The STRAIGHT LEASE is a significant tool the IDA has used to help businesses acquire, construct, and equip their facilities to create and retain jobs, and to provide for economic development, growth, and stability in the community.
Straight leases enable companies to receive the benefits of the IDA project status. Through a lease agreement, the IDA takes title to the property and/or the machinery and equipment so that it can provide property, sales, and mortgage tax relief to the company.
1. Real Property Tax Exemptions
If real property owned by the applicant is transferred to the Agency as part of a straight lease transaction, or of a bond transaction, the Agency becomes the “owner of record” of the property. As a tax-exempt agency, any property owned by the Agency is exempt from normal real property taxes, including school taxes. Therefore, the applicant will not be required to pay normal real property taxes for as long as the title of the property is in the name of the Agency. In such cases, the Agency will negotiate a payment in lieu of tax agreement (“PILOT”) with the Applicant.
The PILOT will usually require the Applicant to pay a portion of what it would normally pay in real property taxes, especially in the earlier years of the project. This benefit affords the applicant initial tax relief for its capital investment in Sullivan County. The Agency will attempt to balance the cash flow needs of the applicant with the local municipality’s need for a stable and secure tax base.
Special assessments and special ad valorem levies, such as assessments for water, sewer, lighting, and fire districts, however, are fully taxable and payment for such assessments shall become the responsibility of the Applicant as if the real property were in the name of the Applicant and not the Agency.
Absent unusual circumstances, the payment in lieu of tax agreement policy of the Agency provides for a reduced real property tax payment based on a schedule of abatement applicable to county, municipal, and school taxes. The Agency’s policy results in a tax schedule for an approved project starting at a base amount and increasing over the full period of the exemption to 100% payment of the assessed value of the project. PILOT payment schedules will not extend beyond a twenty-year period. The tax payments received are divided among the taxing jurisdictions in a prorated fashion.
2. Sales and Use Tax Exemptions
All purchases of construction materials, equipment rentals, and purchases of project related equipment and furnishings are made as agent for the Agency and are therefore afforded full exemption from local and New York State sales and use taxes. Operating and maintenance expenses of a project are not incurred as agent of the Agency and no sales tax exemption is provided for those expenses. Letters of sales tax exemption will be issued by the Agency for a predetermined length of time, or until the project certificate of occupancy is issued whichever is a shorter period.
Applicants are required to file a statement with the Department of Taxation and Finance annually concerning the value of the sales and use tax exemptions for the project.
3. Mortgage Tax Exemptions
The Agency can exempt the mortgage recording tax on all project related financing to the full extent permitted by New York State law.
