The Economic Development and State Historic Tax Credit Act
Governor Jerry Brown vetoes legislation
Assemblywoman Toni Atkins (D-78) of San Diego introduced The Economic Development and State Historic Tax Credit Act (AB 1999), legislation for a California Historic Rehabilitation Tax Credit to benefit economic development of properties on or eligible for the State or Federal Register of Historic Places.
If approved, California would have provided a state income tax credit equal to 20% of approved expenses on structures listed in the National Register of Historic Places or the California Register of Historical Resources, both income-producing buildings and non-income-producing buildings (private residences). It could be used together with the 20% federal credit or separately, depending on the project and specific regulations. A 5% additional credit would apply for projects containing a majority of low-income housing units, involving surplus government properties, or located in economically distressed areas, Base Realignment and Closure Act zones, or Transit-Oriented Development areas.
The bill cleared the Senate Appropriations Committee with a 6-0 vote to approve, the Senate with a 35-0 vote to approve, and back to the Assembly with amendments and a 74-0 vote to approve. Despite the overwhelming support, the Governor vetoed the legislation on September 29, 2014.
The broad-based coalition under the leadership of the California Preservation Foundation and the California Council of the American Institute of Architects intends to press for the passage of similar legislation in the future.
The Economic Development and State Historic Tax Credit Act (AB 1999), introduced during the 2014 legislative session, was sponsored by a broad-based coalition under the leadership of the California Preservation Foundation and the California Council of the American Institute of Architects. Leading preservation organizations, property owners, developers, affordable housing advocates, and builders supportwd this incentive.
Proposed features of the bill included:
- A 20% tax credit
- A 5% bonus for certain projects (local, state or federal surplus properties, low-income housing, BRAC zones or Transit-Oriented Development areas)
- Use of the credit by income-producing properties and owner-occupied buildings
- An annual aggregate cap on the tax credit program
- ($50,000,000 proposed)
Other provisions included:
- Project screening by CA “Go Biz” (or other government agency) to demonstrate the return on investment to the state.
- Projects may be subject to a prevailing wage requirement under certain conditions. This would not apply to owner-occupied residences.
- An effective date of January 1, 2015.
If passed, this bill would have:
- Created construction and building industry jobs.
- Enhanced state tax revenues through increased economic activity, employment, and wages.
- Increased local revenues through increased property values, sales tax, and heritage tourism.
- Stimulated the economy and sustainable development, reduce blight, and preserve the rich legacies of California communities.
- Combined these credits with other tax credits for greater leverage.
Thirty-five states have similar programs. State rehab tax credits allow a property owner to claim a percentage of their rehabilitation expenses against state income taxes and are usually designed to complement the Federal Rehabilitation Tax Credit. These revenue-enhancing programs more than pay for the initial one-time economic cost of the rehabilitation credit. Studies show that a third of the initial cost of a credit is paid back during the construction phase, prior to the issuance of any credit. Missouri reported that one project generated enough in new sales and income taxes to repay the state for the taxcredit within the first five years. The California program will include a project analysis to calculate the return on investment to the state.
The California program can be a powerful force for historic places throughout Los Angeles County: revitalizing economically depressed urban areas and local communities adjusting to the phase-out of redevelopment dollars; stimulating public and private investment; and building civic pride as we
celebrate our heritage and preserve California’s past.
As a member of the California Historic Tax Credit Coalition, the Los Angeles Conservancy strongly urged support for The Economic Development and State Historic Tax Credit Act (AB 1999) and all that it can do to stimulate private investment and advance historic preservation goals.
If passed, The Economic Development and State Historic Tax Credit Act (AB 1999) would have done the following:
1. Stimulated local economies
2. Revitalized downtown areas and communities
3. Promoted affordable housing
4. Demonstrated inherent sustainability
5. Supported smart growth and new urbanism
6. Encouraged owners to list their historic properties
7. Encouraged property maintenance and rehabilitation
8. Leveraged use of the federal rehabilitation tax credit
9. Benefited heritage tourism
10. Enhanced California’s leadership role in sustainability and protection of historic places
To learn more, see sample letters, and to keep up-to-date on the latest developments, please visit the California Preservation Foundation's website.