Carl Primavera on Philadelphia Tax Abatements

The following post was written by Carl Primavera, partner at Klehr Harrison Harvey Branzburg LLP, who is widely recognized as one of the top rated land use lawyers in Philadelphia. You can read more about Carl or find out how to reach him to discuss any zoning or real estate issues here.

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As Philadelphia City Council plans to approve a budget for 2019, there have been a variety of public comments regarding the costs and benefits of Philadelphia’s current real estate tax abatement programs. The legislation authorizing these abatements was premised on the idea that short term real estate tax relief would invite investment and construction that would, over time, increase our population, support construction jobs, and grow the tax base. Despite hard data showing the success of this program, there are those that believe these incentives are no longer necessary and deprive the Philadelphia School District of much needed funds. Regardless of your opinion on these issues, it is important to understand these abatements and how they are successfully implemented.     

There are 2 significant abatements (referred to in the Philadelphia Code, Title 19, Chapter 1300, as exemptions): the 10 year and the 30 month. The 10 year abatement covers all improvements to real estate, including additions to existing structures and new, ground up construction. The general rule is that this abatement starts the year following the year in which the certificate of completion is issued by Philadelphia’s Department of Licenses and Inspections (L&I). The other available program is referred to as the “developer’s abatement,” and this applies only to residential projects. It runs for 30 months from the date of issuance of the building permit and abates any improvement value from the real estate tax assessment during that period of time. That is to say, the tax rate will not be applied to that portion of the property’s assessed value, which results in a lower tax bill. With respect to apartment projects, if both programs are properly utilized, the development of a new apartment building will be covered by the 30 month developers abatement during construction, followed by the 10 year abatement.

These tax incentives can mean real savings and are available to homeowners making improvements or additions to their properties, hotel or office developers, or with respect to any other real estate development.  One final note, though: these abatements must be applied for by submitting an application with the Philadelphia Office of Property Assessment within 60 days of the time L&I issues a building permit for the planned construction or improvements. Failure to properly and timely apply for the abatements may cause you to lose these valuable tax benefits.