Legislation Would Provide Tax Incentive for Rehabilitation, Create Jobs
TRENTON – The Historic Property Reinvestment Act sponsored by Senators Barbara Buono and Shirley K. Turner that would encourage homeowners and businesses to rehabilitate historic properties by providing tax credits for some of the costs associated with restoration was approved today by the Senate State Government, Wagering, Tourism and Historic Preservation Committee.
The lawmakers said providing tax credits would spur job growth in the construction trades, as has been seen in the 31 other states with similar programs, and is vital to preserving the state’s heritage.
“New Jerseyans need jobs and this bill accomplishes that, especially in the construction industry. Spurring economic growth is also a priority and this bill accomplishes that too,” said Senator Buono (D-Middlesex). “It also boosts property values and encourages homeowners and businesses to invest in properties that may typically remain vacant and underused in austere times like these.”
“With the economic downturn, high levels of unemployment and the current foreclosure crisis, many of New Jersey’s oldest and most historic communities continue to deteriorate,” said Senator Turner (D-Mercer, Hunterdon). “This tax credit program can be an effective tool for turning these homes, buildings and communities around while putting these properties back on local tax rosters and creating construction jobs for New Jerseyans.”
The bill (S-141) would create two types of tax credits – one for homeowners and one for businesses – to cover up to 25 percent of the cost of repairing and rehabilitating historic properties in New Jersey. Qualifying properties would be required to be listed on the National Register of Historic Places or the New Jersey Register of Historic Places – either individually or as part of a historic district – or designated by the State Historic Preservation Office or other state or local organization as contributing to a district’s historic significance.
For homeowners, the tax credit would apply against their gross income tax liability and can equal up to $25,000 per property per ten year period. The homeowner would be required to spend no more than 60 percent of the rehabilitation costs on the interior of the property and the total rehabilitation costs would have to be at least 50 percent of the equalized assessed value of the structure. Additionally, the homeowner would be required to own and occupy the property as their primary residence for one year following the completion of the rehabilitation.
The business tax credit would be uncapped and would apply against the businesses’ corporation business tax and insurance premiums tax liabilities. Businesses seeking the tax credit would be required to – within either a 24-month or 60-month rehabilitation period – have eligible rehabilitation expenditures of either $5,000 or the property’s adjusted valuation used for federal income tax purposes, whichever is greater.
“Since New Jersey is the most densely populated state and has little room for growth, it is becoming essential that we adopt a strategy to redevelop and reinvigorate already existing properties rather than expand into open, undeveloped space,” said Senator Turner. “This bill would provide homeowners and businesses with an incentive to do just that.”
If enacted, New Jersey would be the 32nd state to implement a historic rehabilitation tax credit. In Maryland, Virginia and Rhode Island, analyses of those states’ tax credit programs have found that each dollar credited returns as much as $8 to state coffers through increased economic activity.
Historic rehabilitation projects also have been found to create more jobs per dollar of output than either manufacturing or new construction. Missouri created 6,871 jobs and saw $60 million in new state and local tax revenue in the first four years of its tax credit program.
Rhode Island saw a nearly eight-fold increase in rehabilitation projects in the first five years of its credit program as opposed to the five years before it was enacted. According to National Park Service data, there were only two historic commercial revitalization projects completed in New Jersey in all of 2009.
“Rehabilitation can provide some of the biggest opportunities in our historic communities,” said Senator Buono. “It can not only transform these properties into livable, workable homes and businesses, but also can breathe new life into communities that are falling into disrepair. Additionally, it will help to protect state history – the buildings and structures that show our rise from a farming state to an industrial powerhouse – that we continue to lose due to development and deterioration.”
The bill was approved by the Senate State Government, Wagering, Tourism and Historic Preservation Committee with a vote of 3-0-2. It now heads to the Senate Budget and Appropriations Committee for further review.