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Carolyn Powell

 Tags: InBN Dictionary

Property tax abatement: a reduction or exemption on property taxes from the government for a company.  Often used for in exchange of new, expansion, or rehab construction.

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Companies that take advantage of property tax abatement often find their savings substantial.  The government typically uses these reductions or exemptions to incentivize expansion, new construction, or relocation of a business into their district.  These benefits are determined by an application process and approved by the local Industrial Development Agency (IDA).

For example:  Company ABC decides to locate a food processing facility in the Buffalo Niagara region.  The company has a very specific manufacturing process thus, they need to build a new building for their operations.  This company would buy vacant land and then build their 25,000 sq. ft. building to meet their needs.  That vacant land has a current tax assessment of $XX dollars (Land tax can never be abated and removed from the tax rolls).  After the 25,000 sq. ft. construction is finished, now the land and building will be given a new tax assessment of $YY dollars.  To encourage a company to select this location, the government may offer them property tax abatement on the new construction.  This abatement is on the difference between the currently land taxes of $XX and the new assessment of $YY.  That difference of $ZZ (Known as the improvement assessed value) is then abated over a period of seven to ten years.  It gives the company a gradual increase to the $YY assessment and allows them to get the building built, operations setup, and new employees hired before they are paying the full new tax assessment.  This allows the government to continue collecting the land tax dollars and gain new tax dollars in the next seven to ten years to assist their community and costs. 

This company could also identify an existing 15,000 sq. ft. building but then need to complete a 10,000 sq. ft. addition to it.  The same idea applies here regarding property tax abatement.  The current taxes on the land and 15,000 sq. ft. building would remain the same, but the additional property tax assessment based on the new 10,000 sq. ft. addition would be abated over a 7-10 year period.  Again, allowing the company time to manage their capital expenditures and increase to that new assessed amount over the extended period.

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Founded in 1999, Invest Buffalo Niagara represents the eight counties of Western New York. We are the region’s nonprofit, privately funded economic development organization focused on job creation.