Many of our developer clients enter into “straight-lease” transactions with industrial development agencies throughout New York State. Straight-lease transactions are generally completed in connection with the construction by a developer of a project (each a “Project”), for example a commercial solar or wind farm, and the granting of financial assistance by an industrial development agency to induce the construction of the Project. Industrial development agencies are required to monitor each of their Projects to ensure compliance with various statutory requirements and report such information to the Authorities Budget Office (“ABO”).
To ensure they are able to obtain the necessary information from each Project operator, industrial development agencies condition the granting of financial assistance on the submission of various annual reports and other information. In certain instances, an industrial development agency can terminate or recapture the financial assistance granted to a Project if a Project operator fails to provide the required information.
While developers should confirm the annual reporting requirements of the specific industrial development agency that provided assistance, here is a summary of the annual information that Project operators are usually required to submit and the dates by which each must be submitted.
Required Reports and other Submissions:
1. Rental Amounts:
General: Some industrial development agencies require Project operators to make annual rental payments to the industrial development agency to cover the administrative tasks associated with monitoring the Project.
Timing: As set forth in the agreement between the industrial development agency and the Project operator. Generally, industrial development agencies submit invoices to each Project operator annually in January and require payment within thirty (30) days.
2. Insurance:
General: Industrial development agencies generally require Project operators to maintain a certain level of insurance on the Project’s facility(ies), and to list the industrial development agency as an additional insured.
Timing: As set forth in the agreement between the industrial development agency and the Project operator. Generally, at least thirty (30) days prior to the expiration of the existing policy.
Additional Notes: If the Project operator has appointed a contractor, the contractor may be required to maintain separate insurance during the construction of the Project. The Project operator may also be required to ensure that updated proof of insurance is submitted by the contractor.
3. Construction Cost Affidavit:
General: Industrial development agencies generally charge an administrative fee equal to ¾-1% of Project costs in connection with entering into a straight-lease transaction. The initial fee is due upon closing based on the estimated Project costs at that time. Some industrial development agencies require the submission of an affidavit upon completion of construction indicating the actual amount of Project costs and may adjust the administrative fee based on such affidavit.
Timing: As set forth in the agreement between the industrial development agency and the Project operator. Generally, within sixty (60) days of the completion of construction.
4. Annual Employment Information:
General: Industrial development agencies are required to consider whether a Project will create or retain full-time-equivalent (“FTE”) employee positions when determining whether to grant financial assistance to such Project. To ensure that a Project creates or retains the amount of FTE positions as initially contemplated, industrial development agencies generally require Project operators to submit an annual report regarding the number of people employed at the Project and certain other matters.
Timing: As set forth in the agreement between the industrial development agency and the Project operator. Generally, within sixty (60) days of the end of each calendar year.
Additional Notes: The industrial development agency may require the Project operator to include a copy of the NYS-45 Form – Quarterly Combined Withholding, Wage Reporting, And Unemployment Insurance Return with this report or the Annual Report discussed in item 5 below.
5. Annual Status Information:
General: As indicated above, industrial development agencies are required to submit their own annual reports to the ABO which must include information on each Project undertaken by the industrial development agency. Industrial development agencies generally include a blank fill-form report in the agreement(s) to be executed with each Project operator, or submit an annual request to each Project operator with a fill-form report.
Timing: As set forth in the agreement between the industrial development agency and the Project operator. Generally, within sixty (60) days of the end of each calendar year.
Additional Notes: Industrial development agencies are required to submit their annual reports to the ABO no later than ninety (90) days after the end of their fiscal year (generally by March 31 annually). Most industrial development agency Project documents require Project operators to provide reporting information as to enable the industrial development agency to comply with its annual reporting requirements. Failure to provide the annual report by the date set forth in your agreement with an industrial development agency, or at least prior to the March 31 deadline, may be considered an event of default under the Project documents and, as indicated above, permit the industrial development agency to terminate or recapture the financial assistance granted to your Project.
6. New York State Department of Taxation and Finance Form ST-340 – Annual Report of Sales and Use Tax Exemptions Claimed by Agent/Project Operator of Industrial Development Agency/Authority (IDA):
General: If a Project operator accepts financial assistance in the form of sales tax exemptions from an industrial development agency, the Project operator must submit an ST-340 to report the amount of sales and use tax exemptions saved with respect to the Project during the preceding calendar year.
Timing: The ST-340 must be submitted on the last day of February of the following year. For 2024 reporting, the ST-340 must be submitted by February 28, 2025.
Recipients: The ST-340 must be submitted to the New York State Department of Taxation and Finance (the “DOTF”). Many industrial development agencies also require that the form be submitted to the agency for reference.
Additional Notes: A form must be submitted for each entity that is directly appointed as an agent of the industrial development agency and authorized to make sales tax exempt purchases of materials for the construction of the Project. If a Project operator hires a general contractor to assist with construction and such contractor is directly appointed by the industrial development agency, the Project operator is generally required to ensure that the contractor’s forms are also submitted. If a contractor is not directly appointed, the Project operator must include the amount of savings claimed by the contractor on its own ST-340. It is the Project operator’s responsibility to ensure that it will be able to get the required information and/or forms from the contractor.
7. Payments in Lieu of Taxes:
General: If a Project operator accepts financial assistance in the form of real property tax abatements from an industrial development agency, the Project operator is usually required to make payments in lieu of taxes to the industrial development agency or directly to the “affected tax jurisdictions” (as defined in the General Municipal Law).
Timing: As set forth in the agreement between the industrial development agency and the Project operator. Generally, payments in lieu of taxes are payable on January 1 annually, or on some other date which may correspond with the real property billing schedule of the “affected tax jurisdictions.”
Recipients: The industrial development agency and/or “affected tax jurisdictions.”
Additional Notes:
If a Project operator makes a payment in lieu of taxes late, or fails to make a payment, the General Municipal Law imposes a required five percent (5%) interest charge on the delinquent payment.
If the Project involves the construction of certain renewable energy projects (commercial solar or wind farms, etc.), the payments in lieu of taxes may be calculated as a per-megawatt amount based on the actual installed capacity of the Project. The Project operator may be required to submit a certificate or other proof of the actual installed capacity annually to ensure the payment in lieu of tax amount can be calculated. That information generally must be submitted at least thirty (30) days prior to the date that the payment in lieu of tax payments are due.
