On October 31, Governor Dannel Malloy signed into law Connecticut’s bipartisan budget bill, which provides for a tax incentive plan to support brownfields remediation and reuse. The new plan, called the 7/7 Brownfields Program, aims to provide a series of income, sales, and property tax incentives to property owners for redeveloping and utilizing brownfields that have been abandoned or underutilized.
Connecticut defines a “brownfield” as “any abandoned or underutilized site where redevelopment, reuse or expansion has not occurred due to the presence or potential presence of pollution in the buildings, soil or groundwater that requires investigation or remediation before or in conjunction with the redevelopment, reuse or expansion of the property.” A “7/7” site is defined under the new law as “real property redeveloped or utilized or proposed to be redeveloped and utilized by a 7/7 participant.” A 7/7 participant is an eligible brownfield property owner whose application submitted pursuant to the 7/7 Brownfields Program is approved by the commissioner. To be eligible, a 7/7 participant cannot be responsible for pollution on the property, so the 7/7 program does not include a liability relief provision.
The tax incentives for remediating and redeveloping a brownfield property provide participants in the 7/7 program seven years’ tax credits for taxes due under chapters 208 (Corporation Business Tax) and 229 (Income Tax). A 7/7 participant that initiates business operations at a 7/7 site will not be required to pay General Statutes chapter 219 taxes (Sales and Use Taxes) for any items purchased in the first seven years of the business, provided the items are purchased for use in the ordinary course of business at the site. Finally, the municipality in which the 7/7 site is located must use the assessed value of the site for five years following the date that a 7/7 participant is approved for a building permit to begin construction on the site. For the 8th to 14th years of operation, the business may deduct 8.57% of qualifying remediation expenditures from its Chapter 208 Corporation Business Tax and Chapter 229 Income Tax.
The 7/7 program was established within the Department of Economic and Community Development (DECD) and is modeled in part after initiatives in Wallingford and Milford to engage vocational programs with local manufacturers.
To be eligible for the new program, a 7/7 participant must apply to DECD with:
(1) A description and the proposed use of the real property;
(2) A certification from the eligible party that the property is a brownfield, or from the local municipality in which the property is located stating that it has been abandoned or underutilized for ten years or more;
(3) A plan including the anticipated workforce needs and training requirements for remediating and revitalizing the property, which the property owner must submit to local high schools and regional-community technical colleges;
(4) A commitment by the eligible owner to hire at least 30% of its workforce from students enrolled in any programs developed in notified schools and colleges;
(5) The relevant municipality’s written support of the 7/7 application; and
(6) Any other information the commissioner deems necessary.
The 7/7 program instructs DECD to promulgate regulations to implement the new program, in consultation with the Department of Revenue Services. Given the ambitious scope of the 7/7 program, significant refinements are likely in 2018, in the form of regulations or policy guidance from DECD. Brownfield tax incentive programs in other states have also evolved through amended legislation after early steps to implement the program.
The 7/7 Program builds from Connecticut’s existing Brownfields Programs, which offer a municipal grant program to municipalities and municipal entities only, and a targeted brownfield development loan program that provides low-interest loans to applicants seeking to develop brownfields property.