transaction, such costs could total approximately $60,000, including:
    • Application fee; Project fee:$20,000
    • NYCIDA Outside Council Fee $20,000
    • Company’s legal fees: $20,000
    • Additional cost: Ongoing Annual Compliance Fees: $37,500 
    • Additional cost: Periodic Audits: $10,000

Contact Info

To learn more about Commercial Tax Incentives, or to tell us about your big project, please contact:

Shin Mitsugi
Vice President
NYCEDC
(212) 312-3571