Fiscal Note - SB 0335 - Authorizes Tax Credits For Renovations of Historic Structures in Historic Districts
L.R. NO. 1196-01
BILL NO. SB 335
SUBJECT: Tax Credits for Historic Structure
TYPE: Original
DATE: February 17, 1997
FISCAL SUMMARY
ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED FY 1998 FY 1999 FY 2000
General Revenue $0 ($28,558) ($26,734)
to to
($2,828,558) ($7,026,734)
Total Estimated ($28,558) ($26,734)
Net Effect on All to to
State Funds $0 ($2,828,558) ($7,026,734)
ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED FY 1998 FY 1999 FY 2000
None $0 $0 $0
Total Estimated
Net Effect on All
Federal Funds $0 $0 $0
ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED FY 1998 FY 1999 FY 2000
Local Government $0 $0 $0
FISCAL ANALYSIS
ASSUMPTION
The Department of Revenue (DOR) assumes the proposal would require
modifications to the income tax systems, forms and schedules. The DOR
assumes the additional programming, data entry and state data center expenses
required to implement this legislation could be handled using existing
resources. The DOR anticipates they can process this credit with existing
personnel, however, if the taxpayers claiming this credit exceeds 1,600, a
Tax Processing Technician for six months of each tax processing year would be
requested.
The Department of Natural Resources (DNR) assumes this proposal would provide
a tax credit program to provide an incentive to rehabilitate historic
properties, similar to the federal investment tax credit for rehabilitation
of historic structures established in 1981. Based on federal tax credit
program data from 1981-1995, and assuming a 25% tax credit, the DNR assumes
an average year's tax credit would amount to approximately $14,000,000.
Because this would be a new state program, the DNR estimates during the first
year approximately 20% of the estimated $14,000,000 credits or $2,800,000
would be claimed. The DNR estimates approximately 50%, or $7,000,000 would
be claimed the following year.
DNR assumes they would request one Architect and related equipment and
expenses including rent expenses to administer this program based on 100
applications per year which is the average number of federal projects during
the same 15-year period. It is estimated that each project requires, at a
minimum, an average of 20 hours. Therefore, a minimum of 2,000 hours per
year will be needed to administer the state income tax credit program.
During the initial years, the resources would be directed toward providing
technical assistance to applicants and potential applicants.
The Architect would review applications including architectural plans &
specifications for compliance with guidelines; provide technical assistance
for applicants; conduct on- site meetings with project architects & owners;
monitor project progress; inspect completed projects to determine eligibility
for tax credit; and complete necessary forms to certify the tax credit.
Oversight assumes the actual credits claimed would depend on future
participation of taxpayers' in historic restoration projects and has
therefore ranged the cost of the tax credit to be from zero to the amount
projected by the DNR based on historical federal data.
As DNR has estimated half of the estimated annual credits would be claimed in
the fiscal note period, Oversight assumes a .5 Architect would be sufficient
to accomplish the requirements of the proposal. Oversight assumes the
architect would be located in existing facilities and has not included costs
for rent. Also, DNR expense and equipment costs have been reduced to conform
with OA guidelines.
FISCAL IMPACT - State Government FY 1998 FY 1999 FY 2000
(10 Mo.)
GENERAL REVENUE FUND
Loss - reduced tax revenue due to $0 $0
Historic Renovation Tax Credit to to
$0 ($2,800,000) ($7,000,000)
Costs - DNR
Personal Service - .5 FTE $0 ($16,384) ($16,793)
Fringe Benefits 0 (4,674) (4,791)
Expense and Equipment 0 (7,500) (5,105)
Total Costs $0 ($28,558) ($26,734)
Estimated Net Effect on ($28,558) ($26,734)
GENERAL REVENUE FUND to to
$0 ($2,828,558) ($7,026,734)
FISCAL IMPACT - Local Government FY 1998 FY 1999 FY 2000
(10 Mo.)
$0 $0 $0
FISCAL IMPACT - Small Business
Small businesses who elect to take advantage of the tax credit for the
renovation of historic structures would be fiscally impacted.
DESCRIPTION
A person who rehabilitates a historic building in a historic district is
eligible for a tax credit against Chapter 143 taxes equal to twenty-five
percent of the cost if the cost exceeds fifty percent of the taxpayer's basis
in the property (investment less depreciation, as determined under IRS rules)
and the rehabilitation meets the standards of the State Historic Preservation
Officer. The credit may be carried back for three years or forward for ten
years.
This legislation is not federally mandated, would not duplicate any other
program and would not require additional capital improvements or rental
space. Any tax credits claimed as a result of this proposal would decrease
Total State Revenues.
SOURCES OF INFORMATION
Department of Natural Resources
Department of Revenue
This Fiscal Note is not an official copy and should not be quoted or cited.