Category Archives: Uncategorized

Solar and Wind PILOTs

Solar and Wind Energy PILOTs – Recent Changes to Appraisal Methodology Further Support Renewable Energy Development

The ever-growing trend of supporting and promoting clean energy to combat the negative effects of climate change includes the State of New York promulgating a standard appraisal methodology for solar and wind energy systems with a nameplate capacity equal to or greater than one megawatt. The standard appraisal methodology, known as the discounted cash flow approach, was added to the New York State Real Property Tax Law by new Section 575-b in 2021 as part of the State budget. Until recently, however, implementation of Section 575-b has been on hold due to a lawsuit filed by a collection of individual towns from Schoharie County. Noncompliance with the procedural requirements of the State Administrative Procedures Act (“SAPA”) was the primary basis for the petitioners’ challenge to the assessment model. In response, Section 575-b was further amended by the Legislature in the 2023 State budget to clarify that the appraisal model is authorized without regard for the SAPA. The parties entered a Stipulation of Discontinuance in May and the Department of Taxation and Finance posted a notice that the standard appraisal model is now in effect.

The Department of Taxation and Finance, in consultation with the New York State Research and Development Authority (“NYSERDA”) and New York State Assessors Association (“NYSAA”), will annually update the appraisal model. It remains to be seen what the year-over-year impact of the standard appraisal model will be. Indeed, the Department of Taxation and Finance acknowledges that the renewable energy industry is evolving and changing, and the intent of the model is to reflect those annual changes. But it appears that the immediate effect is a reduced valuation for solar projects, and correspondingly, a reduction in the amount of taxes and Payments in Lieu of Taxes (“PILOT”) that can be collected.

Continuing to financially incentivize renewable energy development is one of the most effective ways for the State of New York to achieve a green energy future and combat climate change.

Real Property Tax Law Section 487 automatically exempts solar and wind energy systems from taxation for a period of fifteen years unless the taxing jurisdiction, i.e., a county, local municipality, or school district, opts-out pursuant to RPTL Section 487(8), rendering the solar or wind energy system fully taxable. If a taxing jurisdiction has not opted-out, they can require a PILOT. However, RPTL Section 487(9) states that the PILOT payment cannot exceed the amount that would otherwise be payable if the green energy facility was fully taxable. Based on the foregoing, if the appraisal model continues to reduce the taxable value of solar projects, it will continue to support and incentivize the development of more facilities and help the State achieve the renewable energy benchmarks established by the Climate Leadership and Community Protection Act (CLCPA).

Cuddy & Feder’s attorneys are experienced in every stage of the renewable energy siting process, including land acquisition and leasing, SEQRA, Site Plan, Special Permit and Variance approval, as well as PILOT negotiations pursuant to the recently enacted standard appraisal model.

Unmarked Burial Site Protection Act – New York State Laws re: Native American Unmarked Graves

Unmarked Burial Site Protection Act Sparks New Considerations for Development Community

On May 2, 2023, the New York State Legislature passed a new law, the “Unmarked Burial Site Protection Act,” that for the first time regulates Native American remains and funerary-related artifacts found on private land. This law was incorporated into the State’s recently adopted FY 2023-2024 budget, which was then signed by Governor Kathy Hochul. The new law represents a significant change to New York’s regulatory approach, as there was no previous requirement that such remains and artifacts found on private property be reported to the State (such limits only applied to projects on public land and publicly-funded projects). It is notable that last year, Governor Hochul vetoed an almost-identical proposed law, despite the State legislature passing it almost unanimously, going on record to state that she was seeking to balance property interests and grave protection.1 The former and recently-adopted law were drafted with the input of the Shinnecock and Unkechaug Indian Nations, and some form of the law has been proposed for over 20 years.2

By passing the Unmarked Burial Site Protection Act, New York State is sending a powerful message about the importance of respecting Native American remains and burial artifacts. This new law not only enhances grave protection but also sparks new considerations for the development community, emphasizing the need to balance property interests with cultural preservation.

Pursuant to the new law, the sale, destruction, or removal of these remains and burial-related artifacts will be considered a Class E felony. If found during ground disturbance activity, property owners would have to pause projects upon discovery and report said finds to the applicable County Medical Examiner. If the Examiner determines that the remains or burial-related artifacts were more than 50 years old, the State Archaeologist would have to determine their origins. If determined to be related to an Indian Nation or tribal community, the property owner must then consult with a committee of tribal representatives and State experts. Moreover, Indian Nations, tribal communities, and “culturally affiliated groups” (groups, including tribal communities, whose past or present government, traditional culture, or religions were affiliated with the remains or artifacts), would be given a right of possession over the discovered remains and artifacts. If no agreement can be reached between the property owner and these parties related to next steps, the developer can remove the remains and artifacts after 90 days under the oversight of a professional archaeologist (this 90-day period was an extension of the 10-day period in the previously proposed law that was vetoed by the Governor). Tribal representatives would be able to monitor the excavation process.3

