Authorizes the NYSUDC to form a limited liability company for the purpose of certification as a community development entity under the New Markets tax credit program

BILL NUMBER:S7462A

Title of bill

An act to amend chapter 174 of the laws of 1968 constituting the New York state urban development corporation act, in relation to authorizing the corporation to form a limited liability company for a specific purpose and providing for the repeal of such provisions upon expiration thereof

Purpose

This bill would, allow New York State to participate in the federal New Markets Tax Credit (NMTC) Program by creating the necessary authority for the Empire State Development Corporation (ESDC) to form limited liability companies.

Summary of provisions

Section 1 of the bill would amend the opening paragraph of § 12 of § 1 of Chapter 174 of the Laws of 1968 constituting the New York State Urban Development Corporation (UDC) Act, to authorize ESDC to form LLCs pursuant to Limited Liability Company (LLC) Law § 203 for the sole purpose of the participation in the federal NMTC Program. This section would also provide that all projects awarded New Markets Tax Credits by ESDC or its subsidiary shall be submitted to the Public Authorities Control Board for approval, in accordance with the 'provisions of Public Authorities Law § 51. Finally, this section would provide that ESDC report annually on the NMTC Program.

Section 2 of the bill would provide for an immediate effective date, as well as a five year sunset provision.

Existing law

Current law does not permit ESDC to form LLCs.

Prior legislative history

This is a new bill.

Statement in support

In May of 2009, ESDC was awarded a $30 million allocation of federal NMTCs under the American Recovery and Reinvestment Act (ARRA) in order to facilitate and increase private sector investment in economic and community development in low income communities. This amendment to the UDC Act would permit credits to flow to investors and foster economic development in distressed communities throughout the State.

Enabling ESDC to form LLCs for the purpose in question will enable the State to take advantage of a benefit under the federal stimulus package. This benefit comes at no cost to the State. Currently, New York is at a disadvantage relative to other states that take part in the NMTC program. Other states can form LLCs and LLCs are the only type of entity that can effectively utilize the NMTC benefit.

Accordingly, necessary private investors have no incentive to invest in New York projects using the NMTC allocation awarded to ESDC in 2009.

Since the award in May of $30 million from the ARRA, ESDC has identified several eligible projects with funding gaps that could be filled with an NMTC investment. Additionally, the federal government is expected to announce another round of NMTC awards in 2010, but New York will not be able to compete for an additional allocation of NMTCs until the proposed amendment has been adopted and the current allocation is awarded.

Budget implications

None to the State. Allocation of this funding will create a significant economic benefit to underserved communities in the State. Since its creation in 2000, the NMTC Program has resulted in the investment of over $14 billion of private sector capital in low income communities around the country.

Effective date

This bill would take effect immediately and expire five years later.