Tax Credit Advisor, May 2009: Arkansas Gov. Mike Beebe has signed a bill (HB 1953) creating a state historic rehabilitation tax credit. Arkansas reportedly is the 30th state with a state historic tax credit.

The new law (Act 498), signed 3/24/09, is effective through 2015 and authorizes the state tax credit for historic income-producing properties (i.e. commercial) that qualify for the federal historic rehabilitation tax credit, and for historic non-income producing properties (e.g., owner-occupied homes) that meet certain criteria. The credit is limited to rehab projects placed in service after 1/1/09 that receive a completion certificate from the Department of Arkansas Heritage.

The tax credit can be claimed on up to $500,000 in rehab expenses for a commercial property, and on up to $100,000 in rehab costs for a non-income producing property. A minimum of $25,000 in rehab expenditures is required. The maximum annual amount of tax credits that the state can issue is $4 million.

The Arkansas credit may be claimed by the owner of a rehabbed property to offset liability for state income taxes or premium taxes – the latter paid by insurers on premium income. The credit may be transferred, sold, or assigned in part or whole. Unused credits may be carried forward up to five tax years.

Multiple state departments must issue regulations to implement different parts of the statute. The Department of Arkansas Heritage must issue rules that set out criteria to prioritize the applications received for the state historic credit. At a minimum, priority is be given, in order, to projects that will: (1) Create a new business; (2) Expand an existing business; (3) Establish or contribute to the establishment of a tourism attraction; (4) Contribute to the revitalization of a specific business district; or (5) Be a key property in the revitalization of a specific neighborhood.

Multiple organizations supported and lobbied for passage of the new legislation. One, the Historic Preservation Alliance of Arkansas, described the bill’s passage as “a very exciting step for preservation” that will motivate owners to rehabilitate historic buildings. The Alliance also indicated the credit is intended to encourage and foster economic development and community revitalization, leverage private investment in historic properties, and create jobs.

(Statute: http://www.arkleg.state.ar.us/assembly/2009/R/Acts/Act498.pdf)