The Virginia General Assembly and Governor Terry McAuliffe have proposed a change to the state historic rehabilitation tax credit program that could affect real estate development statewide. The bill was introduced after a Senate panel killed Senator Glen Sturtevant’s proposed bills to cap and phase out state historic tax and other credits.
HB 2460 would take effect for taxable years beginning on and after January 1, 2017, but before January 1, 2019. The proposed changes provide that the amount of annual state historic tax credit each taxpayer uses may not exceed $5 million. The limit would also apply to state historic tax credits carried over from prior years.
The bill is proceeding to the Governor for signature into law.
Assuming the bill becomes law, the bill’s impact will be to impose a limit, for tax years beginning in 2017 and 2018, upon the amount of state historic credits each taxpayer may use annually-not a cap on state historic credits generated per-project. In other words, the cap created by the bill applies to users of the state historic credit, not to projects generating the state historic credits. Larger projects with more than $20 million of qualified expenditures would still have the ability to generate more than $5 million of state credits.
The bill would, however, limit taxpayers using more than $5 million of state historic credits for tax years beginning in 2017 and 2018, thus limiting some larger investors from investing in projects for state historic credits (or from realizing the full benefit of investments already committed to projects) and potentially impacting investor pricing for state historic credits. It remains to be seen whether new investors will be available to invest in projects to take up any state historic credits not taken by larger investors as a result of the bill.
The General Assembly will likely revisit the state tax credit program in next year’s session. During the rest of the year, developers and builders should remind their delegates and senators of the important role state historic credits play in funding qualifying historic rehabilitation projects.
Below are some tips for reaching out to state legislators:
Provide examples of renovated, newly productive buildings made possible, in part, because of the state historic credit program. Cite the number of jobs created by these projects.
Communicate the state historic credit program’s key role in reviving Virginia’s large and small communities.
Invite legislators to groundbreakings and grand openings of historic rehabilitation projects.
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