Mississippi legislators say legislation passed this session will put more money into historic preservation and at the same time save the state money.
The new law returns $250,000 to developers for every $1 million invested in a qualified historic preservation project. The measure caps allocations at $60 million, though legislators involved in formulating the bill do not expect the outlays to come near the cap level.
Passed as House Bill 1311, the legislation sets a $1 million threshold on the value of the project in order to qualify for the 25 percent historic renovation tax credit refund. Though the state will be distributing cash refunds, HB 1311 saves the state 25 cents on every dollar allocated for the credits. This is because the developer can take a 75-cents-on-the-dollar credit instead of taking the full credit spread over 10 years.
“It limits the impacts on the loss of revenue,” said Rep. Percy Watson, author of the bill and chair of the House Ways & Means Committee.
Watson said his bill also ensures that more of the dollars awarded for historic preservation actually go into preservation projects. Previously, developers whose tax liability fell short of the amount of credits available would bring on partners who buy the credits. This often would leave the developer receiving only 30 cents to 40 cents on the dollar and the partner — in actuality a middleman who later sells the tax credits — making the rest.
“We modified the bill to limit” the transferability of the credits, said Watson, who noted lawmakers received strong pressure to insert ways to discourage the transfers even further.
State law forbids transferring of the credits but developers could still bring on partners for the sole purpose of selling them unused portions of the tax credits. Extending the credit over a two-year period helps to ensure the developer has sufficient tax liability to make full use o fit, said Rep. Toby Barker, a co-sponsor.
“I think it’s a win-win,” he said. “You’re making the tax credit more flexible for developers and saving some money for the state over the long haul as well.”
The direct refund puts more equity into a preservation project and it does it sooner, Barker noted.
Barker said the tax credits are helping his hometown of Hattiesburg save its past. “It adds so much to the fabric of their community by having these buildings restored to some functionality,” he said.
Earlier in the session, legislators extended the tax credits to 2014.
The process to qualify for the credits begins with the Mississippi Department of History and Archives. A project must qualify for the federal government’s 20 percent preservation tax credit to be eligible for the state credit. In effect, the combined federal and state credits can reduce the cost of a certified rehabilitation of an income-producing historic structure by 45 percent.
For the state credit, a commercial project’s rehabilitation work must equal at least 50 percent of the value of the structure. On residential, the rehab value must be at least $5,000. Residential projects are ineligible for the federal credit.
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