The House Taxes Committee is considering doing something historic.
That would be extending the state’s historic structure rehabilitation tax credit. Set to sunset at the end of this fiscal year (June 30, 2022), the credit may live on.
Sponsored by Rep. Cheryl Youakim (DFL-Hopkins), HF3688 would extend the sunset date to 2030, and allow the credit to be taken in one lump sum, instead of over a five-year time period.
On Wednesday, the bill was laid over by the House Taxes Committee for possible inclusion in an omnibus taxes bill. It has no Senate companion.
“Since 2010, over 110 completed tax credit projects across Minnesota have generated $5 billion in economic activity,” said Heidi Swank, executive director of Rethos, a nonprofit that advocates for the use of old buildings and sites. “The impact of the historic structure tax credit is particularly dramatic in Greater Minnesota, where every single dollar of tax credit invested yields more than $16 in economic activity. … An eight-year extension gives communities, developers and local governments the time and security they need to pursue historic redevelopment.”
The historic rehabilitation credit is a refundable credit equal to 20% of qualified rehabilitation expenditures. Those receiving it must qualify for the federal historic rehabilitation tax credit. Like that credit, Minnesota’s is spread over five years in a series of five installments. But that would change with the bill’s lump sum provision.
The Revenue Department estimates the change would reduce the General Fund by $31.8 million in fiscal year 2023, with that figure dropping to $14.6 million in fiscal year 2024.
A University of Minnesota Extension Service report on the tax credit said developers filed a record 34 applications during fiscal year 2021, largely a result of the planned sunsetting of the program.
Those project developers planned to spend $890 million to complete their projects. Taking ripple effects into account, the projects are expected to generate about $1.4 billion of economic activity in the state and $693.4 million in labor income while supporting 9,660 jobs.
The report said that every dollar of tax credit created $11.30 of economic activity in the state, and that construction of the projects will repay 50% of the credit cost immediately upon completion, through increased state and local tax collections.
“All of us live in towns or have towns near us that have buildings like this,” said Rep. Bob Dettmer (R-Forest Lake). “So I definitely support this extension.”