Multiple States Considering Legislation Relating to State Historic Tax Credits
By Caitlin Jones & A. J. Johnson
5 min read
THE NEW YEAR HAS SEEN the introduction of legislative proposals to curtail, expand, or establish various state historic rehabilitation tax credits. Declining revenues and a projected budget deficit are the motivating factors in some states.
In Rhode Island, Gov. Donald L. Carcieri has proposed a legislative change to impose a cap on the total amount of the state’s commercial historic rehabilitation tax credit that could be claimed in any one year, to help close a state budget gap. The annual cap would be $20 million for 2008 and $40 million in future years through the program’s scheduled final year of 2017.
Rhode Island has a 30% state tax credit for qualified rehabilitation expenditures for income-producing historic properties. Currently there is no overall annual cap for all state historic credits claimed for incomeproducing properties, and no per property annual cap.
The governor’s proposal has been introduced in the state legislature, and was the subject of a hearing 1/31/08 by the House Finance Committee. Preservation advocates testified against the proposed cap at the hearing. Developers contend the cap would endanger 130 projects.
Rhode Island also offers a state tax credit for renovation of owner-occupied historic residences.
Maryland Proposal
In Maryland, Gov. Martin O’Malley in his Fiscal Year 2009 budget request has proposed cutting annual funding for the state’s state historic tax credit for rehabilitation of commercial properties to $14.7 million, down from $25 million approved in FY 2008.
Maryland offers a 20% tax credit for rehabilitation expenditures for historic commercial properties, with a credit cap of $3 million for a single project. The program is called the Certified Heritage Structure Rehabilitation Tax Credit.
Maryland also has a 20% tax credit for rehabilitation of historic owner-occupied residences.
Colorado Legislation
In Colorado, the House Finance Committee on 2/6/08 acted to advance a bill (HB08-1033) that would extend the sunset date for the availability of the current state historic rehabilitation tax credit by 10 years, through 2019. The state tax credit is equal to 20% of qualified rehab costs for eligible historic income-producing properties and owner-occupied residences, subject to a cap of $50,000 per property.
The committee endorsed an amendment that would suspend funding of state tax credits claimed in a year, starting in 2010, if there is insufficient revenue in the state’s general fund. Funding would resume after a shortfall ceases.
Michigan Program Amended
Michigan Gov. Jennifer Granholm on 12/27/07 signed into law a bill (H.B. 5126) that adds the state’s historic preservation tax credit to the list of state business tax credits that insurance companies can use to offset their state business tax liability, under the new Michigan Business Tax system the state switched to on 1/1/08. Banks were already eligible to claim the state historic credit, which is available to property owners and long-term lessees for 25% of qualified rehabilitation costs for historic commercial and residential properties.
New Jersey Proposed Credit
In New Jersey, state lawmakers have re-introduced legislation (A.791, S. 468), stalled by the governor in 2007, which would establish a state historic rehabilitation tax credit.
The legislation would create two state historic tax credits, one for businesses and one for homeowners. The tax credit would be equal to 25% of qualified rehabilitation costs for eligible historic income-producing properties or owner-occupied residences. Taxpayers unable to fully utilize the tax credit could transfer it to another taxpayer. A five-year recapture period would apply.
The legislation would limit the total amount of tax credits that could be approved to $15 million in FY 2008, $25 million in FY 2009, $40 million in FY 2010, and $50 million per year thereafter. Two-thirds of annual approved credits would be for income-producing properties.
Maine Legislation
Preservation advocates in Maine are pushing for passage of a bill (LD 262) held over from last year’s legislative session that would amend in several ways the state’s existing 20% tax credit for qualified rehabilitation costs for income-producing historic properties. The bill would remove the current tax credit cap of $100,000 per project, permit the state credit to be bifurcated from the federal historic tax credit, make the state credit refundable, and permit the state credit for projects with rehab expenditures between $50,000 and $250,000 that don’t meet the requirements for the federal historic credit.
In his “state of the state” address in January, Maine Gov. John Baldacci said he supports an historic rehabilitation tax credit. “For a modest investment” he stated, “we can attract millions of dollars worth of growth, which will bring new jobs, new revenues, affordable housing and new life to our cities and towns.”
