When does a brownfield site count as 'used primarily for manufacturing,' raising the tangible-property credit cap from $35 million to $45 million?

Plain-English summary

A property owner planning to enter a site into New York's Brownfield Cleanup Program (BCP) has an 80,000 sq ft building that will be occupied by three businesses: a software developer (30,000 sq ft, non-manufacturing) and two manufacturers (50,000 sq ft combined). The owner asked which cap applies to the tangible-property credit component of the Brownfield Redevelopment Tax Credit (Tax Law § 21): the lower cap (lesser of $35M or 3x site-prep + groundwater costs) or the higher manufacturing cap (lesser of $45M or 6x those costs).

The Office of Counsel concluded the higher $45M / 6x cap applies, because the site would be "used primarily for manufacturing activities." "Primarily" isn't defined in § 21, so it takes its ordinary meaning - "of first importance," "principally" - and the Department's other (mostly sales-tax) regulations define "primarily" as 50% or more (20 NYCRR 528.14(c)). With 50,000 of 80,000 sq ft (more than half) used for manufacturing, the building is primarily manufacturing, triggering the higher cap. (The opinion assumed, but did not decide, that the two tenants' activities are "manufacturing.")

What this means for you

Brownfield developers and owners

If more than half of your redeveloped site (e.g., by floor area) is used for manufacturing, you can access the larger tangible-property credit cap - the lesser of $45 million or 6x your site-prep and on-site groundwater-remediation costs - instead of the $35M / 3x cap.

Accountants and credit advisors

"Used primarily for manufacturing" turns on a majority (50%+) test, read in the ordinary sense and supported by the Department's "primarily = 50% or more" regulations. Document the square-footage (or other reasonable) split. Note the opinion did not decide whether specific tenant activities qualify as "manufacturing activities" under § 21(a)(3-a)(B).

Common questions

Q: My building has both manufacturing and office/software tenants. Which cap applies?
A: If manufacturing is the primary (majority) use, the higher $45M / 6x cap applies. Here 50,000 of 80,000 sq ft was manufacturing.

Q: How is 'primarily' measured?
A: In its ordinary sense - principally / of first importance - which the Department's regulations treat as 50% or more.

Q: Did the Department decide the tenants are 'manufacturers'?
A: No. It assumed that for the opinion and expressed no view on whether the specific activities are manufacturing.

Q: Can I rely on this opinion?
A: It binds the Department only as to the petitioner. Use it as guidance and confirm your own facts.

Citations and references

Statutes, regulations, and cases:
- Tax Law § 21(a)(3); § 21(a)(3-a)(A); § 21(a)(3-a)(B)
- 20 NYCRR 528.14(c); 528.9(a)(4); 49.1(e); 527.8(h)(4)
- Automatique, Inc. v. Bouchard, 97 A.D.2d 183 (3d Dept. 1983); Malat v. Riddell, 383 U.S. 569 (1966)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/income-ao-2020.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/income/a20-4i.pdf

