April 11, 2015 10:03:54 PM
A key state tax credit for preserving historic properties is reaching its cap, leaving some Mississippi developers with tough decisions about their projects.
State lawmakers failed before this year's session ended in Jackson to raise the $60 million cap set in 2006 for a 25-percent tax credit for qualifying historic preservation rehabilitation projects. House Speaker Phillip Gunn proposed a bill to raise the cap to $100 million, but it died in committee.
To date, the Mississippi Department of Archives and History, which facilitates the tax incentive program, reports the state has issued roughly $50 million in tax credits for projects.
MDAH Deputy State Historic Preservation Officer Ken P'Pool said the program would likely reach its cap this year unless a special session is called.
MDAH, in many cases, certifies a project is eligible for the tax credit before developers begin the work, P'Pool said. Those developers, however, cannot claim credits until projects are complete. Reaching the cap, P'Pool said, could leave some developers with certified, but unfinished, projects out in the cold when they try to claim their credit.
"What this means is people will do the work, will file for their tax credit, and it won't be there," he said. "We don't know when exactly we'll hit the cap because we don't know how quickly the unfinished projects will move. We do know that some developers are waiting and not doing any work...so they can see how all of this works out."
Getting approval v. getting the credit
P'Pool said the Department of Revenue deals with issuing the credits after a project is completed, while MDAH manages whether projects meet the historic preservation standards. Because of that, P'Pool said, the state doesn't always know how much a rehab project costs until after work is done, which opens the door to more projects qualifying for the program than the state cap will allow to actually receive credit.
To be eligible for the 25-percent state tax credit, a property must be listed individually on the National Register of Historic Places, be certified as a contributing property in a National Register-listed historic district, or be designated a Mississippi Landmark, according to the MDAH website. Rehabilitation work must exceed $5,000, in most cases, and the property must generate income.
Developers must submit a three-part State Historic Preservation Certification Application, along with photographs of the work, to MDAH. All work must meet the Secretary of Interior's Standards for Rehabilitation.
Of 234 projects, 29 in Golden Triangle
Since enacting the 25-percent state tax credit in 2006, MDAH has certified 234 projects -- the vast majority of which are complete and receiving the credit -- for the program, including 29 in the Golden Triangle. Of those, MDAH data indicates 17 are in Starkville, eight are in West Point and four are in Columbus.
Notably, the program assisted restorations to the Whitehall antebellum home in Columbus, The Cedars in Starkville and The Ritz Theatre in West Point.
Columbus-based developer Chris Chain said the tax credit served as a key incentive for developers to take on projects that preserve Mississippi's heritage, rather than demolish that heritage. Developers who complete qualifying projects, he said, could claim a portion of the credit -- essentially like a tax deduction -- for up to 20 years. While that might not always net big money for developers, Chain said "every little bit helps."
"Without those things in place, some people won't take the initiative to do these old building projects," Chain said. "It's a tax credit, not free money, and that's what some people don't understand. You have to take the initial risk to get to the point where you can claim it."
Before 2006, Chain said the state offered a 10-percent tax credit through MDAH or these projects. At the very least, he hopes the program reverts to that. At most, he hopes the legislature raises the cap -- either in special session this year or regular session next year -- and leave the credit at 25 percent.
Another Columbus developer, Mark Castleberry, said regardless of whether the state continues the program, it should fund projects already in the queue. His Mill at MSU project, a hotel/conference center and retail development in Starkville, has qualified for $5 million in credits through the program for its work to restore the old Cooley Building, an old cotton mill that once served as MSU's physical plant. He plans to complete the project this year, with or without the tax credit.
In the meantime, he wants to "mobilize political forces" to convince the legislature to raise the cap this year.
Like Chain, Castleberry said failing to continue the tax credit could deter developers from historic property restoration in the future.
"I don't think anybody is against the program," he said. "It's been wonderful for the state of Mississippi.
Zack Plair is the managing editor for The Dispatch.
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