A variety of public benefit corporations have been established on behalf of the municipalities in New York State to facilitate development projects and promote economic development within a municipality.  One example is Industrial Development Agencies (IDAs).

The Ulster County Industrial Development Agency (UCIDA) was formed to promote, encourage, attract and develop job and recreational opportunities, economically sound commerce and industry in cities, towns, and villages throughout Ulster County.  The UCIDA provides various types of financial assistance in connection with the development of a project, including:

• Issuance of tax exempt or taxable bonds;
• Real estate tax abatements;
• Sales and use tax exemption; and
• Exemption from mortgage recording tax.

The IDA may also issue tax exempt bonds for projects on behalf of hospitals, universities, and not-for-profit corporations which qualify as Section 501(c)(3) organizations under the Internal Revenue Code and to finance certain manufacturing facilities (under $10,000,000), retirement facilities, solid waste disposal facilities and multi-family housing facilities.

Real property owned by the IDA, or under the jurisdiction and control of the IDA, is exempt from real property taxes.  Customarily, the IDA requires a project proponent to enter into a payment in lieu of tax agreement (“PILOT”).  While real property owned or controlled by an IDA is not subject to ad valorem real property taxes, it is still subject to special assessments and user fees.  The IDA can offer a ten-year real property tax incentive formula that can save the applicant property tax costs.

Another benefit of financing a project through the IDA is that materials purchased by or in the name of the IDA and incorporated into the project are exempt from sales and use tax.  Also financing a project through the IDA will exempt a mortgage from the mortgage recording tax.

The IDA also promotes economic growth through “straight lease” or “sale/leaseback” transactions.  In this type of transaction, a company will transfer title to real property on which a project is be constructed to the IDA and the IDA will then lease back or sell the property back to the company.  The company uses conventional bank financing to finance the cost of the project and the IDA joins in the mortgage to exempt it from mortgage recording tax.  In addition, in straight lease transaction, a company may also obtain a PILOT and sales tax exemption.

For more information about the tax benefits and financial savings available through the IDA visit www.ulsterny.com or contact Peter Gallagher, Director of Business Development, at 845-338-8840.