New Georgia Law Expands State Historic Tax Credit Program

The Briarcliff Summit Apartments in Atlanta, which opened in late 2014, used Historic Rehabilitation Tax Credits to convert this former hotel into affordable housing.  

Gov. Nathan Deal signed Georgia House Bill 308 into law on May 12, which makes significant changes to the Georgia historic tax credit (HTC) program. The new law will have a positive impact on developers of certified historic properties and includes changes to the definition of a certified historic structure, the distribution of claimed but unused credits, and a substantial increase in the maximum credit allowed for certified non-residential structures. In addition, a unique provision is made for large developments that doubles the total tax credit if a substantial number of jobs are created. 

Here is a review of what these changes mean for historic building development in Georgia starting January 1, 2016.

‘Certified structure’ definition now includes reference to the National Register of Historic Places.

Previously, the code read that a ‘certified structure’ was defined only as a historic building or structure individually listed in the Georgia Register of Historic Places or certified by the Department of Natural Resources as contributing to the historic significance of a Georgia Register Historic District. This changes little in the program since any building listed in the National Register of Historic Places is automatically placed in the Georgia Register but the added language streamlines closings since it allows federal certifications to document eligibility for the state program.

The maximum credit for non-residential certified structures has increased from $300,000 annually to $5 million.

This significant increase in the project cap means that projects up to $20 million in qualified rehabilitations expenditures (QREs) will now be able to take full advantage of the HTC. Currently, any project over $1.2 million in QREs sees only a partial incentive, which is reduced as the size of the project grows. The change brings Georgia to a competitive level with other southeastern states and should entice more investment on larger scale historic projects.

The law does include a $25 million annual cap for the program, where projects receiving more than $300,000 in credit count toward the program cap.

Where a project creates 200 or more full-time, permanent jobs or $5 million in annual payroll, the project is eligible for credits up to $10 million for any individual certified structure.

This change aims to incentivize the preservation of large-scale historic properties that function as employment centers. This seemingly favors large retail, hospitality or new corporate office uses but only time will tell if this change is truly effective in incentivizing historic rehabilitations and job creation throughout the state.

Previously claimed but unused HTCs may be transferred or sold in whole or in part to another Georgia taxpayer.

This is great news for developers who want to add equity to their projects. Since the law makes it easier to transfer the tax credits generated from the rehabilitation, those credits should be more valuable to tax credit investors and provide more capital for the developer. 

The program is capped at $25 million per year for larger-scale projects.

While this means that just a few large rehabilitation projects could exhaust the cap in each calendar year, any project not funded because of the annual cap will receive priority in the following year. So, plan to submit as early as possible to get high in the pecking order. While we would prefer to have an uncapped program, the improvements in the law provide far greater benefit for historic building development than we have seen over the past 12 years of the existing program.   

The definition of ‘target area’ remains the same, meaning a qualified census tract under Section 42 of the IRS Code of 1986.

Under section 42(d)(5)(c) of the Code, a Qualified Census Tract is a census tract (or equivalent geographic area defined by the Bureau of the Census) in which at least 50% of households have an income less than 60% of the adjusted median gross income (AMGI). The intent of the program is to spur redevelopment in the areas that most need investment.

It’s a whole new ballgame for developers of historic properties in Georgia come January 1. These incentives could be good news for the future numerous large-scale historic properties in Atlanta like the Medical Arts Building on Peachtree Street built in 1927 and abandoned in 1995 after a four-alarm fire, or the mid-century modern Atlanta Constitution building built in 1947 at the corner of Alabama Street and Forsyth Street, currently up for sale. The revisions, however, are designed for economic growth that will certainly have an impact on a number of communities throughout the state and stimulate interest in historic buildings.