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Fixes to historic preservation tax credits may have to wait

March 6, 2012

Fixes to the state's historic preservation tax credit program pushed by Indiana Landmarks may have to wait another year after the Indiana Senate put the brakes on a bill that won unanimous support in the Indiana House.

The historic preservation program awards tax credits worth up to 20 percent of the total cost of renovating previously vacant income-producing property on the Indiana Register of Historic Places, but it caps the credits to a total of $450,000 per year statewide ($100,000 per project).

Since the cap is so low, the state has been allocating credits for future years, meaning developers fixing up historic buildings this year will have to wait a decade or more to see the tax benefit.

The House bill by Rep. Ed Clere, R-New Albany, would increase the state funding for the program to $2 million annually, setting aside $450,000 per year to catch up on the backlog. It would set aside 25 percent of the credits for projects under $500,000.

But a Senate version pushed by Sen. Luke Kenley, R-Noblesville, would prohibit the assignment of credits to future years, making the program essentially unusable for at least a decade. The Senate version instead creates a new local preservation tax credit that could help cities and counties boost historic preservation.

The drastic differences between the bills, now in conference committee, suggest the legislation may die, Tina Connor, executive vice president at Indiana Landmarks, wrote in an email.

"If so, we'll be back again next year to lobby for the kind of fix for the broken credit that the (House bill) provides," Connor said.

Kenley, who could not be reached Tuesday morning, told The Statehouse File that the General Assembly shouldn't make any decisions about state funding until next year, when lawmakers will write the next two-year state budget.

Kenley does not like how the state's Department of Natural Resources has administered the state's program, which together with a similar federal credit can allow developers to recoup up to 40 percent of rehabilitation costs as tax credits.

The House may wind up accepting the Senate version in some form, since allowing municipalities to offer their own historic preservation tax credits is a popular idea. Supporters of the fixes to the state program figure they could try again next year for more money for that program.

The extended backlog for the state program has become a disincentive for developers who otherwise might take advantage and invest more in historic properties, said Mark Dollase, vice president of preservation services for Indiana Landmarks.

A few large projects can quickly soak up most of the credits for the year, leaving smaller projects to wait up to 14 years. The preservation group had lobbied legislators to raise the annual cap to $10 million; the House voted 98-0 for $2 million.

"Our argument all along has been this is a job-creation program," said Dollase, who cited a study the group commissioned that found that every $1 the state spends on the credit results in $3 of private-sector investment.

The Statehouse File contributed to this story.

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