Land use applicants should take particular note of this law, as it represents an issue that may be considered by a Lead Agency under the State Environmental Quality Review Act (“SEQRA”) if remains or artifacts are found.4 Moreover, it is important to note that New York State is home to a number of Indian Nations and tribal communities and a long tribal history, and this law will have impacts on development across the State. Cuddy & Feder’s land use, zoning and development attorneys are experienced in every stage of the SEQRA review process and are prepared to assist its clients through this process, including the procedural steps that this new law creates for those seeking to improve their properties.

New York Energy Storage – Battery Storage Siting and Permitting

Battery Energy Storage Siting – Permitting in New York

Large-scale energy and battery storage are playing a critical role in New York’s plans for grid resilience and the transition to clean and sustainable energy. In 2019, New York passed the Climate Leadership and Community Protection Act, which includes some of the most ambitious energy and climate goals in the country, including plans for achieving 3 gigawatts of energy storage capacity by 2030. In late 2022, NYSERDA and the NYSDPS outlined a roadmap called “New York’s 6 GW Energy Storage Roadmap” to double the state’s energy storage targets by 2030. This updated roadmap identifies barriers and provides comprehensive recommendations for expanding New York’s energy storage programs through NYSERDA-led initiatives.

For both large-scale (bulk) and community, commercial, and industrial (retail) systems, one of the findings highlights challenges in completing interconnection processes in a timely manner, which can sometimes involve lengthy local land use and entitlement procedures. On average, timelines range from three to five years from the time of an interconnection request and financial commitments to the actual commissioning of a storage facility. To assist developers and local communities with the entitlement process, NYSERDA has published an Energy Storage Guidebook containing model codes, permits, and other relevant information to support rezoning and planning for energy storage systems.

Communicating the benefits of energy storage facilities for local grid resilience and their interrelationship with sustainable energy from solar and wind is crucial when engaging with municipalities.

Our experience with numerous renewable energy projects throughout New York, including early battery storage projects and utility-scale and community solar installations under the NY-Sun program, confirms that the NYSERDA model law for energy storage systems serves as a starting point for most local governments. Active engagement has been crucial to achieving success, extending beyond the typical site due diligence process to assess project feasibility and create a local roadmap. There is simply no substitute for early and strategic communication on how a project is supported through NYSERDA financial programs, understanding location constraints related to grid interconnection, and addressing the unique aspects of each municipality’s land use regulations to eliminate variability.

Communicating the benefits of energy storage facilities for local grid resilience and their interrelationship with sustainable energy from solar and wind is crucial when engaging with municipalities. Complex sets of federal, state, and local regulations should not serve as barriers to streamlining a project’s success. Addressing potential impacts, such as noise, safety, aesthetics, and land use compatibility upfront, can contribute to efficient permitting timelines, including compliance with the State Environmental Quality Review Act (SEQRA).

Successfully siting and permitting battery energy storage projects in New York requires meticulous planning, community engagement, regulatory compliance, and proactive guidance. As the energy landscape continues to evolve, it is essential to stay updated on regulatory changes, engage with stakeholders, and adapt strategies accordingly. By collaborating with experienced professionals at Cuddy & Feder, we assist energy companies in avoiding common pitfalls and ensuring a smooth path towards deploying renewable systems that contribute to a cleaner and more resilient energy future in New York.

Local Waterfront Revitalization Programs (LWRPs) – New York State Coastal Management Programs

Local Coastal Policies: What to Know When Developing Waterfront Property

The vast majority of New Yorkers live within coastal areas along the Hudson River, Long Island Sound, and Great Lakes. Although these areas account for a minor percentage of the State’s overall land mass, the population densities far outpace landlocked communities, often resulting in competing, if not conflicting, demands for economic development and conservation.1

Property owners looking to develop within coastal areas should carefully evaluate whether their proposed site is subject to a Local Waterfront Revitalization Program (LWRP) aimed at addressing these competing demands. An LWRP will generally establish heightened standards for land use projects within the coastal area and will usually require the developer to obtain an additional project approval in the form of a “Consistency Determination” that the proposed project is consistent with the land use policies of the LWRP.

LWRPs can significantly affect proposed development projects, and sometimes the effect is not immediately obvious to a prospective land purchaser. The “Coastal Area” targeted by the LWRP regulations often extends a substantial distance inland, and not just to “waterfront” lands. A “Consistency Determination” requires that the proposed project be consistent with all Coastal Policies. The State has 44 Coastal Policies and an LWRP can adopt refined local policies as well. It is sometimes difficult to be consistent with policies that cover such a wide range of goals.

