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Historic Tax Credits News Briefs - May 2021

A bipartisan group of House of Representatives members April 1 introduced the Historic Tax Credit Growth and Opportunity (HTC-GO) Act of 2021, a bill that includes a temporary increase in the federal historic tax credit (HTC) and a permanent increase in the HTC percentage for small projects. The legislation would increase the HTC percentage from 20% to 30% for 2020-2024, then begin a gradual decline back to 20% by 2027. The bill also would provide a permanent increase in the HTC percentage to 30% for the first $2.5 million of qualified rehabilitation expenditures (QREs) for smaller projects; a drop in the substantial rehabilitation test threshold from 100% to 50% of the adjusted basis; the elimination of the HTC basis adjustment and elimination of the Internal Revenue Code Section 50(d) income recognition requirement and more. Reps. Earl Blumenauer, D-Oregon; Darrin LaHood, R-Illinois; Brian Higgins, D-New York and Terri Sewell, D-Alabama, are the original sponsors of the bill.

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Rep. Earl Blumenauer, D-Oregon, reintroduced legislation Feb. 26 to reinstate the non-historic rehabilitation tax credit as a 15% credit. The Revitalizing Economies, Housing and Businesses Act of 2021 (H.R. 1483) would apply to rehabilitation expenses for buildings that are more than 50 years old, including adjacent properties on the same block, provided the property is within a half-mile of an existing or planned public transportation center. A bonus credit of 25% would be available for expenses related to affordable housing and public infrastructure.

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The federal HTC created more than $6.5 billion in private investment in historic preservation and community revitalization in fiscal year 2020, according to the National Park Services’ annual report. Federal Tax Incentives for Rehabilitating Historic Buildings: Annual Report for Fiscal Year 2020 detailed 939 certifications of completed work (Part 3), with 5,730 rehabilitated housing units and 10,894 new housing units. The NPS reports that there has been more than $109 billion investment in rehabilitation since the HTC incentive began in 1977, featuring 46,372 certified projects. According to the report, Virginia (108) and Missouri (92) had the most Part 3 approvals in 2020.

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The IRS’s Office of Chief Counsel issued a memorandum March 8 clarifying that the installation of accessibility ramps on historic buildings to comply with the Americans With Disabilities Act won’t jeopardize the tax deductibility of contributions to preserve the building. Easements to facilitate the preservation of historic buildings can qualify for tax breaks under IRS Section 170(h) and IRS Chief Counsel Memorandum AM 2021-001 says ramps for people with disabilities doesn’t interfere with the donor’s right to take a tax deduction on the easement. The guidance is not binding in court, but indicates the position the IRS will take in audits.

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A bill introduced Feb. 18 in the West Virginia Senate would eliminate the sunset date and transaction cap for the state HTC. S.B. 344 would remove the Dec. 31, 2022, expiration date for the state’s 25% HTC, as well as the $10 million cap for a single project, the $30 million annual statewide cap and the $5 million set-aside for small projects.

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A bill introduced Jan. 27 in the Maine Legislature would extend the state HTC for 15 years. L.D. 240 includes a provision that would change the sunset date for the Maine HTC from Dec. 31, 2025, to Dec. 31, 2040. The Maine HTC is a 25% credit if the property qualifies for the federal 20% credit, with a transaction cap of $5 million per year.

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A bill introduced in the Nebraska Legislature earlier this year would eliminate the sunset date for the Nebraska Job Creation and Mainstreet Revitalization Act, part of the state’s HTC incentive. L.B. 194 also adds a provision to increase the credit percentage from 20% to 25% for counties with a metropolitan or primary city and to 30% for other counties and increases the project cap to $2 million. The bill also makes other changes, including ending the prohibition of single-family detached residences. The Nebraska HTC currently has a sunset date of Dec. 31, 2022.

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Legislation introduced March 4 in the Illinois House of Representatives would triple the annual cap for the state HTC. H.B. 3974 would increase the annual cap from $15 million to $45 million. The bill makes no other changes. Other legislation in Illinois would create a Lincoln-Douglas state HTC for seven cities and extend the River Edge State HTC five years.

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Sweeping tax legislation introduced in the Montana Senate would terminate the state’s HTC. S.B. 399 would decrease the number of income tax brackets, eliminate the state’s capital gains tax and make several other changes, including the elimination of 18 tax credits. One of those targeted for elimination is the Montana Historic Rehabilitation Income Tax Credit, which is worth 25% of the federal tax credit claimed.

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The Mississippi Legislature approved legislation reinstating the refundability of the state HTC, sending the bill to the desk of Gov. Tate Reeves. H.B. 1296 would allow a rebate of up to 75% of the state HTC if the amount of the credit exceeds the taxpayer’s tax liability. The statewide cap for refunds would be $12 million for projects with QREs of less than $1.75 million and $12 million for projects with QREs of $1.75 million or more. Mississippi’s HTC is for 25% of QREs and was extended last summer through 2030, although a previous provision that allowed the rebate was removed.

Journal Category:

Historic Tax Credits

Authors:

Novogradac

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