H.R. 1043 / S. 584
On February 14, 2007 H.R. 1043, Rep. Stephanie Tubbs Jones (D-Ohio) with Rep. Phil English (R-PA) as the minority party lead reintroduced the Community Restoration and Revitalization Act. The act contains important amendments to the existing Federal Historic Rehabilitation Tax Credit Program (FRTC). The Senate companion bill is S. 584.
According to the National Park Service, in 2005 alone the existing Federal Tax Incentives for Rehabilitating Historic Buildings produced more than $3.1 billion in private investment, created 52,464 jobs and created or renovated 14,354 housing units nationwide. Since its inception in 1976, the Rehab Credit has generated over $36 billion in renovation and revitalization dollars, and has helped build over 170,000 housing units in total; 60,000 of which were affordable. It is the largest federal incentive promoting urban/rural revitalization through private investment in historic buildings.
These proposed amendments in H.R. 1043 deepen the program’s capacity for community revitalization and affordable housing helping historic properties throughout the state, particularly in economically distressed urban and rural communities, and make them easier to use by spurring greater investments in smaller commercial projects and properties in older neighborhoods.
Some of the Principal Amendments Include:
+ Expanding the tax credit to 40% for projects that are $2 million or less, which will greatly benefit smaller commercial rehab developments. The 40% credit applies to the first $1 million in projects under $2 million. This would be a huge gain for “Main Street” type projects, especially in distressed older downtowns, where the costs of setting up rehab credits are currently too prohibitive.
+ Making the 10% credit available for rental housing and changing the definition of qualifying buildings to “50 years or older”. Currently, this credit is only available for commercial properties and buildings “built before 1936.” The 50-year definition will also avoid the need for future legislative updates. The current provision requires the payback of the credit if the property is sold within five years, which eliminates usage of this credit for many developers. H.R. 1043 broadens the tax credit’s use to include condominium developments and eliminates the payback penalty.
+ Increasing the FRTC in “high cost areas” to 130% of qualified rehabilitation expenditures. The 130% increase would also apply to Qualified Census Tracts and difficult to develop areas. This results in a greater subsidy for distressed areas such as the Mohawk Valley.
download Preservation Action's Legislative Briefing on HR1043
download The National Park System's "Recommendations"
New York Rehabilitation Tax Credit Program
In 2006, New York State became the twenty-eighth state to enact tax credits for the rehabilitation of historic properties when it passed the New York Rehabilitation Tax Credit Program (Chapter 547 of the
Laws of 2006). The program provides a first-ever financial incentive for homeowners and homebuyers for upkeep and stewardship of historic homes. The commercial tax credit offers a financial incentive that complements an existing federal program for historic structures, likely attracting additional projects to the federal program. This will provide enhanced opportunity for the financing of smaller projects.
The program establishes state income tax credits for the rehabilitation of historic homes and other properties. The historic homeownership rehabilitation credit is equal to 20% of the qualified rehabilitation expenditures, capped at $25,000. The historic property rehabilitation credit equals 30% of the federal historic preservation tax credit, capped at $100,000.
The residential credit applies only to buildings within state and national register districts. Some local landmark districts qualify since they are also state and/or national districts, but many do not. It applies only in identified community renewal areas of communities that have enacted a “historic preservation and community renewal program.” Approximately 11,000 historic residential structures are qualified statewide, primarily in urban neighborhoods.
The bill also includes incentives for historic commercial properties. National Register-listed or -eligible commercial properties that qualify for the Federal Rehabilitation Tax Credit would qualify for an additional New York State Income Tax Credit, covering 30% of rehabilitation costs, up to a credit value of $100,000.
While this legislation is certainly welcomed, a broad coalition of stakeholders is proposing changes that are needed to make this program as successful as those in other states. They suggest changing the current State 6% credit to 30%; removing the current $100,000 limitation on credit value, and allowing a project sponsor to transfer or convey commercial tax credits to entities with New York State tax liabilities. These changes are needed to help attract project sponsors to the more economically distressed communities of upstate New York in particular.
UPDATE:
In late April, Senator Frank Padavan introduced S.5425 and Assemblyman Sam Hoyt introduced A.7935. These bills make a series of important technical corrections and improvements to the recently enacted tax credit. In addition, this legislation increases the rate of credit to 30%, a level meaningful enough to stimulate revitalization.
With these changes the NYS rehabilitation tax credit program will closely model the highly successful Rhode Island tax credit program. Rhode Island has experienced more than an 800% increase in historic rehabilitation and adaptive reuse projects with more than 75% of these projects taking place in economically challenged areas. Further, an independent study has shown that for every $1 in tax credit the Rhode Island program generates $5.47 in economic output.
With the end of the legislative session quickly approaching it is imperative that we make a real push for enactment. The bills must proceed through the Ways & Means Committee (RoAnn Destito) in the Assembly and the Finance Committee in the Senate.
download The Preservation League of New York's Proposed Legislative Changes
FOR MORE INFORMATION ON PRESERVATION LEGISLATION: Preservation Action