Coastal Management Program Statutory Authority

The federal government adopted the Coastal Zone Management Act (CZMA) in 1972 to encourage coordination and cooperation amongst federal, state, and local agencies for the development, use, and protection of coastal areas throughout the United States.2 Under CZMA, states are authorized to adopt Coastal Management Programs (CMPs) that set forth various objectives and policies guiding public and private uses of lands and waters in an identified coastal area.3 CMPs must also set forth the criteria and standards for local implementation of a state’s coastal policies.4

In 1981, New York enacted the Waterfront Revitalization of Coastal Areas and Inland Waterways Law (Waterfront Act), in furtherance of the federal coastal management programmatic requirements. The Waterfront Act establishes the boundaries of the State’s coastal areas and establishes enforceable policies for state and federal actions in the coastal area. 5 In 1982, New York issued its CMP, which formally established the State’s 44 coastal policies.6 These policies range from encouraging revitalization of deteriorated waterfronts and the siting of water dependent uses, to protecting significant coastal wildlife habitats and increasing public facilities and access to the waterfront.7

Local Waterfront Revitalization Programs

The Waterfront Act also empowers local governments to join in the enforcement of the State’s Coastal Program, by adopting an LWRP.8 The first part of the LWRP is a refinement of the State’s 44 coastal policies to apply to the unique resources of each community.9 After the State approves the community’s LWRP, the Consistency Determinations of all Agencies approving actions within the Coastal Zone will be based on the local community’s refined version of the 44 coastal policies.

An LWRP can significantly affect proposed development projects, and sometimes the effect is not immediately obvious to a prospective land purchaser.

The second part of the LWRP Program is an enforcement program to assure that future development in the Coastal Zone will be consistent with the LWRP. This is usually done by requiring what is effectively an additional land use approval, a “Determination of Consistency” that the project is consistent with the LWRP coastal policies. The authority to issue these determinations can be delegated to an existing board (the Planning Board or the Zoning Board, for example) or to a Board created as part of the LWRP program. Some communities delegate the authority to the State Environmental Quality Review Act Lead Agency for the proposed project.

Waterfront Development in Practice

Investigation relating to waterfront regulations should be incorporated into basic due diligence prior to land acquisition. If the property is within an LWRP designated coastal area, it is also important to review the standards for obtaining a Consistency Determination, and the timing impacts for the project of the additional review. Even if the community does not presently have an LWRP, it is important to find out if one is being considered. The adoption of an LWRP frequently is preceded by many months of local review.

Cuddy & Feder’s Land Use & Zoning and Energy & Environmental attorneys have significant experience leading design teams through the local waterfront review process in connection with proposals involving manufacturing plants, commercial and mixed-use developments, single- and multi-family residences, and adaptive reuse projects. Our land use attorneys can assist with reviewing a locality’s LWRP and waterfront regulations to determine whether and to what extent the proposed development requires consistency review by a local board prior to formalizing a development application.

Ossining downtown

Real Property Law Amendments May Simplify Process for Termination Notices

For years, landlords seeking to terminate residential tenancies outside of New York City had to be careful about the termination date they chose in a termination notice. That may no longer be the case, however, thanks to the enactment of the Housing Stabilization and Tenant Protection Act of 2019 (HSTPA).

Prior to the HSTPA, Real Property Law § 232(b) governed notifications to terminate month-to-month tenancies outside of the city. That statute required that 30 days’ notice be given, and case law interpreted the language of § 232(b) to require that “the surrender of possession date must coincide with the expiration of the term or rental period.” Hunt v. Hart, 188 Misc. 534, 534, 68 N.Y.S.2d 463, 464 (City Ct., Orange Co. 1947).

Therefore, for a month-to-month tenancy which “renewed” on the first day of each month, the termination date in the notice would have needed to be the first day of the calendar month following the expiration of the 30-day period – the “anniversary” of the lease term. If a landlord picked a day that did not coincide with this “anniversary” date, the subsequent holdover proceeding based on that termination notice could be dismissed. See e.g. Ferro v. Lawrence, 195 Misc. 2d 529, 530, 758 N.Y.S.2d 460, 461 (App. Term 2d Dep’t 2002) (holding that April 4th termination notice which purported to terminate tenancy on the 6th of the following month “was a nullity in that it failed to terminate the tenancy on its renewal date, the first day of a calendar month following a notice served ‘at least one month before the expiration of the term”).

As long as landlords comply with the 30-60-90 day notice requirements, the termination notice should be effective, regardless of what day of the month is set forth in the notice as the termination date.

