Cherrytree Group LLC Blog

State’s construction industry gets a little lift from 14 projects

Minnesota’s Historic Rehabilitation Tax Credit appears to be producing construction jobs.

14 projects had preliminary approval to take advantage of the tax credit, according to a report released Monday. Developers expect the projects to create 1,808 construction jobs — and a total of 2,948 jobs when indirect and induced jobs are counted.

That’s in line with the 1,500 to 3,000 construction jobs a year that the Minnesota Historical Society and the Preservation Alliance of Minnesota predicted would be created when former Gov. Tim Pawlenty signed the tax credit into law in 2010.

The tax credit is creating construction jobs at the same time that the industry appears to be improving after years of decline. Last month, Minnesota posted its first 12-month gain in construction jobs since April 2006.

The credit covers up to 20% of qualifying rehabilitation expenses; that’s on top of a federal tax credit that can cover another 20%. Supporters say job creation is reason enough for the state Legislature to keep the state tax credit going.

Minnesota’s construction industry remains in a state of “depression,” with more than 50,000 jobs lost between 2006 and 2011, so every bit helps.

Developers plan to spend an estimated $343 million on the 14 projects, with $250 million going toward rehabilitation expenses that qualify for the tax credit. Total economic impact is expected to be $451 million — about $9.20 for every dollar of the $49.1 million of tax credits going toward the 14 projects.

Besides the 14 projects mentioned, there are an additional 14 that have since applied and another handful of developments are considering it, the Minnesota Historical Society. Contrast that with 2009, when only two Minnesota developments were seeking the federal tax credit.

Steve Elliott, the Historical Society’s director and chief executive officer, described the state historic rehabilitation tax credit program as a “resounding success” during a Monday morning news conference.

Original article Finance & Commerce

…by Warren Kirshenbaum

The Louisiana Main Street program resides in the Louisiana Division of Historic Preservation. Louisiana has 34 designated local Main Street communities. Main Streets apply a four-point approach to the revitalization of their historic commercial districts: organizational development, design and preservation, economic development and promotion.

In order to facilitate preservation, federal and state tax credits exist for commercial historic rehabilitation.
The purpose of tax credits is to encourage the preservation of historic buildings through incentives to support rehabilitation of historic and older buildings.

What is a tax credit?
A tax credit is a direct, dollar for dollar, reduction in the amount of money a taxpayer must pay in taxes for a given year. For example, if a taxpayer owes $5,000 in taxes to the Internal Revenue Service, but has a $3,000 credit, he only pays $2,000. A credit is much better than a deduction which merely reduces a taxpayer’s income and puts him in a lower tax bracket.

Federal Historic Rehabilitation Tax Credit

• The Federal Rehabilitation Tax Credit is for 20 percent of the costs of rehabilitation expenses for an income producing building.
• The credit is available for income-producing properties that are contributing elements to a National Register Historic District, or individually listed on the National Historic Register. All properties must be certified by the National Park Service.
• To qualify, the rehabilitation work must exceed the adjusted basis for the building (either the purchase price minus the value of the land, or the current depreciated value).

• The building must be a contributing element to a Downtown Development District (DDD) or a Cultural District.
• The building must be used for an income-producing purpose.
• Eligible expenses must exceed $10,000.
• This credit may be used in addition to the Federal Historic Rehabilitation tax credits, provided that the most stringent program requirements are met. It may also be combined with the State Residential Tax Credit Program if the building is mixed-use.