This tax incentive has proven quite popular in recent years, as the Legislative Fiscal Bureau says that since 2014, over $156 million in Historic Rehab Credit awards have been handed out for projects throughout the state.
Historic Rehab helped pay for some of the construction at this site
But in the state budget, Walker wanted to limit the amount of Historic Rehab Credit award to $10 million a year beginning in 2018, with potential clawback provisions allowing WEDC to take back some of the credits if the project wasn’t (yes, this is very ironic). This means that there would less of the Historic Rehab Credit write-offs and higher tax revenues coming in for the state as a result.
And Walker’s office underestimated just how big an effect this would be, as the Legislative Fiscal Bureau says that it means that many more potential projects would be affected, which would raise the amount of taxes that the state retains in future years....and raise the taxes of the individuals working on the homes and buildings.
7. The bill would limit the amount of tax credits that could be certified by WEDC to $10 million per year, beginning in 2018, and to the greater of $10 million or the amount WEDC certified between January 1, 2017, and the effective date of the bill for 2017 (Attachment 1 shows that WEDC has entered into contracts for historic credits of $10.5 million through March 24, 2017). The administration estimates that this provision would increase state tax revenues by $3.0 million in 2017-18, $14.1 million in 2018-19, $26.7 million in 2019-20, and $27.7 million in 2020-21.Now, if Walker is concerned that too many Historic Rehab Credits are causing revenues to fall short and jeopardize his spending priorities (STOP LAUGHING! It might be true!), then maybe this budget provision might make sense, even if it’ll prevent a few projects from happening. The flip side of limiting the Historic Rehab credit means that less people will likely be able to use it even though they want to, as evidenced by the large number of requests and awards from 2014-2017.
8. Based on certification data for the historic credits provided by WEDC, including the final date that credits can be earned under WEDC contracts and current projections from DOR, our office has reestimated the fiscal effect of this proposal higher beginning in 2020-21. The Governor's estimates for 2017-18, 2018-19, and 2019-20 have not been revised, but the impact of the annual limit has been reestimated to increase state tax revenues by $34.0 million in 2020-21, $39.1 million in 2021-22, $44.2 million in 2022-23, $48.6 million in 2023-24, and $50.1 million in 2024-25 and annually thereafter. Once fully phased-in, the Governor's recommendation would reduce the fiscal effect of the credits to 16.6% of the current estimate.
If the Legislature doesn’t like that idea, and wants to keep the program operating as it has been, then the Fiscal Bureau says that it’ll cost the state $17.1 million in this budget. But keeping the current law for Historic Rehab Credits has its own problems, since this budget is already being held up due to a lack of revenues available to fund transportation and K-12 education. There may not be $17 million in breathing room in this budget to clear up without messing up some other GOP 2018 talking point that they want to preserve.
While taxes hasn’t gotten much attention as part of this budget (mostly because Walker’s tax proposals are so gimmicky and pointless),the Historic Rehab Credit shows things to be turned on its head from what we’re used to seeing in the Age of Fitzwalkerstan- a tax credit that actually works to spark economic activity and improve aesthetics and quality of life of communities. And this time it is Walker that is trying to keep it from happening (why? No idea. Is it because he's truly concerned about the cost, or because the rehabbers don’t pay him enough in donations?).
If/when the Joint Finance Committee ever meets again, let’s see how they maneuver through this, as the Historic Rehab Credit is a popular program for many community revitalizations. And even though the program seems to be working in encouraging new developments to get off the ground, it may have to go by the wayside due to past and current fiscal foolishness in other matters.