The HSTPA modified RPL § 232(b)to apply to only non-residential tenancies and notices given by tenants to their landlords. For residential tenancies, RPL § 226-c now sets forth notice periods based on the number of years of occupancy to terminate residential holdover tenancies. Unlike the language of RPL § 232(b), RPL § 226-c requires that 30, 60, or 90 days’ notice of termination be provided to a tenant, with no reference to months or to the expiration of a lease term.

It follows that all pre-2019 law which dealt with termination notices issued to residential tenants outside of New York City pursuant to RPL § 232(b), and which required that those notices must terminate the tenancy on a specific day of a calendar month, should no longer be applicable to termination notices issued pursuant to RPL § 226-c.

As long as landlords comply with the 30-60-90 day notice requirements, the termination notice should be effective, regardless of what day of the month is set forth in the notice as the termination date. That said, due to the lack of a developed body of case law interpreting the effects of these statutory revisions on holdover proceedings outside of New York City, tenants may continue to raise timing issues in termination notices as a defense in holdover proceedings until the courts expressly address this issue. In the meantime, we will continue to monitor developments in decisions interpreting the HSTPA.

 

Solar panels - inflation reduction act

Opportunities for Solar and Electric Vehicle Programs from the Inflation Reduction Act of 2022

In August of 2022, President Biden signed the Inflation Reduction Act of 2022 (the “Act”). 1 The Act earmarks approximately $370 billion for energy and climate initiatives – the most significant investment in U.S. history. 2 These initiatives directly impact areas that Cuddy & Feder Clients have a significant interest in, including solar infrastructure and electric vehicles and their charging stations. As to solar infrastructure, the Act contains a 30% tax credit toward homeowners’ installation costs for solar panels or other tools to harness renewable energy such as wind, geothermal, and biomass fuel. This credit applies through the end of 2032. 3 At the utility scale, solar projects will be able to choose between the Investment Tax Credit and the Production Tax Credit.4 However, they cannot choose both. The Law extends the Investment Tax Credit for solar and other qualifying renewable projects beginning construction before January 1, 2025. The base rate is at 6% and rises to 30% based on criteria, including meeting apprenticeship and prevailing wage requirements. The Act extends the Production Tax Credit for wind, solar, geothermal, biomass, and certain hydropower projects beginning construction before January 1, 2025, as well. The Law provides a rate of 2.6c/kWh credit for projects. Again, apprenticeship and prevailing wage requirements apply. 5 Both credits come with potential adders for meeting certain domestic content requirements, including locating in designated energy communities and/or environmental justice communities, or allocated credits for locating on qualified low-income property. For example, an additional Investment Tax Credit bonus is available for wind and solar projects of five megawatts or less that (i) receive an allocation of available capacity limitation (1.8 gigawatts during each of 2023 and 2024), and (ii) are: (a) located in low-income communities or on American Indian land (10% rate), or (b) are part of a qualified low-income residential building (20% rate).

The Inflation Reduction Act expands the electric vehicle industry by including a $7,500 credit for taxpayers purchasing new electric vehicles and a $4,500 tax credit for used ones.

Meanwhile, the Act expands the electric vehicle industry by including a $7,500 credit for taxpayers purchasing new electric vehicles and a $4,500 tax credit for used ones. The Act also sets aside $2 billion in grants to help convert existing auto manufacturing factories into ones that make electric vehicles and $20 billion in loans for new clean vehicle manufacturing facilities.6 Furthermore, the Act will extend the tax credit for charger installations until December 31, 2022. Businesses and other organizations that install electric vehicle chargers can qualify for up to a 30% tax credit, with the maximum amount capped at $100,000 for projects completed after December 31, 2032. For such projects, the Act requires that projects pay the prevailing wage for labor and meet certain apprenticeship requirements. It also limits availability of tax credits to installations completed along approved low-income and rural census tracts, and allows for bi-directional charging equipment. Homeowners who install electric vehicle chargers also qualify for a 30% tax credit, up to $1,000. 7 (Note that these benefits are in addition to the $7.5 billion plan to build a half-million recharging stations under the recently passed Bipartisan Infrastructure Law, of which $900 million in grants was recently released. 8 ) Cuddy & Feder has highly experienced attorneys in the areas of both utility-scale solar infrastructure and obtaining approvals for electric vehicle chargers, and are prepared to guide you through the municipal review process, as well as the associated financial incentives as described here.

Cuddy & Feder LLP: Deeply Committed to the Continuing Growth of White Plains

Over fifty years ago, Robert Feder & William V. Cuddy set up shop in a three-story colonial house on Maple Avenue in White Plains, New York. We’ve expanded from those early roots into a group of over 60 legal professionals in four offices building upon the strengths of our real estate development practice. From housing, health care and senior living, mixed-use developments, shopping centers and office buildings to parks and affordable housing projects, we’ve assisted in many of the developments that have enabled White Plains to continue its role for decades as a major economic center in Westchester County.

