Tennessee Legislation Would Create State HTC

Tuesday, February 16, 2021 - 11:00am

Bills in the Tennessee Legislature would establish a state historic tax credit (HTC) worth 25% of qualified rehabilitation expenditures, with a 5% bonus for properties in specially designated areas. S.B. 678 (and an identical bill in the Tennessee House) would mirror the federal HTC with the addition of the bonus for designated areas (which include designated Tennessee main street communities or downtown communities, federal opportunity zones, counties with populations of less than 500,000, Tier 3 or Tier 4 counties and disaster areas). The state HTC would have a statewide annual cap of $5 million and 65% of the annual allocation would be reserved for projects in the special designated areas. The credit would be taken in one year with an individual cap of $500,000 per taxpayer, although it could be carried forward for up to seven years if the credit exceeds tax liability. The credit would apply to properties that began construction Jan. 1, 2020, or later and would be repealed Dec. 31, 2025. All seven states that border Tennessee currently have state HTCs.

The 2020 Edition of the Novogradac Historic Rehabilitation Handbook provides an overview of the HTC and the intricacies of the federal and state HTC incentives.