October 30, 2017

CT Creates New Brownfields Program, Adopts Brownfields Tax Credit

Holland & Knight Energy and Natural Resources Blog
Stephen J. Humes

Buried in an 881-page budget bill passed Thursday by the Connecticut General Assembly was a new program to support remediation and reuse of brownfields – properties long contaminated and underutilized – as well as new job creation while rewarding investors with a new state income tax credit for remediation expenditures.

The new program, called the 7/7 Brownfields Program, creates new incentives the Connecticut Department of Economic and Community Development (DECD) can use to reward new investors for cleaning up contaminated sites and reusing them while creating local jobs in the process. Qualifying investors can apply a credit for the expenditures against their Connecticut state income tax liability for seven  years and use the credit to offset sales and use taxes.

Connecticut’s budget stalemate was the last in the nation to be cleared this year and resulted when Democratic and Republican lawmakers caucused together without input from Gov. Dannel Malloy to reach a compromise budget that won a veto-proof majority in both the House and Senate during a special session on Thursday. Governor Malloy now has until November 1 to sign or veto the budget bill, but sentiment in Hartford seems to make clear that the Legislature is prepared to override a veto in the interest of ending fiscal uncertainty for the state and its 169 municipalities. Either way, the 7/7 Brownfields Program is therefore quite likely to become law next week.

Under existing Connecticut law, a “brownfield” means 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. As is typical with other programs that encourage and reward remediation of brownfields, the 7/7 Brownfield Program is not available if the party is responsible for the contamination or pollution issues; in other words, the eligible 7/7 participant must be a bona fide prospective purchaser or innocent landowner.

To qualify as eligible under the new program, investors in brownfields will be required to apply to DECD with the following information: (1) a description of the real property to be acquired and the proposed use; (2) a certification from the eligible owner that the site qualifies as a brownfield or from the municipality that the site has been underutilized or abandoned for at least 10 years; (3) a jobs plan that the eligible owner will submit to area high schools and regional-community technical colleges that includes the anticipated workforce needs for the proposed reuse of the property and proposed workforce training needs in order to enable such high schools and regional-community technical colleges to meet such needs; (4) a commitment from the eligible owner to hire not less than 30% of its workforce from students enrolled in such programs; (5) a written certification from the municipality supporting the application as a qualifying 7/7 site; and (6) any other information required by DECD in regulations to be adopted soon.

The 7/7 Brownfields Program indicates that any 7/7 participant that seeks to redevelop and reuse a brownfield shall be able to claim the tax credit and offset sales and use tax expenditures once the brownfield remediation has been completed and verified, and the participant notifies the DECD and municipality that the cleanup work is completed.

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