Amd 210-B, 606 & 1511, Tax L; add Art 14-A 14.15 - 14.18, Pks & Rec L
Authorizes the pass-through or transfer of the credits for rehabilitation of historic properties; authorizes the allocation of the credit in a separate manner from any federal certified historic tax credit.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A9722
SPONSOR: Woerner TITLE OF BILL:
An act to amend the tax law and the parks, recreation and historic pres-
ervation law, in relation to authorizing the pass-through or transfer of
the credits for rehabilitation of historic properties
PURPOSE OR GENERAL IDEA OF BILL:
To allow for greater allocation of the New York State Historic Tax Cred-
it to parties or investors currently ineligible to receive this, credit
and permit non-profit entities to serve as a Historic Tax Credit conduit
to reduce the state capital needed to generate affordable housing.
SUMMARY OF PROVISIONS:
Sections one through three of this bill amend three separate
provisions of the New York Tax Law by adding the same language to each
provision, respectively.
Section one of the bill amends subdivision 26 of section 210-B of the
tax law by adding new paragraphs (g) and (h). Subsection (i) of para-
graph (g) permits bifurcation of the federal rehabilitation credit and
New York State historic rehabilitation tax credit (HTC), as it author-
izes the allocation of HTC with respect to a federally certified histor-
ic structure to investors and pass-through entities other than those to
which the federal tax credit has been allocated on said property.
Subsection (ii) of paragraph (g) permits tenants of certified historic
structures subject to a lease arrangement to receive a transfer of the
HTC from a landlord. Where the landlord of a certified historic struc-
ture under a lease arrangement elects to pass the federal rehabilitation
credit through to the tenant taxpayer, the landlord may opt to either
retain the HTC or to also pass it down to the tenant taxpayer.
Subsection (ii) also defines the term "landlord" for purposes of this
subdivision.
Subsection (iii) of paragraph (g) identifies article 14-A of the parks,
recreation and historic preservation law as setting forth the parameters
for transferring the HTC.
Paragraph (h) directs the commissioner to annually report on the aggre-
gate amount of credits claimed pursuant to this subdivision on returns
filed during the preceding calendar year and to make such report public-
ly available on the department's website.
Section two of the bill amends subsection (oo) of section 606 of the
tax law by adding new paragraphs 7 and 8 with the same language as in
Section one.
Section three of the bill amends subsection (y) of section 1511 of the
tax law by adding new paragraphs 7 and 8 with the same language as in
Section one.
Section four of the bill amends the parks, recreation and historic
preservation law by adding new Article 14-A, Historic Rehabilitation Tax
Credit Transfer Program.
Section 14.15 of Article 14-A defines key terms, including "federal
rehabilitation credit," "pass-through entity," "qualified rehabilitation
expenditures," "regulations," "rehabilitation credit," "transferee," and
"non-profit transferee."
Section 14.16 of Article 14-A authorizes a single transfer of the HTC,
in whole or in part, from one taxpayer, or from a pass-through entity
that may report the rehabilitation credit or otherwise elect to pass the
federal rehabilitation tax credit through to a tenant taxpayer, to
another taxpayer, provided that a transfer conducted through a non-pro-
fit conduit to another taxpayer shall be deemed to satisfy the single-
transfer limit. A partial transfer of the HTC may be for no less than
twenty-five percent of the full HTC claimed by the taxpayer, and a
transferee shall use or report the rehabilitation credit in the year it
is allowed.
Section 14.17 of Article 14-A directs the taxpayer, or a pass-through
entity that may report the credit or otherwise elect to pass the federal
rehabilitation credit through to a tenant taxpayer in accordance with
applicable federal law, to provide an information statement to the
commissioner which includes specified threshold information.
Section 14.18 of Article 14-A authorizes the commissioner to promul-
gate rules and regulations.
Section five of the bill sets forth the effective date.
JUSTIFICATION:
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.
However, when both the federal and state HTC are allocated to the same
investor, 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.
PRIOR LEGISLATIVE HISTORY:
New bill.
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:
To be determined.
EFFECTIVE DATE:
This act shall take effect immediately and shall apply to taxable years
beginning on and after January 1, 2025.
STATE OF NEW YORK
________________________________________________________________________
9722
IN ASSEMBLY
April 3, 2024
___________
Introduced by M. of A. WOERNER -- read once and referred to the Commit-
tee on Ways and Means
AN ACT to amend the tax law and the parks, recreation and historic pres-
ervation law, in relation to authorizing the pass-through or transfer
of the credits for rehabilitation of historic properties
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. Subdivision 26 of section 210-B of the tax law is amended
2 by adding two new paragraphs (g) and (h) to read as follows:
3 (g) (i) The allocation of the credit established by this subdivision
4 may be made without regard to and in a separate manner from any federal
5 rehabilitation credit that may be allocated with respect to a certified
6 historic structure under section forty-seven of the internal revenue
7 code by written agreement of the taxpayer otherwise entitled to claim
8 such credit or by written agreement of a pass-through entity that may
9 report such credit or otherwise elect to pass the federal rehabilitation
10 tax credit through to a tenant taxpayer in accordance with applicable
11 federal law.
