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Increasing Your Bottom Line - MCI Tax Abatement Program

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By Martin Heistein, Esq.

Last year, the State Legislature passed a number of changes to the rent regulatory laws which affect property owners. One of the changes involved amending the amortization period for the calculation of Major Capital Improvement (MCI) rent increases. While the amortization period used to be 84 months, the Legislature changed this to 96 months for buildings with 35 or fewer apartments or 108 months for buildings with more than 35 units. This had the practical effect of lowering the monthly rent increase that Owners could pass on to their tenants.

As a way to give back something to the real estate industry, the Legislature also passed a law that provided for new tax abatement to Owners who received an MCI rent increase Order after June 15, 2015.
The abatement, which is administered by the City Department of Finance (DOF), provides that Owners who apply to DOF will receive a one-time tax abatement equal to 50% of the total MCI, multiplied by a formula, depending on the size of the building.

According to DOF’s “Guidance on the Implementation of the MCI Abatement in Section 65 of Chapter 20 of the Laws of 2015”:

The formula for determining the amount of the abatement is: 0.5 x MCI cost x (increase in months in the amortization schedule - either 12 or 24 months)/total new amortization period in months - 96 months or 108 months).

You can download and view DOF’s pdf via the following link: http://on.nyc.gov/2k4YE5s.

Again, this abatement is only applicable for those buildings which received an MCI order from DHCR after June 15, 2015. One very important issue to note is that a building will receive the full abatement, no matter how many rent regulated units there are in the building.

For example, if a building is a condominium or cooperative, or if a building contains a number of free market units that are not subject to rent regulation, the building will still receive the full abatement, so long as an MCI Order was issued and so long as at least one rent regulated tenant resides in the building.

There is no deadline for filing and receiving this type of abatement but the abatement is not renewable as it is a one-time benefit lasting for one tax year. This potentially could result in additional revenue to a building’s bottom line, but the facts of each filing should be discussed with counsel. 



 

 

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