Legislators, Developers, and Advocates Urge Action to Re-Authorize State Historic Tax Credit – Make Changes to Address New Federal Rules
New federal tax law weakens effectiveness of historic tax credits – Leaders urge action to de-couple state historic tax credit from federal
Buffalo – Today, February 1, 2018, New York State Assemblymembers Sean Ryan and Crystal Peoples-Stokes, and New York State Senators Chris Jacobs and Tim Kennedy joined with Preservation Buffalo Niagara and local developers to urge action in the state budget to address the future of the New York State Historic Tax Credit for commercial properties.
The legislators visited the Pierce Arrow Business Incubator in Buffalo, a project currently under construction and receiving historic tax credits, and were joined by Jessie Fisher, Executive Director of Preservation Buffalo Niagara, and developers Rocco Termini, Nick Sinatra, and Jake Schneider.
When the federal historic tax credit was joined by the New York State historic tax credit in 2010, projects began to accelerate. Since the state historic tax credit was re-authorized and expanded in 2013, Buffalo and all of New York State have seen significant investments made in historic properties. According to Preservation Buffalo Niagara, for the third year in a row, New York State has been the national leader for the use of the federal historic credits, with over $3.5 billion dollars invested in historic projects from FFY15-17. Over 60% of these investments are located in upstate communities, with over 100 completed projects in greater Buffalo since 2012. The tax credit is directly responsible for creating over 6,000 well-paying construction jobs in Western New York. This number does not count the additional spin-off jobs that come from the newly occupied buildings. If no action is taken, the state historic tax credit will sunset in 2019.
The state historic tax credit also faces a threat from the new federal tax law, which made significant changes to the federal historic tax credit program. The new law spreads the tax benefit over five years rather than allowing the entire benefit to be taken at once. This is expected to erode the ability of the federal credit to attract capital to rehabilitation projects and thus erode the value of the program. Additionally, lowering the overall corporate tax rate from 35% to 22% is expected to make fewer dollars available to invest in this program. According to Preservation Buffalo Niagara, experts such as PlaceEconomics and the National Trust for Historic Preservation have estimated that these changes will lower the value of the tax credit by 9 – 15%, which in many cases in Upstate New York is enough to prevent projects from happening.
The legislators, developers, and advocates are urging action on multiple fronts to allow the state historic tax credit to continue to be an effective economic development tool. The leaders today urged the Governor’s 30-day budget amendments to include:
- Re-authorizing the State Tax Credit immediately, rather than waiting until the 2019 sunset date. Traditionally, a program like this is reauthorized two years before it is slated to sunset in order to sustain investor confidence. That was the case in the 2013 re-authorization.
- De-coupling of the State Credit from the Federal program. Because the state law is piggy backed off of the federal credit, new projects are subject to the diminished incentives of the federal and state program, and are required to take the State credit over a 5 year period, further eroding the value of credits in New York State versus other States who will be able to continue to offer their credits up-front.
- Technical fixes to help Western New York. WNY needs two additional technical fixes to spread the benefit of the historic tax credit to more of our distressed neighborhood centers and rural villages: an increased tax credit rate for small projects under $2,500,000, and credit transferability, to attract increased private capital to NYS credit projects at no cost to the state.
- A fix to ensure tax credits for some projects are not delayed until 2021. The Executive Budget Proposal delays current projects from taking tax credits in certain circumstances until 2021, which will have a major impact on important projects in WNY such as the Northland Corridor Training Facility, and the School 77 low income senior housing project, and discourages new projects from taking place. The leaders are urging the Governor to exempt historic preservation projects from this tax credit delay, the same way he has exempted the film industry tax credits.
Assemblyman Sean Ryan said “The new federal tax law takes direct aim at the historic tax credit and weakens its effectiveness. We have to prioritize action to separate our state historic tax credit from the federal program, and extend our tax credit beyond 2019 to ensure this program continues to be effective. Most importantly, we have to act fast, and include these changes in our state budget this year to provide certainty to developers. Projects to rehab historic properties have been a game-changer for Buffalo and Western New York. If we can keep this program moving forward, we will see a continued economic boost for our region and across our state.”
Assemblywoman Crystal D. Peoples-Stokes said "Western New York would not be the architectural treasure and attraction it is today without the New York State Historic Preservation Tax Credit. Buildings would not be standing much less reused without this program. The sunset of this would create a regional economic ripple effect on residential and commercial space, tourism, film, and more. As the state continues to respond to the federal tax code changes, it’s imperative for this to be included as part of a very important conversation."
Senator Tim Kennedy said "Throughout Buffalo's ongoing renaissance, many developers have dedicated themselves to not only accelerating new growth, but preserving our city's culture and historic structures. They've been able to make these substantial investments, in part, because federal and state historic tax credits have encouraged them to preserve and repurpose these properties.” "It is critical that we reauthorize the state's historic tax credit program in this year's budget, and take steps to decouple the state and federal programs, so that our city continues to build on the momentum we've witnessed."
Jessie Fisher, Executive Director of Preservation Buffalo Niagara said “People in western New York are passionate about the places they live, work, and play. The New York State Historic Tax Credit program has enabled investments in our heritage buildings and neighborhoods and we call on the Governor to renew the program and make structural changes that will allow the program to make even more of a difference to our neighborhood main streets and rural communities.”
Rocco Termini, President of Signature Development Company said “Without a strong State Historic Tax Credit, projects like mine simply can’t happen. With the changes to the Federal Tax Credit, it’s more important than ever for New York State to step up and make the necessary changes to the program that will allow the Buffalo Renaissance to continue.”
Nick Sinatra, President and Founder of Sinatra and Company Real Estate said “Ensuring that the New York State Historic Tax Credit is retained and strengthened is critical to keeping Western New York State competitive and critical to continue to fuel our economic resurgence.”
C. Jake Schneider, AIA, CEO of Schneider Family of Services said "The HTC program has clearly been a valuable tool for Western New York’s development community. With rising construction costs it’s getting harder and harder to revitalize historic structures through adaptive reuse. The changes imposed on the federal HTC program already render a heavy blow to future historic development projects in this community. Any modifications that weaken the program at the state level could bring a screeching stop to all the momentum we’ve generated.”