Tax Credit Report

January 2011Newsletters In the Zone

On Dec. 16, 2010, the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act (the Tax Relief Act) was passed into law. Of note to the real estate industry are two provisions:

  • Section 733 of the Tax Relief Act extends the New Markets Tax Credit Program by providing $3.5 billion of tax credit authority for 2010 and 2011. The CDFI fund received applications for 2010 allocations on June 2, 2010, for an anticipated $5 billion dollars of tax credit authority. More than 250 applications were filed requesting a total of $23.5 billion in tax credits. It is anticipated that the CDFI fund will announce the 2010 allocatees later this month.
  • Section 707 of the Tax Relief Act extends the grant in lieu of energy tax credit program through 2011. This program provides a significant incentive for alternative energy development by making qualifying projects (i.e., solar, hydropower and biomass) eligible for a payment in lieu of tax credit for up to 30 percent of the project cost.

On the state level, New Jersey is currently considering significant tax credit legislation to stimulate development. A-3143 proposes an expansion of the Urban Transit Hub Tax Credit (UTHTC). (By way of background, the UTHTC provides tax credits for every dollar of capital investment to cover the costs of investing in a facility within a designated urban transit hub. These tax credits can be applied to corporate business tax and/or insurance premium tax credits over a 10-year eligibility period. An urban transit hub includes property located within a 1/2 mile radius surrounding the mid-point of a New Jersey Transit, PATCO or PATH rail station platform area, including all light rail stations.) While the prior legislation allowed tax credits solely for the development of business facilities, A-3143 expands the availability of the tax credit to mixed-used residential projects provided the project meets certain requirements. As of the date of this writing, A-3143 has passed both houses and is awaiting Governor Christie’s signature.

Under A-1851, titled the “Historic Property Reinvestment Act,” New Jersey proposes a state counterpart to the federal Historic Tax Credit Program. The bill proposes a credit of up to 25 percent of the cost of rehabilitation of a “qualified property,” which is defined as property: (1) individually listed or located in a district on the National Register of Historic Places and certified as contributing to the historic significance of the district; or (2) individually identified or registered or located in a district composed of properties identified or registered by a municipality as suitable for substantially achieving the purpose of preserving and rehabilitating buildings of historic significance and certified as contributing to the historic significance within the jurisdiction of the municipality. As of the date of this writing, A-1851 has been passed by the Senate and is being considered by the Assembly.

For more information about the New Markets Tax Credit Program, the Urban Transit Hub Tax Credit Program or the Historic Property Reinvestment Act, please contact Daniel V. Madrid at 609.844.7413 or [email protected]. For more information about the Grant in Lieu of Energy Tax Credit Program, please contact Alexander M. Wixted at 609.895.6730 or [email protected].