ICAP Rule Amendments & RACE for Space Rules: What Property Owners and Businesses Need to Know

The New York City Department of Finance (“DOF”) has adopted final rules implementing recent statutory amendments to New York City’s Industrial and Commercial Abatement Program (“ICAP”) and formally establishing the City’s new Relocation Assistance Credit Per Employee (“RACE for Space”) program.

Although the underlying legislation was enacted by the New York State Legislature in 2025, these newly adopted DOF rules provide critical implementation guidance, clarify vesting and completion standards, and introduce enforcement mechanisms that materially affect project eligibility, underwriting assumptions, and construction timelines. Property owners, developers, lenders, and relocating businesses should promptly evaluate how these rules impact both existing and future projects.

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Background on ICAP

ICAP provides a partial real estate tax abatement for eligible industrial and commercial construction and renovation projects in New York City. For decades, the program has served as a cornerstone incentive for property owners undertaking substantial capital improvements or ground-up development.

Eligibility for ICAP, however, is strictly governed by statute, the NYC Administrative Code, and DOF regulations. Recent rulemaking reflects the City’s evolving policy priorities and narrows eligibility in several important respects.

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First ICAP Rule Amendment: Elimination of Benefits for New Parking and Storage Uses

The DOF rules memorialize the statutory elimination of ICAP benefits for new parking facilities, self-storage facilities, and storage warehouses that did not vest by the statutory deadline.

Key Takeaways:

• To preserve ICAP eligibility, owners must have obtained a qualifying construction permit on or before August 7, 2025.
• Projects that failed to meet this vesting deadline are no longer eligible for ICAP benefits, regardless of planning or partial design work.
• A narrow exception remains for certain HPD-financed residential parking facilities, subject to strict statutory and regulatory requirements.

This change has significant implications for:

• Stand-alone parking garages
• Self-storage facilities and storage warehouses
• Mixed-use projects where parking or storage constitutes a substantial portion of the building

Owners who assumed ICAP benefits would remain available under prior practice should immediately reassess project feasibility, financing assumptions, and construction schedules.

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Second ICAP Rule Amendment: Clarification of “Completion of Construction”

The DOF also adopted a revised definition of “completion” for ICAP purposes.

For new buildings or structures, completion is now defined as the earlier of:

• The issuance of a final certificate of occupancy by the NYC Department of Buildings; or
• A determination by DOF that construction is complete, based on submitted documentation and, where applicable, an on-site inspection.

For modernization, rehabilitation, or expansion of existing buildings:

• Only the DOF determination applies.

Importantly, the rules clarify that an architect’s or engineer’s certification is no longer dispositive and is treated as only one factor in DOF’s analysis.

Because ICAP benefits are mechanically tied to assessed value increases, the timing of completion relative to physical assessment is critical. Misalignment can significantly reduce the value of the abatement.

New Appeal Process

The amended rules establish a formal administrative appeal process:

• Applicants may contest DOF’s completion determination within 15 days of notice.
• DOF must issue a written decision within 60 days.
• A denial constitutes a final agency determination, subject to review under CPLR Article 78.

Adoption of Rules for the RACE for Space Program

The City has also adopted final rules for the RACE for Space program, a new incentive designed to attract out-of-state businesses and jobs to New York City.

RACE for Space provides refundable income tax credits for relocating employees from outside New York State to qualifying NYC office space.

Program Highlights:

• Businesses must have operated outside of NYS for at least 24 months prior to relocation.
• Relocation must occur within the next 36 months.
• The preliminary eligibility application deadline is June 30, 2028.
• Applications are processed on a first-come, first-served basis.
• The City aims to attract 15 new anchor tenants by the end of 2026, activate over 800,000 square feet of office space, and add 3,000 jobs.

Key Eligibility Criteria:

• Credit valued at $5,000 per eligible employee, refundable over five years.
• Manhattan buildings must be built prior to 2000 (this requirement does not apply in the Bronx, Brooklyn, Queens, or Staten Island).
• Minimum space requirement of 10,000 square feet, with at least 175 square feet per employee.
• After submitting a RACE Pre-Application, businesses have 90 days to provide an executed lease or purchase contract for eligible space.

Practical Takeaways

I. ICAP Requires Immediate Eligibility and Completion Review

Property owners and developers should:

• Confirm whether any portion of a project includes now-excluded parking or storage uses;
• Determine whether ICAP vesting was achieved through timely permit issuance;
• Review existing ICAP applications and benefits letters for exposure under the new rules; and
• Consult counsel before modifying project scope, use, or timing in ways that could impact ICAP eligibility or benefit amounts.

II. RACE for Space Should Be Evaluated by Out-of-State Businesses

• Businesses considering relocation to NYC should consult counsel early to assess RACE eligibility.
• Office renovations undertaken in connection with relocation may also qualify for additional incentives, including ICAP.

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Conclusion

The adoption of these ICAP amendments and the RACE for Space rules marks a significant shift in New York City’s economic development landscape. Early analysis and careful planning are essential to preserve benefits and avoid unintended consequences.

Owners, tenants, and lenders interested in ICAP or RACE for Space should contact their trusted real estate and economic development counsel for guidance.

Disclaimer: This is published by the law firm Rosenberg & Estis, P.C. It is not intended to provide legal advice or opinion. Such advice may only be given when related to specific fact situations that Rosenberg & Estis, P.C. has accepted an engagement as counsel to address. Prior results do not guarantee similar outcomes.