At Cuddy & Feder, our goal is to approach projects as a win-win opportunity for the entire community and help our clients build the smart cities of tomorrow.

Following the legacy of Founding Partners, Bob Feder and Bill Cuddy, Partners William S. Null, Neil J. Alexander, and Eon S. Nichols have continued to help clients secure approvals and financing for developments in White Plains that create vibrant, livable, and sustainable communities. Just 25 miles north of Manhattan, White Plains continues to be a corporate, healthcare and retail hub and is viewed as one of the most attractive and desirable cities in which to live, work and play.

Lennar Corporation: 131 Mamaroneck Avenue (The Mitchell)

Cuddy & Feder obtained Site Plan and Westchester County Industrial Development Agency (IDA) approvals for the construction of a $223-million mixed-use facility consisting of 434 rental apartment units and retail space. In addition to obtaining a PILOT from the IDA, Cuddy & Feder obtained approximately $4.5 million in sales tax exemptions and approximately $1.12 million in mortgage recording tax exemptions. Included in the project are a 6-story parking structure and 8,000 square feet of retail and restaurant space on Mamaroneck Avenue.

RMS Companies: 51 South Broadway

Cuddy & Feder obtained Site Plan and IDA approvals for the construction of a $48-million mixed-use development. In addition to obtaining a PILOT from the IDA, Cuddy & Feder obtained approximately $1.5 million in sales tax exemptions and approximately $350,000 in mortgage recording tax. The project will consist of 134 apartments including 27 studios, 59 one-bedroom units and 48 two-bedroom units. The building will include amenities such as a pool, garden terrace, outdoor fireplace and seating area.

White Plains Hospital Center

Cuddy & Feder secured Special Permit and Site Plan approvals for another major expansion and modernization of the White Plains Hospital campus in downtown White Plains, NY. The hospital’s modernization includes the construction of a 250,000-square-foot Center for Advanced Medicine & Surgery located at 122 Maple Avenue (CAMS). The CAMS facility offers the community the highest quality of sophisticated, state-of-the-art care, including wellness care and outpatient surgery. It is connected by pedestrian bridges to the Hospital and the Center for Cancer Care.

Greystar Real Estate Partners: 25 North Lexington Avenue

Cuddy & Feder obtained Site Plan and IDA approvals for the construction of a $275-million mixed-use development in Downtown White Plains. In addition to obtaining a PILOT from the IDA, Cuddy & Feder obtained approximately $5.36 million in sales tax exemptions and approximately $1.65 million in mortgage recording tax exemptions for the mixed-use development project located at 25 Lexington Avenue. The proposed project will involve the redevelopment of an existing parking structure into a 500-unit, 25-story residential apartment building. The project will consist of 19,000 square feet of ground floor retail, 60,000 square feet of amenities, and 755 parking spaces.

Southern Land Company: 250 Mamaroneck Avenue

Cuddy & Feder obtained Site Plan, Special Permit and final authorizing approvals for an approximately $107-million mixed use development. In addition to obtaining a PILOT from the IDA, Cuddy & Feder obtained approximately $2.56 million in sales tax exemptions and approximately $733,000 in mortgage recording tax exemptions for the mixed-use development project located at 250 Mamaroneck Avenue that will replace the White Plains YMCA building. The project will consist of an eight-story, 177-unit mixed use structure that will include one-, two- and three-bedroom units, approximately 1,876 square feet of ground floor retail, and an underground parking garage for residential tenants and retail patrons. The existing YMCA building will be demolished to make way for the new mixed-use development on the 1.16-acre property.

National Development: 150 Bloomingdale Road (The Waterstone)

Cuddy & Feder secured Site Plan and IDA approvals to construct a five-story senior living facility with 132 apartments for independent seniors known as The Waterstone. The project includes a garage and a publicly accessible 13,000-square-foot green space. Cuddy & Feder obtained approximately $2.4 million in sales tax exemption and approximately $780,000 in mortgage recording tax exemptions from the IDA.

Beitel Group: One Lyon Place

Cuddy & Feder obtained Site Plan and IDA approvals for the construction of an $83-million multi-family development in downtown White Plains. In addition to obtaining a PILOT from the IDA, Cuddy & Feder obtained approximately $2.7 million in sales tax exemptions and $362,000 in mortgage recording tax exemptions. The proposed project, located at 1 Lyon Place and 10 Lyon Place in the City of White Plains, will involve the redevelopment of two vacant buildings previously used as a senior living facility/hotel into two multifamily rental buildings. The project will consist of approximately 149 units at the 1 Lyon building and 63 units at the 10 Lyon building. The unit mix will be 50 studio units, 128 one-bedroom units and 34 two-bedroom units.

