IMPORTANT: The 421-a program was suspended on January 15, 2016. However, the state legislature is expected to restore the City’s hope for an effective residential tax exemption program. MGNY will publish updates as soon as news comes from Albany.
The 421-a tax incentive program is a partial exemption for new construction of Class A multiple dwellings. The benefits are now available for all projects that began work on the foundation prior to December 31, 2015.
The rules are extremely intricate and require in-depth knowledge and strategic analysis during the planning stages of project development. For example, projects within a “Geographical Exclusion Area” (GEA) are eligible to receive benefits only if affordable housing units are created and maintained, or if the project is constructed with substantial government assistance. MGNY encourages developers of residential buildings to contact us at the acquisition stage to determine project eligibility and potential 421-a tax savings.
Developers often refer to 421-a tax benefits as “421-a tax abatement.” Technically, the term “abatement” refers primarily to fixed or variable amounts of tax discounts applied to the taxpayer’s final bill. Tax exemption, on the other hand, allows for a certain portion of the assessed value to be exempt from taxation. Although they both reduce the final tax bill, the calculation and implementation of exemptions and abatements are very different.
The 421-a application may be filed upon commencement of construction and must be filed before completion of the project. The preliminary Certificate of Eligibility is issued by HPD upon review and approval of the developer’s application. The benefits are then implemented by the NYC Department of Finance.