12 (ii) With respect to certified historic structures that are subject to
13 a lease arrangement whereby the landlord elects to pass the federal
14 rehabilitation credit through to the tenant taxpayer, not only may the
15 New York state rehabilitation credit be passed down to the tenant
16 taxpayer and then allocated without regard to and in a separate manner
17 from any federal rehabilitation credit that may be allocated, but the
18 landlord may also opt to retain the New York state rehabilitation cred-
19 it. For purposes of this section, a "landlord" means the owner of the
20 certified historic structure for federal tax purposes.
21 (iii) The New York state rehabilitation credit may be transferred as
22 provided for in article fourteen-A of the parks, recreation and historic
23 preservation law.
24 (h) The commissioner shall report annually, on or before the first day
25 of November, on the aggregate amount of credits claimed pursuant to this
26 subdivision on returns filed during the preceding calendar year. Such
27 report shall be provided to the governor, temporary president of the
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD10411-05-4
A. 9722 2
1 senate, speaker of the assembly, chairs of the senate committees on
2 finance and on housing, construction and community development, and
3 chairs of the assembly committees on ways and means and on housing and
4 shall be made publicly available on the department's website.
5 § 2. Subsection (oo) of section 606 of the tax law is amended by
6 adding two new paragraphs 7 and 8 to read as follows:
7 (7) (A) The allocation of the credit established by this subsection
8 may be made without regard to and in a separate manner from any federal
9 rehabilitation credit that may be allocated with respect to a certified
10 historic structure under section forty-seven of the internal revenue
11 code by written agreement of the taxpayer otherwise entitled to claim
12 such credit or by written agreement of a pass-through entity that may
13 report such credit or otherwise elect to pass the federal rehabilitation
14 tax credit through to a tenant taxpayer in accordance with applicable
15 federal law.
16 (B) With respect to certified historic structures that are subject to
17 a lease arrangement whereby the landlord elects to pass the federal
18 rehabilitation credit through to the tenant taxpayer, not only may the
19 New York state rehabilitation credit be passed down to the tenant
20 taxpayer and then allocated without regard to and in a separate manner
21 from any federal rehabilitation credit that may be allocated, but the
22 landlord may also opt to retain the New York state rehabilitation cred-
23 it. For purposes of this section, a "landlord" means the owner of the
24 certified historic structure for federal tax purposes.
25 (C) The New York state rehabilitation credit may be transferred as
26 provided for in article fourteen-A of the parks, recreation and historic
27 preservation law.
28 (8) The commissioner shall report annually, on or before the first day
29 of November, on the aggregate amount of credits claimed pursuant to this
30 subsection on returns filed during the preceding calendar year. Such
31 report shall be provided to the governor, temporary president of the
32 senate, speaker of the assembly, chairs of the senate committees on
33 finance and on housing, construction and community development, and
34 chairs of the assembly committees on ways and means and on housing and
35 shall be made publicly available on the department's website.
36 § 3. Subdivision (y) of section 1511 of the tax law, as added by chap-
37 ter 472 of the laws of 2010, is amended by adding two new paragraphs 7
38 and 8 to read as follows:
39 (7) (A) The allocation of the credit established by this subdivision
40 may be made without regard to and in a separate manner from any federal
41 rehabilitation credit that may be allocated with respect to a certified
42 historic structure under section forty-seven of the internal revenue
43 code by written agreement of the taxpayer otherwise entitled to claim
44 such credit or by written agreement of a pass-through entity that may
45 report such credit or otherwise elect to pass the federal rehabilitation
46 tax credit through to a tenant taxpayer in accordance with applicable
47 federal law.
48 (B) With respect to certified historic structures that are subject to
49 a lease arrangement whereby the landlord elects to pass the federal
50 rehabilitation credit through to the tenant taxpayer, not only may the
51 New York state rehabilitation credit be passed down to the tenant
52 taxpayer and then allocated without regard to and in a separate manner
53 from any federal rehabilitation credit that may be allocated, but the
54 landlord may also opt to retain the New York state rehabilitation cred-
55 it. For purposes of this section, a "landlord" means the owner of the
56 certified historic structure for federal tax purposes.
A. 9722 3
1 (C) The New York state rehabilitation credit may be transferred as
2 provided for in article fourteen-A of the parks, recreation and historic
3 preservation law.
