Improvements to New York Historic Rehab Tax Credit

www.bhlawpllc.com/resources/pdf/Improvements to Historic Rehab Tax Credit.pdf

Dramatic Improvements to New York's Historic Tax Credit Proposed By Governor Cuomo

Governor Cuomo has submitted his proposed FY 2013-14 Executive Budget to the Legislature.  Therein, the Governor has proposed dramatic enhancements to New York's Historic Rehabilitation Tax Credit.  While these changes would make significant improvements to the program, there are features of the changes that need further discussion and examination.

The proposal makes three significant changes:

• Extender.  The proposal would extend New York's current Historic Rehabilitation Tax Credit until 2020 (under current law, the credit would revert to its traditional $100,000 cap at the end of 2014).

• Census Tracts.  The proposal would change the criteria for determining census tracts that are eligible for the New York credit (presumably in a fashion better targeted towards blight, unemployment and poverty).

• Refundability.  The proposal would make, beginning in 2015, the New York credit fully refundable.

For years, developers of historic properties located in distressed census tracts have struggled to fully maximize the value of the New York credit for their projects.  The limitations on the use of the New York credit has reduced the economic benefit recognized by the State from offering the credit.  The proposal to make the credit refundable would correct these problems and ensure that the incentive has maximum economic impact.

Developers of historic properties have two issues they may wish to address with the Legislature.  First, the Governor's proposal tacitly rejects the increase in the cap on the credit (from $5 million to $12 million).  While this will not impact very many projects, it will have a dramatic impact on a few projects across the state that are key to economic redevelopment of distressed urban areas.

Second, the Governor's proposal would delay refundability until 2015.  This raises the following questions and comments:

• As the credit is currently an unlimited carry-forward item, will refundability be available in 2015 for tax credit claimed in prior tax years?  This may include projects placed in service in prior years or in 2013 and 2014.

• With the delay in refundability, and with many projects currently in planning that have an expected placed in service date in 2013 or 2014, should the credit be made refundable beginning with tax years commencing on or after January 1, 2013?

The proposal would have maximum impact if either the effective date of refundability is changed to January 1, 2013, or the State confirms that refundability would attach in 2015 to credits claimed in prior years and treated as carry-forward items.

If you have any questions or comments, you can reach me at tim@bhlawpllc.com or at (315) 701-6426.