About Cuddy & Feder LLP
Cuddy & Feder LLP proudly serves clients in the areas of real estate; public and private finance (including tax-exempt and taxable bond financing); litigation; land use, zoning & development; telecommunications; cannabis law; energy & environmental; non-profit organizations; and trusts, estates & elder law. For over 50 years, we have established ourselves as the leading law firm serving a vast region that includes Westchester, New York City, Connecticut and the Hudson River Valley. Our foundation is local, and we enjoy enduring relationships with leaders, institutions and decision-makers in the communities we serve.

Skyscrapers

Trusts & Estates Legal Considerations for Business Owners

When preparing an estate plan for business owners, it is crucial to consider family dynamics and estate tax exposure in addition to the transfer of control of a business. Legal tools typically included in an estate plan are a last will and testament, revocable trusts, irrevocable trusts, and life insurance policies.

Family & Estate Tax

Family – The business owner’s relationship status dictates how wealth will transfer and to whom. Having a family member, such as a child, directly involved in the business will also inform the estate plan.

Estate Taxes – The business owner’s net worth determines whether he has a taxable estate. Currently, the federal estate tax exemption is approximately $12,000,000 and New York state’s estate tax exemption is approximately $6,100,000. This means that if, at death, the value of your estate is above $12,000,000, estate tax will be due to the federal government.

Below are a few scenarios that illustrate Cuddy & Feder’s approach to estate planning:

  1. A young single entrepreneur can generally benefit from a will or a revocable trust to direct where property will go at death. A pour-over will works in conjunction with a revocable trust to avoid probate. If the client is just starting out and has an estate valued well below the tax exemption, the concerns will be more family focused. We will help the client prepare documents to benefit loved ones. For a single client with a potentially taxable estate, it is important to use techniques that limit tax exposure but also leave room for flexibility for future life events, such as marriage and children.
  2. A married client with children and a thriving business will need a different approach to plan for the future of both family and business. For clients who have developed assets above the estate tax exemption amount, an irrevocable trust can be a good tool for minimizing tax exposure. Assets contributed to an irrevocable trust are not counted as part of the taxable estate on death. For example, a business owner might decide to transfer a small portion of stock in a lucrative corporation to an irrevocable trust for the benefit of children. The transferred stock may have a value of only $100,000 when the transfer is made. A gift tax return is filed to report the completed transfer. Ten years later, that transferred stock may be valued at $10,000,000. The $9,900,000 in increased value will benefit the children and is not taxable in the client’s estate. Each client will have a different degree of comfort with the level of gifting to make since these transfers will deprive the client of control over, and the use and enjoyment of, the gifted asset.
  3. For a client in a second marriage, other techniques can be used to minimize friction while preserving wealth and relationships. For this type of client, a trust structure can help to ensure that hard-earned assets will benefit their own children rather than any relatives of the second spouse. This client may also wish to use a trust to protect assets from being diverted if a surviving spouse remarries.
  4. In some cases, a business owner may have one adult child who is more involved in business operations than others. In these matters, it is essential to balance financial and tax planning concerns with the importance of leaving a legacy of good relationships among family members and a functioning business to benefit a client’s heirs.
  5. For high-net worth clients with illiquid business assets, life insurance policies can be useful if there otherwise would be with little cash to cover estate tax obligations. To avoid having to sell the business, or other hard-to-sell or unique estate assets, a life insurance policy held in an irrevocable life insurance trust (ILIT) helps provide liquid funds to cover these obligations. On the decedent’s death, the life insurance policy is cashed out and its proceeds can be used to pay the estate tax. Most importantly, since the trust owns the policy rather than the decedent, the insurance proceeds are not included as part of the taxable estate thereby preventing those proceeds from being taken.

These scenarios do not present all of the complexities of estate planning, but they do provide an introduction to tools we often find useful for clients. Cuddy & Feder’s Trusts & Estates attorneys are here to guide you through the estate planning process from beginning to end.

 

Firehouse with red doors

Putnam Valley Volunteer Fire Department Uses Low-Cost Bond Financing to Build a New State-of-the-Art Firehouse

In late 2021 the Putnam Valley Volunteer Fire Department used a unique and little-known financing process to close on a $11,000,000 construction and equipment loan for a new, state-of-the art firehouse to be built in Putnam County, New York. The unusual part of this financing? How about a program that allows Fire Departments to borrow millions over a period as long as 30 years with an interest rate under 4.0%? And further, that you would be able to obtain sales tax and mortgage tax savings or exemptions in connection with your capital project?

