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Philly to Vote on New Construction Tax

Tuesday, December 8, 2020

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A Philadelphia City Council Committee approved three bills last week that are making the way for a new tax on residential construction in the city.

According to the Philadelphia Inquirer, the legislation would be a victory for Council President Darrell L. Clarke, who has proposed using the revenue from the new tax to help finance $400 million in bonds for an antipoverty and affordable housing plan.

What Would This Mean?

For homeowners, it could mean a new tax equal to 1% of the value of a new-build home or any major extensions made to an already-existing house. For commercial property owners, it could mean a 10% reduction in the value of the 10-year real estate tax break program, the Inquirer reports.

benedek / Getty Images

A Philadelphia City Council Committee approved three bills last week that are making the way for a new tax on residential construction in the city.

According to reports, it took a while for Mayor Jim Kenney to get on board with the plan, as his political backers include the development industry and building trades unions, however, his administration last Tuesday testified in support of the legislative changes, after a compromise was reached.

Reportedly the new deal would exempt commercial properties from the construction tax as well as delay the implementation of reductions in the tax abatement.

Council also introduced legislation to delay planned reductions to the 10-year tax abatement until 2024. The changes (which are currently set to take effect in January) would offer a 100% tax break on new residential properties for the first year after construction is complete, followed by a 10% decrease in the benefit for each of the following nine years. Council also voted for a bill that reduces the tax abatement for commercial construction projects from 100% to 90%.

The combination of the new tax combined with a delay for the abatement changes seem to be a compromise.

“If you’re going to put a 1% tax in, you have to provide the necessary economic runway for projects to be able to account for that tax,” said Leo Addimando, a developer and president of the Business Industry Association of Philadelphia.

However, critics maintain that the new tax will only add to the cost of development projects in the city.

The bills now head to the Council floor, where they’ll see final votes as soon as Dec. 10. If passed, the new tax would take effect in January 2022.

   

Tagged categories: Commercial Construction; Good Technical Practice; Government; Laws and litigation; NA; North America; Residential Construction; Taxes

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