Commercial Real Estate and Legislature and State Government and Tax Credits and Government & Economic Development and Government and Real Estate & Retail

Real estate-related bills still alive in Legislature

April 26, 2011

Three bills with implications for owners of commercial real estate are still alive as legislators rush to wrap up the 2011 session of the Indiana General Assembly by Friday.

The bill with perhaps the best chance of emerging is the so-called dinosaur buildings bill, House Bill 1005, which would make it easier to win tax incentives for renovating obsolete industrial buildings.

To be eligible for the state’s industrial recovery tax credit, a building must now have been in service for at least 20 years and must be a minimum of 250,000 square feet. The bill would lower the minimums to 15 years and 100,000 square feet.

If the new law is adopted, a building would only have to be vacant for a year to be eligible for the credit, down from two years. The very definition of “vacant” would also change. A building would be considered vacant if no more than 50 percent of it is occupied compared with the 75-percent standard used today.

The Indiana Economic Development Corp. awards the credits, which are applied primarily against adjusted gross income tax. The IEDC estimates approximately 300 buildings would meet the new requirements, up from about 100 buildings.

Only a handful of property owners have taken advantage of the credit since 2005, according to Blair West, spokeswoman for the IEDC.  

The attempt to open up the tax credit to broader use makes sense on several levels, said Bill Waltz, vice president of tax and public finance for the Indiana Chamber of Commerce, noting the positive implications for property tax and income tax revenue when buildings are returned to active use.

The bill passed both chambers with strong support but amendments in the Senate mean it must go to a conference committee, which it’s scheduled to do today.

House Bill 1543, written by Indianapolis-area representative Mike Speedy, is intended to protect the owners of apartment complexes from exorbitant inspection and registration fees charged by municipalities.

Such fees are among the tools some cities and towns have started using to replace tax revenue lost because of property tax caps.

The town of Speedway is the only Indianapolis-area unit of government that is charging a fee, but the legislation is necessary to head off what has happened in the northern part of the state, said Lynne Sullivan, president of the Indiana Apartment Association.

Hammond’s annual fee went from $10 a unit to $80, and for units built after 2010 it’s scheduled to rise to $250 a unit, Sullivan said. “Inspection fees of that magnitude can have a detrimental affect on development.”

Sullivan said local inspections only duplicate what is already done by lenders and by building owners in the case of properties that are operated by fee managers. Affordable housing units are subject to federal-program inspections.

The bill Speedy wrote would discourage such fees by prohibiting government units from funneling the revenue to general operating budgets. The bill, which is opposed by cities and towns, is expected to land in a conference committee.

Apartment owners also breathed a sigh of relief when Rep. Eric Turner successfully offered an amendment to a controversial immigration bill that could have put them at odds with the federal Fair Housing Act.

Senate Bill 590, before it was amended in the House, would have required landlords to verify the legal status of tenants to avoid being charged with harboring illegals. Landlords could have been guilty of a misdemeanor or Class D felony if found to be renting to tenants who were in the country illegally. But apartment interests who backed the amendment said the verification procedures specified in the original version of the bill would have been violations of the Fair Housing Act, which only allows credit checks when vetting potential tenants.

Maggie McShane, senior vice president of government affairs for the Indiana Association of Realtors, said the law also could have snared the owners of commercial properties, particularly in areas where formerly unused properties have been rented to immigrant businesses.

Time is running out to reconcile the two very different versions of the bill before the session concludes.
 

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