Historic Tax Credit and New Market Credits Face Elimination Under New Tax Bill

The recent release of the Tax Cuts and Jobs Act has left real estate professionals questioning the future of commonly used incentives. The new bill is currently a draft and legislation has not passed, but developers need to be aware of the effect of these potential changes.

Historic Tax Credits

The House bill proposes eliminating the 10% and 20% federal historic tax credits entirely. The Senate bill proposes retaining historic tax credits, but reducing the amount from 20% to 10% of qualifying rehabilitation expenditures and eliminating the 10% credit for non-historic buildings built before 1936.

The historic tax credit has been instrumental in creating jobs and generating tax revenue for St. Louis. Projects such as the Mercantile Exchange entertainment district, Arcade Building and the @4240 building in Cortex have all utilized historic tax credits.

New Market Tax Credits

Under the new bill, no new additional New Market Tax Credits would be allocated after December 31, 2017. The New Market Tax Credit is currently authorized through 2019, so this legislation would repeal two years of allocation authority. The New Market Tax Credit is a public-private partnership that attracts private capital to some of the country’s most distressed communities to revitalize and promote economic opportunity. Last year, the St. Louis Development Corporation received $75 million in federal New Market Tax Credits to assist key projects in the City including charter schools, health facilities and child care providers.

The proposed plans eliminate these programs as a way of helping pay for corporate and individual income tax cuts. We will cover developments as legislation passes. Contact an Anders advisor with any questions on how the proposed changes may affect you or your business.