Senate Bill S7002

                                 BILL NUMBER:  S7002

 TITLE OF BILL :  An act to amend the tax law, in relation to
establishing a business franchise tax credit for ten percent of the
value of foreclosed properties

 PURPOSE :

To provide a foreclosed property tax credit

 SUMMARY OF PROVISIONS :

Section 1 amends § 210-B of the tax law by adding a new subdivision
providing that a taxpayer shall be allowed a credit equal to 10% of
the fair market value of a foreclosed property donated to a
municipality agreeing to such donation.

Section 2 provides the effective date.

 EXISTING LAW :

Article 9-A of the Tax Law relates to the franchise tax on business
corporations. Section 210-B of the Tax Law provides the credits
relative to the franchise tax on business corporations. There are no
credits currently provided in statute relative to the donation of a
foreclosed property.
              

 JUSTIFICATION :

Vacant and abandoned properties are more than community eyesores.
According to a 2014 statement published by the US Department of
Housing and Urban Development, these properties are symptomatic of
larger economic forces at issue in the community, including increased
crime, risks to public health and welfare, rising municipal costs, and
declining tax revenues and property values, all of which contribute to
the community's decline and divestment. Often, vacant properties are
the result of foreclosures. Reducing the incidence of vacant
properties following foreclosures will mitigate the devastating
effects that corollary abandoned properties. This legislation
establishes an alternative for these sites by providing a tax credit
equal to 10% of the market value of a foreclosed property donated to a
local government. Once under the authority of a municipality these
lots can be greened, reused, or repurposed for new uses.

Studies attempting to quantify the effect of foreclosure on
surrounding property values find that foreclosures depress the sale
prices of nearby homes by as much as 8.7%. When a foreclosed home
becomes vacant or abandoned, the distressed property has an even more
pronounced effect on surrounding lots, and the length of time the
property remains vacant further enhances this effect. This effect on
property values is again compounded by the fact that crime and
disorder are often synonymous with vacant and abandoned properties due
to what has been termed by social scientists, as the "broken windows
theory." The broken windows theory states that signs of abandonment or
disorder encourage further disorder.

While foreclosures themselves have no effect on crime rates, according
to a study conducted in Pittsburgh, Pennsylvania, when a foreclosed
home becomes vacant, the rate of violent crime within 250 feet of the
property increases by 15%, relative to the areas located further than
250 feet away from the vacancy. Without neighbors to deter and report
crime, signs of vacancy, like boarded doors and windows and overgrown
lawns reveal to criminals illicit "safe heavens." These properties
become prime locations for unsupervised illegal activities, including
vandalism, theft of resalable materials that may remain in the
abandoned property, including copper and appliances, and arson. The US
Fire Administration estimates that between 2006 and 2008 28,000 fires
occurred in vacant residences and of these 37% were intentionally set,
resulting in 45 deaths, 225 injuries and $900 million in property
damage.

Localities are subsequently burdened with the costs of providing
vacant lots with police and fire protection. Local governments also
must maintain, provide administrative services for, and at times,
demolish vacant and abandoned properties. A Chicago study showed that
direct municipal costs range from $430 for a foreclosed and auctioned
property to $34,199 for a vacant property destroyed by fire, based on
varying durations of vacancy, remediation efforts, and other
circumstances such as crime. A similar study found that each vacant
property increases annual police and fire expenditures by $1,472.

Costs associated with foreclosed and vacant properties further burden
local governments' budgets by impacting all three primary sources of
public revenue, income tax, sales tax, and property tax receipts.
Residents that abandon their tax obligations with their homes directly
impact a locality's revenue. Similarly, vacant properties reducing
nearby property values will subsequently diminish tax assessments,
again decreasing a locality's revenue. Because in most cases a lender
has no legal responsibility for the property until the foreclosure is
final and the deed is recorded, the local government's public
responsibility for the property operates at a deficit. Even when the
property is taken by the lender, the outcome of the property remains
uncertain, as there are no assurances that the property will be
adequately maintained.

Managing and reversing the foreclosure and abandoned property crisis
in this state will require a cooperative approach, including
collaboration with private sector financial industries. By providing a
tax credit to corporations that donate a foreclosed property to a
municipality accepting such donation will reduce number of vacant and
abandoned properties that become vulnerable to vandalism and disuse.
Preventing the blight and increased criminal activity that is often
associated with foreclosed and vacant properties will reduce crime,
decrease operational costs, and support the economic growth of
communities throughout New York State.

 LEGISLATIVE HISTORY :

New bill.

 FISCAL IMPLICATIONS :

The fiscal impact of this legislation is dependent on those
corporations that donate properties to local governments, and the
local governments that accept the donation.  While this legislation
will have a fiscal impact on the state, local governments will benefit
tremendously by having more control over vacant properties to ensure
these lots are repurposed and utilized for positive purposes, thus
decreasing administrative, fire, and police costs associated with
vacant properties and blight.

 EFFECTIVE DATE :
This act shall take effect immediately and shall apply to taxable
years beginning January 1, 2017.