The new firehouse will include apparatus bays, equipment storage, radio rooms, and a ready room located on the first floor and a second floor which includes a large meeting hall, kitchen, lounge, offices and a training room. The $11 million also provided financing for the purchase of fire trucks and other equipment used by the firefighters.

The Putnam Valley Volunteer Fire Department used a financing mechanism some have referred to as the “best-kept secret in real estate finance”, namely issuing its own Bonds. A qualified volunteer fire department may issue its own bonds pursuant to (i) the Not-for-Profit Corporation Law of the State of New York, as amended, particularly, Sections 202 and 506 thereof, and (ii) Subtitle A, Chapter 1, Subchapter B, Part IV, Subpart C, Section 150(e) of the Internal Revenue Code of 1986, as amended, which provision authorizes a qualified volunteer fire department, such as the Putnam Valley Volunteer Fire Department to issue tax-exempt bonds for the purpose, among other things, of financing the cost of acquiring, constructing, improving and equipping a firehouse to be used by the qualified volunteer fire department. In addition, pursuant to New York State Tax Law Section 253(3) (which exempts fire companies) no mortgage tax is payable, which for the Putnam Valley Volunteer Fire Department resulted in a savings of over $100,000.

The Putnam Valley Volunteer Fire Department issued its own bonds with the assistance of Signature Bank and its affiliate, Signature Public Finance Corp., which purchased the entire $11 million bond issue. The proceeds from the sale of the Bonds were used to finance the Fire Department’s new firehouse as well as firetrucks and equipment. Typically, the Bonds are marketed and sold to various investors (usually banks, bond funds and institutional investors). Investors are willing to buy the Bonds for investment purposes because interest on the Bonds is triple tax-exempt (exempt from Federal, State and City taxation) for a borrower such as the Fire Department that is a 501c3 entity under the Internal Revenue Code. (For other borrowers that are not triple tax-exempt 501c3 entities, the interest is taxable but still reduced because the bonds are double tax-exempt, losing only Federal tax-exemption but still enjoying State and City tax exemption.)

The Volunteer Fire Department is a not-for-profit, and by virtue of that status, they did not have to pay sales tax on the goods and materials bought in connection with their project.

Prior to engaging an investment bank or other financial institution, the borrower should engage expert counsel to structure the financing and ensure that the bond financing would be beneficial to the borrower. And more importantly, to ensure that the borrower would be permitted to use the tax-exempt financing mechanism. The Putnam Valley Volunteer Fire Department retained Joseph P. Carlucci, Esq. and bond experts from Cuddy & Feder LLP, a law firm based in White Plains, New York to assist them with their bond financing. Cuddy & Feder LLP, which has represented more than 100 organizations over the past 20 years on taxable and tax-exempt bond financings helped the Putnam Valley Volunteer Fire Department work through the transaction, offering guidance and assistance to the Volunteer Fire Department from the initiation of the bond process up to and through the closing of the transaction.

In addition, counsel advised the Volunteer Fire Department on some of the intricate rules of tax-exempt financing. Under state and federal law (Internal Revenue Code), manufacturing companies, airport facilities and not-for-profit entities (such as a Volunteer Fire Department that is a 501c3 entity), can enjoy triple tax-exempt bond financing. For-profit companies cannot enjoy triple tax-exempt bond financing but may undertake (double tax-exempt) taxable bond financing for capital projects. Although the interest rate on taxable bond financing is somewhat higher than tax-exempt bond financing, it is still lower than a conventional commercial bank loan. The interest rates on tax-exempt bond financing can be as much as 50% lower.

If, after consultation with counsel, the borrower determines that bond financing would be beneficial, the borrower then selects an investment banker. The investment banker’s role is akin to that of a financial advisor who will work with the borrower and the borrower’s counsel to structure the transaction and to guide the borrower through the financial aspects of the deal. The Volunteer Fire Department engaged J. Douglas Casey, an investment banker with the investment banking firm of American Veterans Group (AVG) located in New York City. AVG helped the Fire Department to “crunch” the numbers, ensuring that the bond proceeds and the Fire Department’s contribution of equity would be sufficient to undertake and complete the project. AVG also helped the Putnam Valley Volunteer Fire Department structure the repayment of the bonds (the amount of payments of principal and interest the borrower will make during the life of the Bonds). Bonds can have a term for as long as 30-40 years, a much longer repayment period in comparison to a conventional commercial bank loan, customarily 5 to 10 years, which can be a great benefit to a borrower looking to reduce annual debt service.

