South Carolina improves historic rehabilitation tax credit

On June 9, South Carolina Governor Nikki Haley signed legislation that improves the state historic tax credit for rehabilitated income-producing properties and abandoned buildings. The most notable change is the new election for a 25 percent tax credit on rehabilitation costs for income-producing preservation projects.

Benefits of Historic Rehabilitation Tax Credit Increase

The 25 percent tax credit is an improvement for those projects that have rehabilitation costs up to $10 million. With a project cap of $1 million, rehabilitations over $10 million should seek the uncapped 10 percent tax credit.

One provision of the legislation that remains the same is that the credit must be taken in installments starting in the year in which the property is placed in service. However, the term for those installments has been reduced from five years to three years, which is good news for investors.

The final adjustment made to this tax credit legislation enables an ownership group to assign the tax credit to another entity through a pass-through tenant structure.

Changes to Abandoned Building Rehabilitation Tax Credit

South Carolina’s Abandoned Building Tax Credit also received changes in the 2015 round of amendments that includes a new definition for a ‘state-owned abandoned building’, the inclusion of insurance premium taxes as one of the taxes against which a credit can be claimed, the reduction of the credit term from five to three years, and the removal of a limitation related to the amount a taxpayer’s tax liability may be reduced.  An additional section was added to outline the manner in which a taxpayer can receive certification of an abandoned building site.

These revisions, that were effective immediately on the governor’s signing, signify an acknowledgement by state lawmakers that the rehabilitation of historic buildings is a powerful economic development tool in historic communities across the Palmetto state.