MBT:  HISTORIC REHABILITATION CREDIT CAP

House Bill 5479

Sponsor:  Rep. Bert Johnson

1^st Committee:  Tax Policy

2^nd Committee:  New Economy and Quality of Life

Complete to 10-20-09

A SUMMARY OF HOUSE BILL 5479 AS INTRODUCED 9-25-09

House Bill 5479 would lift the $3 million-per-tax-year cap imposed on the credit available under the Michigan Business Tax for expenditures on the renovation of a "high community impact" historic resource, but only for projects that met certain specified criteria, as described later.  (Only a project in Wayne County would appear to qualify under these criteria, and the project would have to involve an historic resource at least 80 years old and consisting of at least 500,000 total square feet.)

The Michigan Business Tax Act offers a tax credit for the preservation of historic property.  The credit was carried over from the Single Business Tax, which the MBT replaced.  The credit was revised substantially by legislation enacted in 2008.  One of the changes provides for a new kind of credit aimed at projects with "high community impact"; that is, projects with significantly greater historic, social, and economic impact than others.   Under Public Act 448 of 2008, the director of the Department of History, Arts, and Libraries (HAL), subject to the approval of the president of the Strategic Fund and the State Treasurer, can approve three "high-impact" credits during 2009, of up to 15 percent of qualified expenditures, and two additional credits of up to 15 percent during 2010, 2011, 2012, and 2013.  There is a cap of $3 million per tax year for each of these credits.  If the amount of a credit exceeds the cap, it is carried forward to offset tax liability in future years until used up.

Two of the three credits available in the 2009 calendar year for high community impact projects must be for applications that meet all the criteria in one of two sets of criteria laid out in the MBT Act.  House Bill 5479 would modify the first set of criteria and then specify that the $3 million-per-year cap would not apply to any credit meeting those criteria.

Under House Bill 5479, a project must meet all of the following criteria:  (1) the historic resource must be at least 70 years old (as opposed to the current 80 years old); (2) the historic resource must consist of at least 500,000 total square feet (in contrast to the currently required 75,000 total square feet); (3) the historic resource must be located in a county with a population of more than 1.5 million; and (4) the resource must be located in a city with an unemployment rate at least two percent higher than the average unemployment rate in the state.  (The fifth criterion currently in the act would be removed -- that made the provision apply to a historic resource receiving a federal earmark appropriation and that is the former home of a professional sports team.)  Only a project in Wayne County would qualify under these criteria.

[Note: The act also requires the HAL director to consider all of the following criteria for any high community impact historic resource credit:

o                   The importance of the historic resource to the community.

o                   If the rehabilitation for the historic resource will act as a catalyst for additional rehabilitation or revitalization of the community.

o                   The potential that the rehabilitation of the historic resource will have for creating or preserving jobs and employment.

o                   Other social benefits the rehabilitation will bring.

o                   The amount of local community and financial support for the rehabilitation.

o                   The taxpayer's financial need for the additional credit.

o                   Whether the taxpayer is eligible for the credit allowed under Section 47(a)(2) of the federal Internal Revenue Code.

o                   Any other criteria that the department director, and Strategic Fund president, and the state treasurer consider appropriate.]

FISCAL IMPACT:

By lifting the $3.0 million cap on the credit, to the extent that a taxpayer is able to claim a credit in excess of this amount, MBT (and GF/GP) revenue will decline.

                                                                                           Legislative Analyst:   Chris Couch

                                                                                                  Fiscal Analyst:   Jim Stansell

■ This analysis was prepared by nonpartisan House staff for use by House members in their deliberations, and does not constitute an official statement of legislative intent.