Original ruling text

New York State Department of Taxation and Finance
Office of Counsel

TSB-A-20(4)I
Income Tax
June 16, 2020

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION
The Department of Taxation and Finance (“DTF”) received a Petition for an Advisory
Opinion from [ REDACTED ] (“Petitioner”). Petitioner requests guidance on issues involving
the Brownfield Redevelopment Tax Credit under Tax Law § 21.
Petitioner asks whether the limitation or “cap” on the tangible property credit component
will be thirty-five million dollars (or three times the sum of site preparation costs and
groundwater remediation costs, whichever is less) or forty-five million dollars (or six times the
sum of site preparation costs and groundwater remediation costs, whichever is less) given that
the site will be developed and used for both manufacturing and non-manufacturing activities. We
conclude that, based on the facts presented, the site would be used primarily for manufacturing
activities and therefore the limitation on the tangible property credit component would be the
lesser of forty-five million dollars or six times the sum of the costs included in the calculation of
the site preparation credit component and the on-site groundwater remediation credit component.
Facts
Petitioner is the owner of property located at [ REDACTED ]. (the “site” or “property”)
Petitioner is a “business incubator” under the START-UP NY program authorized by Economic
Development Law Article 21. 1 It is anticipated that the property will enter the Brownfield
Cleanup Program (“BCP”) sometime in the future. 2
An 80,000 square foot building is located on the site (the “building”). The building will be
occupied by three separate businesses. [ REDACTED ], a software developer, will occupy
30,000 square feet of the building. [ REDACTED ], a manufacturer of ceramic tape media, and
[ REDACTED ] will occupy the remaining 50,000 square feet of the building. In its Petition,
Petitioner opines that [ REDACTED ] and [ REDACTED ] will be engaged in “manufacturing”
activities whereas [ REDACTED ] software development will be a non-manufacturing activity.
Petitioner asks what the cap or limitation on the BCP tangible property credit component will be
given the anticipated mixed use of the building.
We assume for purposes of this opinion that the site will be accepted into the BCP, that a
Certificate of Completion (“CoC”) for the site will be issued to Petitioner and any other relevant

1

This opinion does not engage in an analysis of what effect, if any, Petitioner’s participation in the START-UP NY
program will have on its eligibility for tax credits potentially available under the Brownfield Cleanup Program.
2
Because the site is not currently in the BCP, the amendments to the BCP signed into law on April 13, 2015, L.2015,
c.56, Part BB, apply to this opinion.

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TSB-A-20(4)I
Income Tax
June 16, 2020

business entities and individuals, and that Petitioner and all other relevant business entities and
individuals will comply with all applicable laws and regulations and will not be disqualified from
receiving BCP-related tax credits. We also assume for purposes of this opinion that
[ REDACTED ] and [ REDACTED ] will be engaged in manufacturing activities and that
[ REDACTED ] will not be engaged in manufacturing activities. 3
Analysis
The brownfield redevelopment tax credit is comprised of several tax credits codified
primarily in Tax Law § 21. At issue here is the “tangible property credit component” of Tax Law
§ 21(a)(3). Specifically, the issue is whether the tangible property credit component limitation or
“cap” will be: (1) thirty-five million dollars or three times the sum of the costs included in the
calculation of the site preparation credit component and the on-site groundwater remediation
credit component, whichever is less, or (2) forty-five million dollars or six times the sum of the
costs included in the calculation of the site preparation credit component and the on-site
groundwater remediation credit component, whichever is less.
Tax Law § 21(a)(3-a)(A) provides, in relevant part, as follows:
Notwithstanding any other provision of law to the contrary, the
tangible property credit component available for any qualified site
pursuant to paragraph three of this subdivision shall not exceed
thirty-five million dollars or three times the sum of the costs
included in the calculation of the site preparation credit component
and the on-site groundwater remediation credit component under
paragraphs two and four, respectively, of this subdivision, and the
costs that would have been included in the calculation of such
components if not treated as an expense and deducted pursuant to
section one hundred ninety-eight of the internal revenue code,
whichever is less; provided, however, that: (1) in the case of a
qualified site to be used primarily for manufacturing activities,
the tangible property credit component available for any qualified
site pursuant to paragraph three of this subdivision shall not exceed
forty-five million dollars or six times the sum of the costs included
in the calculation of the site preparation credit component and the
on-site groundwater remediation credit component under
paragraphs two and four, respectively, of this subdivision, and the
costs that would have been included in the calculation of such
components if not treated as an expense and deducted pursuant to
section one hundred ninety-eight of the internal revenue code,
whichever is less….

The Petition does not request an opinion as to whether the specific activities engaged in by [ REDACTED ], and
[ REDACTED ] constitute manufacturing activities, and we express no opinion herein as to whether the proposed
uses of the site do or do not constitute manufacturing activities.
3

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TSB-A-20(4)I
Income Tax
June 16, 2020

