The first major legislative push on restoring historic preservation tax credits begins today in a House Finance committee hearing.
House Bill 152, introduced March 4, lists recommendations of a 15 percent tax credit for qualified expenditures up to $10 million, and a 10 percent tax credit for qualified expenditures between $10 million and $20 million.
By comparison, there had been a 30 percent state tax credit for rehabilitating historic structures before the law was allowed to expire by the legislature Dec. 31, except for some projects that were already pre-qualified.
Also on the agenda is House Bill 89, a Democratic-sponsored omnibus economic-development bill introduced Feb. 12 that includes tax credits for historic preservation and film production.
Senate Bill 287, a companion historic preservation tax credit bill introduced March 12, has been in the Rules and Operations of the Senate committee since March 16.
The two historic preservation bills contain the same provisions as Gov. Pat McCrory’s restoration proposal in his 2015-17 budget plan. McCrory has been crisscrossing the state trying to raise support for the historic tax credits.
However, the Senate bill faces a major challenge getting out of committee despite attracting bipartisan support from 12 co-sponsors that include Triad senators Stan Bingham, R-Davidson; Paul Lowe Jr., D-Forsyth; and Gladys Robinson, D-Guilford.
Several prominent Senate Republican leaders are opposed to carving out tax credit exemptions, saying that continuing efforts to lower the corporate tax rate should be the driving force in making North Carolina’s economy more competitive.
The tax credits in both bills would be made available retroactive to Jan. 1 and not expire until Jan. 1, 2023. The bill requires applicants to also qualify for a federal tax credit.
The state historic preservation tax credit has been instrumental in several revitalization projects in downtown Winston-Salem, with a combined capital investment value of more than $700 million. The main developer has been Wexford Science & Technology LLC with Wake Forest Innovation Quarter.
Another project relying on federal and state historic preservation tax credits involves the $35 million Chatham Mill apartment and commercial real estate project off Chatham Road in downtown Winston-Salem. The developers said that about 40 percent of the project cost is being offset by those tax credits through pre-qualifying.
To attract developers to rural historic rehabilitation projects, the bill's sponsors put in a small carrot: a 5 percent bonus — not to exceed $20 million — if the project takes place in the state's Tier 1 and Tier 2 counties. State law calls for an annual ranking of the state's 40 most distressed counties as Tier 1, the next 40 counties as Tier 2 and the 20 most prosperous counties as Tier 3. Forsyth is a Tier 3 county.
A new 5 percent bonus — also not to exceed $20 million — would be available for qualified projects on an eligible investment site. There also is a provision for up to $22,500 for historic projects that don't produce income.
According to the state historic preservation office, there have been at least 2,483 completed rehabilitation projects related to the tax credits since 1998, spread among 90 of the state's 100 counties.
John Dinan, a political science professor at Wake Forest University, said the challenge to passing the bill is convincing legislators who have touted the corporate tax-rate cut to change their minds.
“The challenge for supporters will be to show that this particular tax credit can be restored in some fashion without unraveling one of the main principles underlying the 2013 tax-reform package,” Dinan said.