The investment banker is also responsible for selling the Bonds. In the Putnam Valley Volunteer Fire Department’s bond financing, AVG did not publicly sell the Bonds in the market but rather placed the bonds with one purchaser because a bank was willing to purchase the entire bond issue. A direct placement with a bank is more common these days than in the past when it was financially prohibitive for banks to purchase such bonds. Whether the Bonds are publicly sold in the market, or are privately placed as in this case, the bond financing procedure is similar. The investment banker will also work with the borrower to create a presentation booklet containing, among other information, financials, historical data and a profile of the borrower, the proposed project and suggested financial structure of the transaction. Using that presentation package of information, the investment banker will offer the “shop” the financing around with a number of banks and other bond purchasers who may have an interest in purchasing some or all of the bond issue.

The entire process usually takes up to 3 to 4 months although circumstances can require more time and the costs to the borrower may range from 3% to 5% of the principal amount of Bonds being issued (up to 2% of the Bond proceeds may be used to finance the costs of the transaction). At first glance, the cost may seem high but the overall savings to the borrower are well worth it when compared to a conventional commercial bank loan, including a much lower interest rate and longer repayment term that result in lowering the borrower’s annual debt service and help the borrower to free-up money to be spent for other purposes.

In addition to the benefits mentioned above, there may be real estate tax abatements, energy costs savings and sales tax exemption. The Volunteer Fire Department is a not-for-profit, and by virtue of that status, they did not have to pay sales tax on the goods and materials bought in connection with their project. Manufacturing facilities and other for-profit entities do not automatically have sales tax exemption; however, if they undertake a similarly financed project, they might be able to avail themselves of sales tax exemptions on goods and materials bought in connection with their project. That benefit alone may save hundreds of thousands if not millions of dollars in project costs. In addition, implementing a reduction in real estate taxes through a mechanism called a “payment in lieu of taxes” can likewise save hundreds of thousands if not millions of dollars in property taxes over the life of a project. Also, in some cases a project may received energy at a much-reduced cost if it qualifies under programs created by energy providers.

In comparison to conventional financing, bond financing is a mechanism which offers growing companies, for-profit or non-profit organizations like the Putnam Valley Volunteer Fire Department, the ability to borrow money to finance capital projects at lower interest rates, repayments over very long terms (30 years typically) and provides other savings like sales tax exemption, energy cost reduction and property tax exemption. The volunteers of the Putnam Valley Volunteer Fire Department can attest to this low-cost financing mechanism, as they soon will have their state-of-the-art firehouse with efficient and reliable equipment, which undoubtedly will increase their productivity and efficiency and save lives.

 

protecting renters from being caught in the rain

New County Law Aims to Protect Westchester Renters from Being Caught in the Rain Without an Umbrella

In recent years, there has been a drastic uptick in the frequency and intensity of rainstorms hitting New York State. Most recently, in 2021, Hurricane Ida hit New York bringing severe flooding in her wake and causing extensive and expensive property damage to the residents of Westchester County (and elsewhere). Scientists predict that the probability of flooding in New York State will continue to worsen due to increasing precipitation across the state, compounded by rising sea levels along the New York State coastline.

Since Ida, many property owners have rebuilt and are now leasing the property that previously flooded. Tenants may be unaware that they are leasing or renting property that may have a propensity for flooding during heavy rainstorms. As such, the Westchester County Board of Legislators has passed a new local law that aims to bridge that flooding information gap between landlords and tenants.

As of August 15, 2022, the new Westchester County Local Law, simply named the “Flood History Disclosure Law,” has gone into effect mandating landlords of residential and commercial property, to provide written notification to prospective tenants, or tenants to their prospective sub-tenants as the case may be, of whether the property is located in a FEMA-designated Special Flood Hazard Area or whether, to the landlord’s knowledge, damage has been caused to the property within the past ten years by flooding (the overflow of inland or tidal waters, rapid accumulation of runoff or surface waters, or the ponding of water due to heavy rainfall) at least once.

In the event that a landlord does not comply with this law and the (sub)tenant sustains damage due to flooding on the property during the term of the lease, the landlord may be held liable by the tenant in a civil action for damages sustained.

The Flood History Disclosure Form can be found on the Westchester County Board of Legislators’ website and provides a one-page, uniform method of communicating the required flood information to potential renters. Landlord, tenant (or sub-tenant, as the case may be) must acknowledge and sign the form prior to entering into a lease. In the event that a landlord does not comply with this law and the (sub)tenant sustains damage due to flooding on the property during the term of the lease, the landlord may be held liable by the tenant in a civil action for damages sustained.

This law may be amended based on a New York State bill that recently passed which would require disclosure of the flooding history in the case of residential leasing. As of the date of this posting, there is no word on any proposed amendments or information on how this County law would be affected by state law.

The experienced Transactional team at Cuddy & Feder is ready to guide landlords and tenants with respect to this and any leasing matters.