News Historic Tax Credit

Breaking News: House Considers Infrastructure Bill, Features Enhancements to HTC and NMTC

Written By: NTCIC

June 22, 2020

House Democrats unveiled the Moving Forward Act (HR 2), a $1.5 trillion infrastructure bill, which is anticipated to come to a vote before July 4th. In addition to dedicating roughly $400 billion in infrastructure investments for roads, bridges, and transit, the bill also includes key Historic Tax Credit (HTC) and New Markets Tax Credit (NMTC) provisions and temporary measures for community development projects related to COVID-19 recovery (Click here to read bill text).

Federal Historic Tax Credit Provisions

The legislation would make permanent most of the provisions in the Historic Tax Credit Growth and Opportunity Act (H.R. 2825/S. 1615) including:

  • 30% Historic Tax Credit for projects $2.5 million and less
  • Eliminates the HTC Basis Adjustment, bringing more value to HTCs
  • Reduces the Historic Rehab Test to 50% of a building’s basis instead of 100%
  • Makes the credit easier to use by non-profits
  • Includes a provision for communities to rehabilitate existing public schools using the HTC
  • Temporary extension of period for completing rehabilitation

The bill includes temporary increases for all HTC projects to further overcome present obstacles and aid in the economic recovery – a 30% HTC from 2020-2024, a 26% HTC in 2025, and a 23% HTC in 2026.

New Markets Tax Credits

The legislation would also make the New Market’s tax credit permanent at $5 billion in credit allocation a year, with increases to the credit in 2019 (retroactively) to $4 billion, $7 billion 2020, and $6 billion in 2021. The bill would also allow the NMTC to be permanently taken against the alternative minimum tax and pushes to ensure that tribal areas receive a proportional allocation, similar to the existing policy for non-metro census tracts.

Community Development Advocacy During COVID-19

Community development projects have experienced drastic, and in some cases, devastating impacts due to the necessary COVID-19 countermeasures. Projects face bans on construction, limited work site attendance, a lack of materials, limited access to government and regulatory partners, and other challenges associated with the near shuttering of the domestic economy. At the same time, new and potential projects face profound financial viability concerns. Limited access to capital, higher investment risk, and an uncertain tenant market is causing significant harm to the present and future pipeline of projects. Including enhanced community development provisions in an infrastructure or economic recovery bill will aid projects facing present obstacles and also act as a catalyst for new growth in community revitalization projects across the nation.

Though infrastructure legislation will likely pass the House this summer, Senate consideration of a transportation/infrastructure may happen this summer, this fall, or could be pushed back to next year. However, there are components of the infrastructure legislation that are directly related to COVID-19 relief/recovery and will likely be considered in House and Senate negotiations for the next phase of COVID-19 related legislation.

Encourage your members of Congress to support these enhancements to both the HTC and NMTC featured in the infrastructure legislation. Ask your members of Congress to include these needed provisions in COVID-19 relief/economic recovery legislation or the next moving legislative vehicle to overcome present obstacles related to onsite labor, supply chain, regulatory and financing challenges, and as a tool to enable future projects to aid in the economic recovery.

To view the recommendations for enhancing the HTC in a stimulus/economic recovery bill, put forward by the preservation and historic rehabilitation advocates, click here.