Authorizes the pass-through or transfer of the credits for rehabilitation of historic properties

• Democratic2

◆ The sponsor's argument

Why Brian Kavanagh says this is needed

The Federal Historic Rehabilitation Tax Credit provides for a 20% feder- al income tax credit to support substantial rehabilitation of buildings that are on the National Register of Historic Places, if the project is approved by the National Park Service. The New York State Historic Tax Credit (HTC) is similarly designed to subsidize rehabilitation of historic income-producing properties, providing a credit for 20% of qualified expenditures under $5 million, or 30% of qualified expendi- tures under $2.5 million. The Legislature and the Governor extended the State program for five additional years in the State budget enacted in May 2023. Current State law requires the NYS HTC to be allocated in the same manner and to the same parties as the federal credit, such that projects may get a total credit of 40% for projects with expenditures under $5 million or 50% for projects with expenditures under $2.5 million. Howev- er, when both the federal and state HTC are allocated to the same inves- tor, the pricing of the credits is typically less than if the NYS HTC could be allocated and sold separately from the federal HTC, because there is a smaller number of investors willing to competitively purchase both. This problem is compounded in affordable housing historic rehabil- itation projects, where the federal and NYS HTC are combined with the federal Low-Income Housing Tax Credit (LIHTC). In these cases, the same credit investor must take the federal HTC, the NYS HTC, and the federal LIHTC together. This depresses the pricing of all three credits, as the investor pool for such projects, especially in those areas most in need of housing investment, is extremely limited. As federal LIHTC is one of the largest sources of funding for affordable housing projects, the inability for New York to attract different inves- tors for federal and state HTC hurts affordable housing development in historic buildings statewide and creates funding gaps in such projects because of the depressed pricing across all credits. State taxpayers end up picking up the tab for these funding gaps, as the state housing agen- cy, New York State Homes and Community Renewal (HCR), must then fill these gaps with limited state capital money. And with limited available capital, some projects competing for resources may not happen, meaning affordable units do not get developed and buildings would not be preserved. The bifurcation of federal and NYS HTC investments is there- fore critical to the generation of affordable housing in New York. This legislation also increases the value of the HTC by allowing a non- profit entity like a non-profit affordable developer or a historic pres- ervation organization to sell the credits on behalf of the project. As non-profit entities are tax exempt, this means that the credit sale will be exempt from federal tax, resulting in more capital for the project, which in turn lowers the need for any HCR subsidies to fully finance a historic preservation and affordable housing project.

This is the sponsor's own case for the bill, quoted from their memorandum. It is not Agora's description of what the bill does.