Id. (emphasis added).
The question, therefore, is whether the site will “be used primarily for manufacturing
activities.” If it is, the tangible property credit component will be the lesser of forty-five million
dollars or six times the site preparation and groundwater remediation costs. If the site is not used
primarily for manufacturing activities, the tangible property credit component will be the lesser
of thirty-five million dollars or three times the site preparation and groundwater remediation
costs.
“Manufacturing activities” is a term defined, in relevant part, as “the production of goods
by manufacturing, processing, assembling, refining, mining, extracting, farming, agriculture,
horticulture, floriculture, viticulture or commercial fishing.” Tax Law § 21(a)(3-a)(B). The
phrase “used primarily for manufacturing activities,” however, is not defined in Tax Law § 21,
nor is it defined in the regulations applicable to the BCP.
Where a statute does not define a term, it is appropriate to interpret that word in its
ordinary, everyday sense. Matter of American Food and Vending Corp., Tax Appeals Tribunal,
July 30, 2015, citing Automatique, Inc. v. Bouchard, 97 AD2d 183 (3d. Dept. 1983). Federal tax
courts and Circuit Courts of Appeal have consistently interpreted the word “primarily” in its
ordinary, everyday sense. See e.g. New Jersey Council of Teaching Hospitals v. C.I.R., 149 T.C.
No. 22 (2017) (“primarily” interpreted to mean “of first importance” or “principally”); Ryther v.
C.I.R., T.C. Memo 2016-56 (2016) (“We know that ‘primarily’ means ‘principally’ or ‘of first
importance.’”); Heller Trust v. C.I.R., 382 F.2d 675 (9th Cir. 1967) (“…’primarily’ means ‘of
first importance’ or ‘principally.’”) citing Malat v. Riddell, 383 U.S. 569 (1966). See also
Statutes, § 234 (“Dictionary definitions may be useful as guide posts in determining the sense
with which a word was used in a statute, but they are not controlling.”) “’Primarily’ is defined as
‘first of all’ (Webster's Third New International Dictionary Unabridged, p 1800) and as ‘in the
first or most important place’, ‘of first importance’, ‘principally’ or, where the context requires,
it may mean ‘essentially or fundamentally’ (72 C.J.S. Primarily, p. 500). As no meaning other
than the usual connotation of the word ‘primarily’ has been indicated by the Legislature, it
should be construed in accordance with its ordinary import.” Automatique, Inc. v. Bouchard,
supra at 186-187.
Although not directly applicable to the BCP, it should be noted that certain Tax
Department regulations, for the most part applicable to sales tax, define “primarily” as “50
percent or more.” 20 NYCRR § 528.14(c). See also 20 NYCRR § 528.9(a)(4) (“[a] commercial
vessel [is] primarily engaged in interstate or foreign commerce when 50 percent or more of the
receipts from the vessel's activities are derived from interstate or foreign commerce.”); 20
NYCRR § 49.1(e) (“[a] taxpayer is ‘primarily engaged’ in such activity if more than 50 percent
of its receipts are derived from retail sales.”; 20 NYCRR § 527.8(h)(4)(“[t]he word primarily
used in this paragraph shall mean 50 percent or more of gross receipts from all business
operations during a reporting period are attributable to sales of 10 cents or less through vending
machines.”).

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TSB-A-20(4)I
Income Tax
June 16, 2020

Applying the usual connotation of the word “primarily” to the facts presented in the
Petition, and using other provisions or Tax Department regulations as guidance, we conclude that
if 50,000 square feet of an 80,000 square foot building are used for manufacturing activities, the
building would be used primarily for manufacturing activities. Therefore, the tangible property
credit component limitation or cap for manufacturing sites (the lesser of $45 million and six
times the sum of the costs included in the calculation of the site preparation credit component
and the on-site groundwater remediation credit) would apply.
DATED: June 16, 2020
/S/
DEBORAH LIEBMAN
Deputy Counsel
NOTE:

An Advisory Opinion is issued at the request of a person or entity. It is limited to the
facts set forth therein and is binding on the Department only with respect to the person
or entity to whom it is issued and only if the person or entity fully and accurately
describes all relevant facts. An Advisory Opinion is based on the law, regulations, and
Department policies in effect as of the date the Opinion is issued or for the specific
time period at issue in the Opinion. The information provided in this document does
not cover every situation and is not intended to replace the law or change its meaning.