By Jason Yots
After a fierce advocacy campaign by the NYS preservation community, Governor Paterson will sign today (1 PM, Buffalo and Erie County Historical Society) expanded NYS historic rehabilitation tax credit legislation. Among other improvements to the law, the commercial project cap was increased from $100,000 to $5,000,000, which certainly will improve the feasibility of many pending historic rehab projects. That feature alone is a cause for celebration.
Unfortunately, a key provision proposed by preservation advocates was lost in the legislative process. Commonly called the "transferability" provision, this feature would have permitted the allocation of NYS historic tax credits to a taxpayer other than the recipient of the federal historic tax credits.
In practical terms, the transferability provisions would have expanded the market for tax credit investment because investors would not need to have both federal and NYS tax liability to invest in a project. Sadly, there are so few institutional tax credit investors with meaningful NYS income that it has been difficult to attract competitive blended investment proposals for local historic rehabs, particularly smaller deals. The transferability provision would have enabled project sponsors to maximize the benefit of historic tax credits by seeking the most competitive bids for each of the federal and NYS tax credits, rather than the best combined federal/NYS bid. It's simple supply and demand: the larger the pool of investors for each type of credit, the smaller the supply (and, therefore, the higher the economic yield for the project).
I'm told that NYS preservation advocacy groups will seek legislative approval of the transferability provisions at the next possible opportunity. Until then, we can still enjoy this major victory for local historic preservation efforts.