WASHINGTON, D.C. — U.S. Senator Gary Peters (D-MI) today announced that he has cosponsored bipartisan legislation to encourage economic development by making common-sense changes and enhancements to the federal Historic Tax Credit (HTC).
Projects that receive credits help revitalize communities, encourage private investment, and create safer, more secure neighborhoods. Since 2002, 298 Federal Historic Tax Credit projects have been completed throughout Michigan, from $342 million in tax credits. These projects have created 27,500 jobs, including 16,072 permanent jobs; generated $2 billion in income; and yielded $430 million in tax revenue. There are approximately 60 ongoing projects in the state.
“Michigan’s historic sites not only tell the story of our state and our people, but they attract visitors and tourists, boosting the economy and creating jobs in the communities where they are located,” said Senator Peters. “This bipartisan legislation would help expand these preservation efforts to new types of projects like community theaters, schools and libraries and encourage redevelopment, particularly in small and rural communities.”
Several sites in the Upper Peninsula have benefited from rehabilitation projects supported by the federal historic tax credit, including the Landmark Inn in Marquette.
Congress created historic preservation tax benefits in 1976 to encourage voluntary, private-sector investment in preserving historic buildings. The program is jointly managed by the National Park Service (NPS) and the Internal Revenue Service (IRS), in partnership with State Historic Preservation Offices.
The Historic Tax Credit Act of 2015 would expand the federal historic tax credit in the following ways:
· Increase for small projects: Creates a 30% credit for smaller deals with Qualified Rehabilitation Expenses of under $2.5 million, changing the credit allowed from $500,000 to $750,000 on the largest projects in this bracket.
· Allow transfer for small projects: Allows the credit to be transferred as a tax certificate for small transactions under $2.5 million, making these deals easier for small project owners.
· Expand types of buildings eligible: Changes the definition of “substantial rehabilitation,” which allows projects to qualify for the tax credit only if the cost of rehabilitation exceeds the building’s pre-rehabilitation cost. This provision would allow a project to qualify for the credit if its cost exceeds the greater of $5,000 or 50% of the building’s adjusted basis. The current threshold is 100% of adjusted basis.
· Reduce depreciable basis adjustment: Changes the amount of the depreciable basis adjustment from 100% to 50% of the amount of the credit, so that applying the credit reduces depreciable value by only 50%.
· Eliminate taxation of state credits: Eliminates federal taxation of income from state historic tax credits.
· Modify tax-exempt use rules: Limits the definition of a “disqualified lease” to those leases that are part of a sale leaseback arrangement involving a nonprofit that has used the property before certification as a historic rehabilitation. The other types of disqualified leases that inhibit the rehabilitation of these buildings: those with purchase options, leases in excess of 20 years, and leases in buildings that use tax-exempt financing, would be eliminated..
· Eliminate “functionally related” requirement: Currently, an owner can only obtain historic tax credit certification for a group of buildings if they are determined to be “functionally related historically” such as a mill complex or carriage house. This provision would eliminate that requirement, allowing owners to apply the historic tax credit to a project encompassing any group of buildings.
[Information courtesy Office of Senator Gary Peters]