• States Extend Historic Preservation Tax Credits
  • December 8, 2015 | Authors: David H. Godenswager; David M. Kall
  • Law Firm: McDonald Hopkins LLC - Cleveland Office
  • North Carolina

    An article in The News & Observer this past summer opined on the state of historic tax credits in the Tar Heel State. The article cited a legislator who lamented the fact that in the economic development arena, “South Carolina is eating our lunch,” and the president of Preservation North Carolina, Myrick Howard, agreed that North Carolina is losing its advantage in the preservation of architectural and historic resources.

    Myrick attributed this to the December 2014 sunset of tax credits that made it easier to rehabilitate historic structures. Indeed, he declared, the effects of the tax credit were tangible: The private sector spent nearly $2 billion to revive key areas throughout the state, like downtown Durham, Raleigh, Winston-Salem, Asheville, Salisbury, Mount Airy, New Bern, and Edenton during the existence of the tax credit.

    However, tax credits are not without controversy. Some opponents claim that these kinds of tax credits go against tax reform and leave local governments without skin in the game. Nevertheless, support for the tax credits is generally widespread, and Howard observed, “[p]robably no tax incentive in North Carolina has generated a better return for the state in jobs, economic development, and community livability and pride. Without this incentive, North Carolina is losing out; jobs and investors are leaving the state in droves. Buildings are sitting empty.”

    Recognition of the economic impact of the credits is evident in the 2015-17 budget. Lawmakers renewed the tax credits on income producing properties, effective Jan. 1, 2016. They also allocated $8 million of general funds for the biennium.

    The budget specifies that a taxpayer who is allowed a federal income tax credit for making qualified rehabilitation expenditures for a certified historic structure is allowed a state tax credit as follows:
    • 15 percent for expenses up to $10 million
    • 10 percent for expenses between $10 million and $20 million
    The budget also establishes the following bonus credits:
    • A development tier bonus of 5 percent of qualified rehabilitation expenditures, up to $20 million if the certified historic structure is located in a development tier one or two area.
    • A targeted investment bonus of 5 percent of qualified rehabilitation expenditures, up to $20 million, if the certified historic structure is located on an eligible targeted investment site.
    The maximum amount of credit allowed is $4.5 million. Additionally, the tax credit may not exceed the amount of tax owed by the taxpayer, and any unused portion of the credit may be carried forward for 9 years.

    These credits are scheduled to sunset on Jan. 1, 2020.

    Georgia

    Similarly, the Peach State revised its tax credit for the rehabilitation of historic structures by way of House Bill 308.

    Effective Jan. 1, 2016, Georgia will allow a tax credit for the rehabilitation of certain certified historic structures, up to $5 million. If the project creates 200 or more full-time permanent jobs, or $5 million in annual payroll within two years of the placed in service date, the project is eligible for credits of up to $10 million. It should be noted that the credit for certified historic homes is capped at $100,000 in any 120-month period.

    All or a portion of any historic preservation tax credits claimed, but unused, may be transferred or sold to another Georgia taxpayer under certain conditions.

    “Many states are improving their Historic Tax Credits to revitalize historic areas. A big change to look out for is the transferability of state credits, which can help developers partially finance a project,” mentioned a PRNewswire article.