PRINTER'S NO. 29
No. 26 Session of 2005
INTRODUCED BY FRANKEL, TANGRETTI, ARGALL, BALDWIN, BASTIAN,
BEBKO-JONES, BELARDI, BUXTON, CORRIGAN, CRAHALLA, CURRY,
DALEY, DeWEESE, FLICK, FREEMAN, GEORGE, GERGELY, GOOD,
GRUCELA, HALUSKA, HARHAI, HARPER, HENNESSEY, HERMAN, JAMES,
JOSEPHS, W. KELLER, LEACH, LEDERER, LESCOVITZ, LEVDANSKY,
MAHER, MANDERINO, MANN, MARKOSEK, McCALL, MELIO, MUNDY,
NAILOR, PALLONE, PETRARCA, PISTELLA, READSHAW, ROEBUCK,
RUBLEY, SAINATO, SAMUELSON, SANTONI, SAYLOR, SHANER, SOLOBAY,
T. STEVENSON, STURLA, THOMAS, TIGUE, WALKO, WANSACZ,
WHEATLEY, WOJNAROSKI, YOUNGBLOOD, YUDICHAK, SHAPIRO,
REICHLEY, SCHRODER, WASHINGTON, E. Z. TAYLOR AND STETLER,
JANUARY 25, 2005
REFERRED TO COMMITTEE ON FINANCE, JANUARY 25, 2005
AN ACT
1 Providing for tax credits for historic commercial sites; and
2 conferring powers and duties on the Department of Community
3 and Economic Development, the Pennsylvania Historical and
4 Museum Commission and the Department of Revenue.
5 The General Assembly of the Commonwealth of Pennsylvania
6 hereby enacts as follows:
7 Section 1. Short title.
8 This act shall be known and may be cited as the Historic
9 Rehabilitation and Economic Revitalization Tax Credit Act.
10 Section 2. Definitions.
11 The following words and phrases when used in this act shall
12 have the meanings given to them in this section unless the
13 context clearly indicates otherwise:
14 "Certified rehabilitation." The rehabilitation of a historic
1 commercial site which has been certified by the Pennsylvania
2 Historical and Museum Commission as complying with 36 CFR 67.7
3 (relating to standards for rehabilitation).
4 "Commission." The Pennsylvania Historical and Museum
5 Commission.
6 "Department." The Department of Community and Economic
7 Development of the Commonwealth.
8 "Historic commercial site." A building which complies with
9 all of the following:
10 (1) The building is located within this Commonwealth and
11 is a certified historic structure as defined in section
12 47(c)(3) of the Internal Revenue Code of 1986 (Public Law 99-
13 514, 26 U.S.C. § 47(c)(3)).
14 (2) The building has income-producing capability.
15 (3) The owner or purchaser of the building has entered
16 into a covenant with the Pennsylvania Historical and Museum
17 Commission providing that:
18 (i) rehabilitation or restoration work, with a total
19 cost of rehabilitation or restoration valued in excess of
20 $5,000, will be completed to the satisfaction of the
21 commission in accordance with 36 CFR 67.7 (relating to
22 standards for rehabilitation) within two years of the
23 date the covenant was entered into with the commission;
24 and
25 (ii) neither the owner nor a successor in interest
26 will make a material alteration, as determined by the
27 commission, to the work under subparagraph (i) for at
28 least ten consecutive years, including the date the
29 covenant was entered into with the commission.
30 "Qualified rehabilitation expenditure." As defined in
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1 section 47(c)(2) of the Internal Revenue Code of 1986 (Public
2 Law 99-514, 26 U.S.C. § 47(c)(2)).
3 "Owner." The term includes a lessee for a minimum term
4 specified by regulation of the Pennsylvania Historical and
5 Museum Commission.
6 "Substantial rehabilitation." As defined in section
7 47(c)(1)(C) of the Internal Revenue Code of 1986 (Public Law 99-
8 514, 26 U.S.C. § 47(c)(1)(C)).
9 Section 3. Agencies.
10 (a) Commission.--The commission has the following powers and
11 duties:
12 (1) Enter into covenants in accordance with the
13 definition of "historic commercial site" in section 2(3)
14 (relating to definitions).
15 (2) Notify the Department of Revenue of a breach of a
16 covenant under paragraph (1).
17 (3) Make recommendations to the department of potential
18 sites for rehabilitation.
19 (4) Cooperate with the department and the Department of
20 Revenue in the implementation of sections 4 (relating to tax
21 credits) and 5 (relating to penalty).
22 (5) Promulgate regulations to determine whether a lessee
23 is an owner.
24 (b) Department.--The department has the following powers and
25 duties:
26 (1) Award tax credits under section 4. This includes
27 adopting a geographic allocation strategy to insure equitable
28 distributions of tax credits.
