NYC developers may receive a tax break in return for building child care centers

For the past year, New York City developers have been hoping for a new tax break that would replace the expired 421-a program favored by the real estate industry. Although the future of the 421-a tax abatement remains uncertain, the city’s property owners could take advantage of the new incentive that would partially cover their construction expenses. 

Under the new Childcare Center benefit, NYC developers may receive a property tax credit of up to $225,000. Property owners seeking to apply for this tax abatement program must either build a new childcare facility or expand an existing one to increase its capacity. The application deadline for the Childcare Center benefit is March 15, 2023. 

Many childcare centers across the United States face financial difficulties, and some have to close their doors. Between January 2020 and July 2022, New York State lost 3,524 childcare programs, according to a recent study conducted by The Children's Agenda, a private non-profit advocacy organization. Nationwide, nearly 16,000 childcare programs have permanently closed due to pandemic-induced financial difficulties, Bloomberg reports. 

Both residential and commercial properties are eligible for the new tax break program. The city hopes to increase the number of childcare facilities by incentivizing office and retail space owners to convert empty spaces. New daycare facilities built in childcare deserts, where there are three or more children under the age of five for each available childcare slot, may be eligible for a larger tax credit. 

Property owners who build new facilities in underserved areas may receive a tax credit of up to $75 per square foot. For properties outside of childcare deserts, the maximum available tax abatement equals $35 per square foot, or up to a total of $100,000 over the next five years. New York City has allocated $25 million for the Childcare Center Abatement program.

Resources:

“Childcare Center Tax Abatement for Real Property Taxes,” (NYC Rules, 2023)

“NYC landlords get new tax break for child care centers,” by Keith Larsen (The Real Deal, 2023)

“Why Child Care Centers in New York City Are Shutting Their Doors,” by Kendra Hurley (Bloomberg, 2022)