What is good for the tank, might not be good for the tax credit…
Especially in Oklahoma.
Bill 977 filed in the Oklahoma Senate proposes a two-year moratorium on most of their state tax credit programs, including the state historic tax credit. The bill is a response to a continued drop in energy prices, which according to the Tulsa World, “is affecting all revenue categories, including income-tax and sales-tax revenues.”
In total 23 tax credits are targeted to be suspended to address a potential $1 billion shortfall.
The moratorium is slated to begin July 1, 2016 and extend through July 1, 2018. It’s not necessarily a death knell for the historic tax credit program (HTC), but it does raise concern over its future and the impact to current projects.
The Senate bill looked at the fiscal impact of each of the 23 tax credits solely from the perspective of the “cost” to the state of Oklahoma by averaging previous year’s usage and not on the economic benefit the credits produce. Clearly some credits won’t produce any monetary benefit for the state and are there for social purposes, while others, like the historic credit, have a greater impact on the economy of the state. Most analysis of state HTCs shows a positive impact to state coffers and certainly exceed revenue neutral. In addition to creating construction jobs and all the ancillary spending that comes with them, historic tax credits induce and increase the local tax base as the buildings that are rehabilitated are assessed at a higher value when complete.
Additionally, a moratorium would not only directly impact the projects, but also the investor market for the credits. Like developers, investors want some sense of predictability. A starting and stopping of the tax credit can make investments in these historic rehabilitation projects less desirable in the long run.
What the current evaluation of the HTC also misses is that the $1,055,00 of historic credit allocated to projects in 2017 and the $2,110,000 projected for 2018 are also matched by an equal federal historic credit, bringing more outside dollars and stimulating development in the state.
Advocates for the HTC in Oklahoma will certainly use all of these facts to help garner support among state legislators to keep the credit intact. As we have seen in efforts in other states that faced similar battles, a complete analysis of historic tax credit programs offer attractive evidence that the programs are a financial boon, not a financial burden.
Here’s hoping for success in preserving the Oklahoma HTC in its current state for the coming year. And also that maybe gas prices go up just a little…