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Tax Credit Round-Up: The Latest News from the States

Published by Jennifer Dockery on Friday, July 1, 2011

Journal cover July 2011   Download PDF

While the mid-December reauthorizations of the Section 1603 grant in lieu of investment tax credits and the reauthorization of the new markets tax credit (NMTC) program were last year’s tax credit nail biters, state legislatures held developers and investors in limbo this year, as lawmakers fought pitched battles over state-level tax credit programs. As the Journal of Tax Credits went to press, many state legislatures had wrapped up or were winding down their sessions for the summer. They left in their wake a changed landscape of tax incentives for developers and investors. Read on to learn about some of the state-level changes that could affect your next project.

Historic Tax Credits
State-level historic tax credit (HTC) programs saw the most change in the last few months.

Mississippi extended its 25 percent HTC until December 31, 2013.

Maryland tweaked last year’s Sustainable Communities tax credit to expand the types of projects that qualify for the credit and directed funds at lower income areas.

New Jersey’s Gov. Chris Christie vetoed a bill that would have created a state HTC.

Michigan eliminated its HTC, brownfield and Michigan Economic Growth Authority tax credits. The state will honor existing tax credit commitments and has formed a task force to explore alternative brownfield incentives, but there is no word on future historic preservation incentives.

Renewable Energy Tax Credits
Iowa’s Legislature modified its renewable energy tax credit at the end of May. The act reduces the size of eligible projects from 150 megawatts (MW) to 50 MW. For non-wind projects placed in service after July 1, 2011, projects cannot be greater than five MW. Legislators also added provisions that allow energy used by the producer to qualify for the credits. It extends the credit until January 1, 2015, but caps the amount of energy produced by eligible projects at 363 MW for wind and 53 MW for other facilities, 10 MW of which is to be reserved for facilities associated with or incorporated in ethanol cogeneration plants.

Near Misses
Tax credit debate got heated in Missouri this session with a number of bills introduced to modify or repeal more than two dozen tax credits. A $30 billion “aerotropolis” tax credit bill intended to encourage the Chinese to make St. Louis a shipping hub was also introduced. As the session ended, some lawmakers accused others of holding unrelated bills “hostage” until a comprehensive tax credit reform bill passed. The session ended without passing any of the bills. At press time, however, there was talk of a special economic session this summer to vote on the aerotropolis tax credit. Stay tuned for the latest developments on that front.

On the Horizon
As the Journal of Tax Credits went to press, many state legislatures were still debating tax credit bills. Here’s a sampling of what could be on the horizon.

In early June, the Louisiana House of Representatives and Senate had passed a bill to extend the HTC until January 1, 2016 for commercial structures. The bill was sent to the governor on June 16.

Rhode Island legislators were discussing reviving the state’s HTC program for commercial buildings, which was frozen in 2008. In March, four senators introduced S. 611 to reinstate the 25 percent HTC for commercial properties. A vote on the bill had not been scheduled at press time.

Illinois could be the next state to create an HTC, at least for urban riverfront areas. S.B. 2168 passed both houses of the Illinois Assembly on May 31. The bill provides a 25 percent tax credit for buildings in River Edge Redevelopment Zones in the cities of East St. Louis, Rockford, Aurora, Elgin and Peoria. The credit would be available for tax years 2012 through 2016.

At press time, Louisiana and Massachusetts were debating economic development programs similar to the federal new markets tax credit.

These are just a few of the tax credit bills that state legislatures are considering. To learn about the latest developments in state tax credits, tune into the weekly Tax Credit Tuesday podcast or visit the state legislation pages on Novogradac & Company’s web site.

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