Senate Bill S2906A

                                
 
BILL NUMBER: S2906A

SPONSOR: RITCHIE
 
TITLE OF BILL:  An act to amend the tax law, in relation to establish-
ing 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 declin-
ing 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 corol-
lary 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 aban-
doned, 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 proper-
ty 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 vandal-
ism, theft of resalable materials that may remain in the abandoned prop-
erty, including copper and appliances, and arson. The US Fire Adminis-
tration 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 main-
tain, 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.  Resi-
dents that abandon their tax obligations with their homes directly
impact a locality's revenue. Similarly, vacant properties reducing near-
by 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 accept-
ing 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:

2017: S.2906 Referred to investigations and government operations.
2016: S.7002 Referred to investigations and government operations.

 
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 adminis-

trative, 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, 2019.