Michigan ramped up its efforts to encourage the redevelopment or reuse of contaminated “brownfield” land when it enacted the Transformational Brownfield Plan (TBP) in July 2017.
Effective through December 31, 2022, TBP allows for the “capture” — or reimbursement — of certain tax revenues generated by approved projects in the state. This incentive, combined with the traditional Brownfield program’s sales and use tax exemption and property tax capture, could mean significant tax savings for developers with qualifying projects.
TBP allows a developer to:
There is an $800 million cap for income and withholding tax captures and a $200 million cap for the construction period. There is a lifetime cap of $1 billion across all approved plans.
TBP includes three types of income tax revenues:
Projects are required to have an expected capital investment starting at $15 million for a project in communities with under 25,000 residents up to $500 million for cities with a population over 600,000.
A potential project must be a mixed-use development, integrating retail, office, residential or hotel uses. Further, TBP allows for only five approved projects in a calendar year, and no more than five total projects in any municipality through 2022.
The TBP plan document also must include:
TBP is an attractive incentive for large-scale economic growth within Detroit and other areas in the state. However, TBP’s detailed approval process, anticipated demand and limit on the number of approved plans also means that now is the time to act if you are considering redeveloping a brownfield site and hope to maximize your development budget.
Sidebar: What Other Economic Incentives Are Available For Developers in Michigan?
The Michigan Economic Development Corporation currently offers Brownfield Tax Increment Financing, Community Development Block Grants, Michigan Community Revitalization, Michigan Main Street, Public Spaces Community Places, Redevelopment Ready Communities and Smart Zones as options. While the incentive programs you qualify for will depend on your project, most must be in place before the project begins. Consult with your advisory team early to help select and obtain critical components of your capital stack, and to structure the deal in the most tax-efficient way.
Please contact a member of your service team, or contact Jeff McMichael at email@example.com or Adam Hill at firstname.lastname@example.org for further discussion.
Cohen & Company is not rendering legal, accounting or other professional advice. Information contained in this post is considered accurate as of the date of publishing. Any action taken based on information in this blog should be taken only after a detailed review of the specific facts, circumstances and current law.
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