4 (8) The commissioner shall report annually, on or before the first day
5 of November, on the aggregate amount of credits claimed pursuant to
6 this subdivision on returns filed during the preceding calendar year.
7 Such report shall be provided to the governor, temporary president of
8 the senate, speaker of the assembly, chairs of the senate committees on
9 finance and on housing, construction and community development, and
10 chairs of the assembly committees on ways and means and on housing and
11 shall be made publicly available on the department's website.
12 § 4. The parks, recreation and historic preservation law is amended by
13 adding a new article 14-A to read as follows:
14 ARTICLE 14-A
15 HISTORIC REHABILITATION TAX CREDIT TRANSFER PROGRAM
16 Section 14.15 Definitions.
17 14.16 Transfer of rehabilitation credit.
18 14.17 Reporting.
19 14.18 Regulations, coordination with federal rehabilitation
20 credit provisions.
21 § 14.15 Definitions. As used in this article, the following terms
22 shall have the following meanings:
23 1. "Federal rehabilitation credit" means the federal credit that may
24 be allocated with respect to a certified historic structure under
25 section forty-seven of the internal revenue code. References in this
26 article to section forty-seven of the internal revenue code shall mean
27 such section as amended from time to time.
28 2. "Pass-through entity" means an entity that is not a taxpayer under
29 federal or state tax law, such as a limited liability company, a part-
30 nership, an S Corporation, or any other entity as determined by the
31 commissioner of taxation and finance which is deemed to be a reporting
32 entity for income tax purposes and files annual information returns
33 passing through items of income, loss, credits and certain other tax
34 attributes to each partner, member or shareholder as applicable.
35 3. "Qualified rehabilitation expenditures" shall have the same meaning
36 as in section forty-seven of the internal revenue code.
37 4. "Regulations" means regulations adopted by the commissioner, in
38 consultation with the commissioner of the department of taxation and
39 finance, pursuant to section 14.18 of this article.
40 5. "Rehabilitation credit" means the credit provided for under subdi-
41 vision twenty-six of section two hundred ten-B, subsection (oo) of
42 section six hundred six or subdivision (y) of section fifteen hundred
43 eleven of the tax law.
44 6. "Transferee" means a taxpayer or a pass-through entity that
45 receives a transfer of the rehabilitation credit. A transferee need not
46 own an interest in the certified historic structure or in an entity with
47 an ownership interest in the certified historic structure to receive a
48 transfer of a rehabilitation credit.
49 7. "Non-profit transferee" means a non-profit entity that receives a
50 transfer of the rehabilitation credit.
51 § 14.16 Transfer of rehabilitation credit. Either a 1. taxpayer or
52 pass-through entity that may report the rehabilitation credit or other-
53 wise elect to pass the federal rehabilitation credit through to a tenant
54 taxpayer in accordance with applicable federal law or 2. non-profit
55 transferee may, with prior notice in accordance with the regulations,
56 transfer the rehabilitation credit, in whole or in part, to any trans-
A. 9722 4
1 feree or non-profit transferee with the same effect as if the transferee
2 or non-profit transferee had incurred the qualified rehabilitation
3 expenditures itself; provided that no partial transfer of the rehabili-
4 tation credit may be for less than twenty-five percent of the full reha-
5 bilitation credit claimed by the taxpayer. A transferee shall use or
6 report the rehabilitation credit in the year it is allowed and may not
7 transfer the rehabilitation credit on to yet another transferee. A
8 transfer of rehabilitation credit to a non-profit transferee, where the
9 non-profit transferee is solely acting as a go-between to further trans-
10 fer the rehabilitation credit to a transferee, shall not constitute a
11 transfer for purposes of determining the single transfer limitation of
12 this section.
13 § 14.17 Reporting. If a taxpayer or a pass-through entity that may
14 report the credit or otherwise elect to pass the federal rehabilitation
15 credit through to a tenant taxpayer in accordance with applicable feder-
16 al law elects to transfer the credit as provided for in section 14.16 of
17 this article, prior to filing any tax returns claiming the rehabili-
18 tation credit, a taxpayer or a pass-through entity that may report the
19 rehabilitation credit or otherwise elect to pass the federal rehabili-
20 tation credit through to a tenant taxpayer in accordance with applicable
21 federal law shall provide an information statement to the commissioner
22 in accordance with the department's regulations. Such information state-
23 ment shall include, but may not be limited to, the identity and tax
24 identification information of any non-profit transferee and the identity
25 and tax identification information of any transferee that will claim the
26 credit.
27 § 14.18 Regulations, coordination with federal rehabilitation credit
28 provisions. The commissioner, in consultation with the commissioner of
29 the department of taxation and finance, shall promulgate rules and regu-
30 lations necessary to administer the provisions of this article.
31 § 5. This act shall take effect immediately and shall apply to taxable
32 years beginning on and after January 1, 2025.
