A new tax credit for the rehabilitation of historic properties that state lawmakers have been trying to establish in New Jersey for nearly a decade is a step closer to becoming a reality.
A proposed historic-preservation tax incentive for both homeowners and developers was approved on a bipartisan basis by members of a key state Senate panel yesterday.
A tax credit for the rehabilitation of historic properties has the strong backing of Gov. Phil Murphy, who highlighted the role that the revival of such properties, particularly in urban communities, could play in a broader reinvention of the state economy during a recent economic-development policy speech. The proposed tax break also has full backing from the state’s historic preservation community.
“Nationally, there are many examples where the renovation of an eyesore has become a catalyst for new redevelopment,” said Katherine Ng, a trustee for the New Jersey Historic Trust.
Under the version of the bill that was approved unanimously yesterday by the Senate State Government, Wagering and Historic Preservation Committee, the historic-rehabilitation tax credit could be worth up to 25 percent of the cost of a qualified project. The bill lists several criteria for a property to be eligible for the tax credit, including those “individually listed, or located in” the National Register of Historic Places or the New Jersey Register of Historic Places.
$25,000 over ten years for residents
But also permitted to qualify for the tax incentives would be those “individually identified or registered, or located in a district composed of properties identified or registered, for protection as significant historic resources in accordance with criteria established by a municipality.” The bill goes on to say any properties “located within a district, certified by the (historic preservation) officer as contributing to the historic significance of the district” would also qualify.
For residents rehabilitating a historic home, the tax credit would be applied to their state personal-income tax liability, capped at $25,000 over a 10-year period. For developers and other businesses, the credit would be applied to their state corporate-business tax liability. The value of the developer’s credit would not be capped, but it would require a minimum of $5,000 in rehabilitation expenses in order to qualify.
Several of the advocates who testified yesterday noted that more than 30 states already have such a tax credit on their books to encourage the rehabilitation of historic properties. In fact, out of the nation’s original 13 colonies, only New Jersey and New Hampshire have yet to establish an historic-preservation tax incentive, they said. And since there’s also a federal version of the tax credit, not having a state incentive means that New Jersey is missing out on federal matching funds.
“This credit would provide a parity with adjoining states,” Ng said. “We are losing revenue by not having this tool available.”
Lawmakers last tried to establish the historic-preservation tax credit in 2011 as part of a broader package of economic-recovery bills that were sent to then-Gov. Chris Christie in the wake of the Great Recession. But Christie, a Republican, vetoed all of those measures, saying lawmakers didn’t identify revenue sources to offset the money that would be lost to the proposed tax breaks. Although similar legislation was reintroduced in subsequent years, it failed to advance during the remainder of Christie’s tenure.
Murphy sees potential for economic growth
Murphy, a Democrat, took over for the term-limited Christie earlier this year, and he’s brought a whole new approach to the state’s economic-development efforts and is promising to revamp existing tax-incentive programs as they come up for renewal next year. Whereas Christie focused efforts on overall job creation and corporate relocation, Murphy has proposed more targeted programs toward specific goals, such as fostering new startup businesses and technology firms.
He’s also identified historic preservation as a key opportunity for economic growth, citing in the major policy speech he delivered in Nutley earlier this month some $2 billion in new revenues that have been generated elsewhere through the rehabilitation of historic properties.
“Our state is rich with history, and we’re not going to knock it down, but rather use it to move forward,” Murphy said.
The advocates who testified yesterday said the tax incentives have the potential to generate indirect economic activity in New Jersey, in addition to increasing the value of properties that are already on the tax rolls. That activity would come as homeowners and developers begin to hire architects, carpenters, painters and other specialists to repair properties that otherwise may have been demolished or left vacant due to the high cost of maintenance.
Job creation, tax generation
“The state would benefit from the jobs created and the income and employment taxes generated,” said Cate Litvack, president of Advocates for New Jersey History.
Sponsors of the bill also believe the tax breaks could be a particularly useful tool for revitalizing some of New Jersey’s most economically disadvantaged urban areas, which are also some of the state’s oldest population centers dating back to the Colonial era. Sen. Shirley Turner (D-Mercer) cited the city of Trenton as a prime example of a place where both the homeowner and developer credits could generate significant new economic activity.
“This is indeed a way to preserve our history,” said Turner, a primary sponsor of the legislation. “We have so many of (these buildings) right here in our capital city.”
To determine whether the program would generate a net benefit for the state despite the revenue that would be lost to the tax breaks, the legislation would require state historic-preservation officials to compile a report outlining the total amount of tax credits that have been awarded. The report, which would be submitted to the governor and lawmakers for review, would also have to show the geographical distribution of the credits and provide some analysis of their effectiveness.