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George E. Pataki
Governor
Liberty Zone Tax Benefits
April, 2002Dear Business Owner:
President Bush recently signed into law powerful new federal legislation that creates a "Liberty Zone" in Lower Manhattan (the area south of Canal and Rutgers Streets), and provides significant tax benefits specifically formulated for businesses located in the zone, to help rebuild Lower Manhattan and encourage reinvestment in New York City.
The Liberty Zone legislation:
· Creates a “Liberty Zone Employment Benefit Credit” of $2,400 per employee, similar to the federal Work Opportunity Tax Credit, for Liberty Zone businesses with 200 or fewer employees;
· allows taxpayers to claim a first-year depreciation deduction equal to 30 percent on property located in the Liberty Zone (including buildings and building improvements, if they rehabilitate or replace real property damaged, destroyed, or condemned as a result of the attacks). The additional deduction applies to property purchased after September 10, 2001 and placed in service before December 31, 2006 (or before December 31, 2009 in the case of nonresidential real property and residential rental property);
· increases the amount that businesses with smaller capital expenditures may expense under section 179 of the tax code by an additional $35,000, and reduces the portion of the cost of Zone property taken into account when applying the phase-out threshold;
· increases the replacement period under section 1033 of the tax code, so that taxpayers would not have to recognize gains from property purchased to replace involuntarily converted (i.e., destroyed or damaged) property located in Lower Manhattan, as long as replacement property is acquired within New York City within 5 years;
· provides a 5-year recovery period for depreciation of leasehold improvements in the Liberty Zone for property placed in served after September 10, 2001 and before January 2, 2007; and
· authorizes the issuance of up to $8 billion of tax-exempt private activity bonds (“Liberty Bonds”) over the next three years to help renovate and rebuild commercial property, residential rental property and public utility property.
Attached below is a map of the Liberty Zone* and a link to the U.S. Internal Revenue Service* web site that provides more detailed information on these new tax benefits.
Thank you for all you have done to keep your business running in New York City – the business capital of the world. Together, with your help and determination we will prevail.
Sincerely,
George E. Pataki,
Governor
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