Today, the New Jersey Senate Budget Committee passed the historic rehabilitation tax credit bill, the Historic Property Reinvestment Act (HPRA) and sent it to the full Senate for a final vote.  Senate prime sponsor Sen. Barbara Buono (Metuchen) spoke passionately and at length about the importance of preserving heritage and unique and historic places as the Committee began consideration of the legislation.  Questions from committee members about the job creation and fiscal impacts of the proposed financial incentive were fielded by speakers Hon, Mary-Anna Holden, Mayor of Madison, NJ and Preservation New Jersey President; Walter Gallas, Northeast Field Office Director of the National Trust for Historic Preservation; Trenton real estate developer David Henderson of HHG Development; and PNJ Executive Director Ron Emrich.

The 9 – 1 affirmative vote came with support from members of both parties.  The final hurdle for HPRA is a full Senate vote, probably in mid-January, plus a pro forma correcting vote in the Assembly.  The signature of Gov. Chris Christie would enact the long-awaited bill.

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More than thirty states across the nation continue to reap a bonanza of surging economic activity by providing state historic tax credits to taxpayers undertaking qualified renovations of historic structures. The most successful state programs have been intentionally designed to compliment the existing federal historic tax credit program, creating significant efficiencies for already overburdened developers and spurring more private/public investment than would otherwise occur.

Recognizing this economic upside and the “green” nature of historic preservation, New York State just amended its state historic tax credit program. The previous incarnation had several limitations, especially related to transferring the credit and its modest dollar ceiling of $100,000, which had negligible real world impact on projects costing tens of millions. While the amended legislation is to be cheered as a step in the right direction – greater symmetry with the federal tax credit program and raising the credit ceiling to $5 million per project – the practical effects are not quite so rosy.

As a result of income and other regulations in the U.S. Internal Revenue Code, the majority of owners and developers of historic structures find that they cannot efficiently utilize the earned historic tax credits. Under the federal program, this problem is solved by taking on an investment partner and/or long term lessee for the project who can use the credits in accordance with law. This investment partner and/or long term lessee will provide equity funds to the deal in return for the credits and other financial benefits. In effect, a transfer of the credit occurs to optimize the value of the credits and to stimulate projects that might have otherwise had a gap in their financing sources. Herein lies the Achilles’ Heel of New York’s amended historic tax credit legislation. (more…)