Alert on Philadelphia City Council Bills
The City of Philadelphia enacted several consequential changes to the real estate tax programs at the end of 2020 which will impact development in 2021 and beyond. Below find a brief summary of those actions, and the likely impact, on the tax abatement programs as well as new construction in the City.
Extension of Residential Abatement
This Ordinance will delay the recent changes made to the tax abatement program for residential property for a period of one year. Hence Applicants for the current abatement of 100% of the value of improvements for 10 years on residential properties will have until December 31, 2021 to file.
Reduction in Tax Abatement for Commercial & Industrial Properties
This Ordinance is for the reduction in the tax abatement for commercial and industrial property of the 10-year tax abatement for the value of improvement on commercial and industrial properties by 10%. This Ordinance would affect all such abatement applications submitted after December 31, 2021. In order to realize the advantage of the current 100% abatement of improvements, applicants must file before that deadline.
New Construction Impact Tax
This Ordinance is a new construction tax that will impose a 1% tax on the costs of constructing a building, or a portion of the building, for residential purposes. Ordinary upkeep and maintenance will not be deemed an “improvement” for purposes of assessing the tax. The bill exempts from the tax any improvements that are not eligible for an abatement under Philadelphia’s existing real estate tax exemption law, or improvements that already are exempt from real estate taxes under the KOZ, KOEZ, and KOIZ laws. The tax will apply to all building permit applications filed on or after January 1 of 2022.
The Real Estate Team at Obermayer continues to track the progress of bills and provides updates to help you make better business decisions. Please feel free to reach out to anyone on the team with questions about this, or any other City or suburban real estate matter.
This alert is intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have. We are fully operational during this pandemic and stand ready to assist as you navigate this ongoing and developing COVID-19 situation.