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State Tax Credits News Briefs - February 2013

A report released in December by the Pew Center on the States shows that state lawmakers often approve economic development tax incentives without reliable estimates of the cost or budget impact. The study, “Avoiding Blank Checks: Creating Fiscally Sound State Tax Incentives,” analyzed the 16 costliest economic development bills in the nation that were approved between 2007 and 2011. Only four of the bills included both rigorous fiscal estimates and annual expenditure caps. One example of a bill without fiscal safety precautions was a tax exemption in Louisiana for horizontal gas drillers passed in 1994. The program cost the state $285,000 in fiscal year (FY) 2007, but rapid drilling expansion following the discovery of a large natural gas deposit pushed the cost to $239 million in FY 2010. The report recommended states use cost estimates and annual spending limits on tax incentive bills to help keep the state budget in balance. The report can be found at www.pewstates.org.

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The Online Incentives Exchange (OIX), a Louisiana-based online exchange for the U.S. state tax credit market, plans to expand its operation to all 45 states that offer transferable/refundable tax credits. Instead of trading tax credits through a broker, users of OIX will be able to transact directly on a bid/ask platform. OIX will include state low-income housing tax credits (LIHTCs), state new markets tax credits (NMTCs), state historic tax credits (HTCs) and state renewable energy tax credits as long as they are tradable or transferrable. OIX is members-only but membership is free. Procedures help ensure that only qualified organizations can become members and participants. OIX also vets each credit submitted for sale with the appropriate state governing agency that issued the credit. Clearing and escrow services for the trades will be handled by OIX as well.

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Iowa State Sen. Joe Bolkcom, D-Iowa City, who was reappointed to chair the Senate Appropriations Committee, held a hearing on Iowa’s tax credit programs in December. He asked lawmakers to take a critical look at the state’s tax credit incentives, including those to entice companies to do business in Iowa.

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Connecticut Light & Power distributed more than $900,000 to nonprofit developers through the Connecticut Housing Finance Authority’s housing tax credit contribution program. The program gives one-for-one state corporate tax credits to businesses that donate to approved housing programs. Renaissance City Development Association received $325,000 for the New London County Down Payment program. Eastern Connecticut Housing will administer the funds for down-payment assistance to qualified first-time home buyers to purchase homes in the same city where they work. HOPE Inc. received $500,000 to buy and renovate several distressed homes the city. Habitat for Humanity received $85,500 to develop new homes.

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IBM Corporation will seek state tax credits from the Ohio Tax Credit Authority to expand its Center for Advanced Analytics division in Columbus. The company plans to create 500 jobs there over three years. The Ohio tax credit panel will deliberate on an 8-year, 60 percent tax credit for IBM based on individual state income taxes generated by the new jobs. The Columbus City Council will also consider a Jobs Creation Tax Credit program for IBM and a city Jobs Growth Incentive program.

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In December, the Rhode Island Economic Development Corporation approved changes to the state Renewable Energy Development Fund (REF), which fills a gap in clean energy funding left when the state renewable energy tax credit expired in 2010. The $6.5 million fund will now make loans and grants available to small-scale solar projects and businesses. The new rules will allow energy projects with a capacity of 10 kilowatts or less to be eligible for a maximum $10,000 grant or $20,000 low-interest loan. The grant can cover up to 25 percent of the project and loans cover up to 50 percent of the cost. New regulations for the REF will also include creation of an advisory board to review applications.

Journal Category:

State Tax Credits

Authors:

Novogradac

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