ALBANY, N.Y. (CN) - Financially stressed New York illegally deferred $87 million in brownfields tax credits to a company that cleaned up a polluted industrial site, the company claims in court.
Empire Gen Holdings and Empire Generating Co. sued New York and its governor in Albany County Supreme Court, challenging Chapter 57 of the Laws of 2010, which amended Sections 33 and 34 of the state tax law (the deferral provisions).
"The deferral provisions are fundamentally unfair, unlawful and unconstitutional," Empire Gen says, citing the due process, equal protection and contracts clauses of the state and U.S. Constitutions. "In fact, the deferral provisions serve to discourage additional investment within New York State."
Empire Gen claims the deferral provisions are particularly offensive as New York offered $2.1 billion in new tax credits to movie companies in the same legislation.
Empire Gen wants the deferral provisions enjoined. The state enacted them to help close a budget deficit then projected at $9 billion.
The amendments required that companies with more than $2 million in aggregate business tax credits for the tax years 2010, 2011 and 2012 defer anything above that threshold until 2013. The deferred credits would be repaid - without interest - during the tax years 2013, 2014 and 2015.
Empire Generating Co., once known as Besicorp-Empire Power Co., unveiled plans in 2000 to build a huge newspaper-recycling facility and power plant at a BASF Corp. site in an industrial section of Rensselaer, across the Hudson River from Albany.
The BASF plant had produced industrial dyes and chemicals for more than a century, but was slated to close as work shifted overseas.
Empire Gen later dropped the idea of a recycling plant in favor of a larger, $800 million, 635-megawatt natural gas-fired electric-generating plant that would help New York meet its power needs.
The project was one of the first to be accepted into the voluntary Brownfield Cleanup Program, enacted by the state in 2003, the company says on its website.
New York created the program to give incentives to clean up and redevelop polluted industrial sites. The state Department of Environmental Conservation was put in charge of overseeing cleanup agreements between developers and property owners, for evaluation, remediation and redevelopment of polluted property.
Under the program, once a cleanup was done, a final engineering report was prepared for the DEC, which would issue a certificate of completion that allowed the developer to claim tax credits.
BASF and Empire Generating worked for several years to clean up the Rensselaer site and got a completion certificate from the DEC in March 2008. The power plant went online in September that year.
Empire Gen claims that it met obligations under the brownfields agreement and, based on the new plant's value, calculated a redevelopment credit of $86.95 million for the 2010 tax year.
It says it relied on the promised credits in "structuring the transaction" that led to remediation of the BASF site and construction of the power plant.
"In fact, but for the timely receipt of credits promised in exchange for these activities, plaintiffs would not have undertaken the remediation or the facility's completion," the complaint states.
Empire Gen claims the deferral provisions violate the equal protection clause, as one section of the amendments added film production tax credits even as it deferred credits for brownfields cleanups.
"The only distinguishing characteristic between plaintiffs and companies who qualify for film production credits is the nature of the investment," the complaint states. "There is no rational or legitimate reason for this disparate treatment based on this distinguishing characteristic."
Empire Gen claims that $2.1 billion in film production credits -$420 million a year for 5 years - were included in the amendments, despite the state's claim that it needed to tighten its belt by deferring other credits.
"The lack of any legitimate reason is underscored by the fact that the Legislature deferred payment of credits already earned while providing for new funding for credits payable immediately for future investment," the complaint states.
Empire Gen seeks declaratory judgment that deferral of the tax credits is unconstitutional, and a permanent injunction against their enforcement.
Empire Gen is represented by David Burch, with Hiscock & Barclay in Syracuse.
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