29 (2) Coordinate activities of the commission and the
30 Department of Revenue in the implementation of sections 4 and
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1 5.
2 (3) Compile and maintain a list of potential sites for
3 rehabilitation in cooperation with the commission, political
4 subdivisions, citizens groups and individuals.
5 (4) Promulgate regulations to administer section 4.
6 This paragraph includes all of the following:
7 (i) A fee schedule for applications for tax credits
8 to defray the cost of processing applications.
9 (ii) Recapture and reallocation of tax credits
10 reserved but not claimed.
11 Section 4. Tax credits.
12 (a) Authorization.--The department may award the owner of a
13 historic commercial site a credit against the tax imposed by
14 Articles III, IV, VI, VII, IX and XI of the act of March 4, 1971
15 (P.L.6, No.2), known as the Tax Reform Code of 1971.
16 (b) Amount.--The amount of the credit under subsection (a)
17 is 20% of the qualified rehabilitation expenditures made in
18 connection with the certified rehabilitation of a historic
19 commercial site. If the person claiming the credit cannot use
20 the entire amount of the credit for the taxable year in which
21 the historic commercial site is placed in service, then the
22 excess may be carried over to each succeeding taxable year for
23 up to 15 taxable years.
24 (c) Procedure.--
25 (1) A person seeking a credit under this section must do
26 all of the following:
27 (i) Obtain documentation from the commission that
28 the project is a certified rehabilitation.
29 (ii) Make application to the local redevelopment
30 authority board stating its intention to claim a credit
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1 under this section for the rehabilitation of a specific
2 historic commercial site within the board's jurisdiction.
3 In the event that the local redevelopment authority board
4 shall approve the application, it shall adopt a
5 resolution of approval, which the applicant shall attach
6 to its application to the Secretary of Community and
7 Economic Development.
8 (iii) Enter into the appropriate covenant in
9 accordance with the definition of "historic commercial
10 site" in section 2(3) (relating to definitions).
11 (iv) Apply to the department for a tax credit.
12 (2) The department may reserve a credit in an amount
13 based on the amount of estimated qualified rehabilitation
14 expenditures stated in the application, subject to the
15 availability of total tax credits, as follows:
16 (i) Not more than $20,000,000 in total tax credits
17 under this section may be awarded in a year.
18 (ii) If the amount of tax credits available in any
19 fiscal year exceeds the amount of tax credits reserved by
20 the department in such year, the excess shall carry over
21 to the next succeeding fiscal year and be available in
22 addition to the $20,000,000 available in that year.
23 (iii) Not more than $4,000,000 in tax credits shall
24 be allowed in connection with a single application for a
25 tax credit under this section.
26 (iv) Not more than 20% of the total dollar amount of
27 tax credits allowed in any year shall be allowed for
28 projects located in any one political subdivision.
29 (3) In determining whether to reserve a tax credit under
30 this section, the department shall weigh the following
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1 factors:
2 (i) The extent to which such award will contribute
3 to the revitalization of deteriorated commercial
4 districts in smaller communities, aging suburbs and large
5 urban areas.
6 (ii) The historic, cultural or architectural
7 importance of the resource proposed to be rehabilitated.
8 (iii) The extent to which such award satisfies the
9 geographic allocation strategy under section 3(b)(4)
10 (relating to agencies).
11 (iv) The extent to which such award extends the
12 benefits of this act to both small and large historic
13 commercial sites.
14 (4) The department shall deny or grant an application
15 within 30 days. Failure to act within this time period shall
16 be deemed a reservation of a credit. The time period may be
17 extended by mutual agreement of the applicant and the
18 department.
19 (5) Denial of a credit is subject to appeal under 2
20 Pa.C.S. Ch. 7 Subch. A (relating to judicial review of
21 Commonwealth agency action).
22 (6) A person for whom a tax credit has been reserved may
23 claim the credit for the taxable year in which the building
24 is placed in service. If actual qualified rehabilitation
25 expenditures exceed the amount of estimated expenditures on
26 which the credit reserved is based, the credit shall be based
27 on estimated expenditures. If estimated expenditures exceed
28 actual expenditures, the credit shall be based on actual
29 expenditures.
30 (7) Credits allowed to a partnership, a limited
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1 liability company taxed as a partnership or multiple owners
2 of property shall be passed through to the persons designated
3 as partners, members or owners respectively pro rata or
4 pursuant to an executed agreement among such persons
5 documenting an alternate distribution method, without regard
6 to the sharing of other tax or economic attributes of such
7 entity. If a person entitled to credits has not claimed such
8 credits, the person may assign, transfer or convey the
9 unclaimed credits, in whole or in part, by sale or otherwise,
10 to one or more individuals or entities. The assignee or
11 assignees may use the credits against any taxes against which
12 the assignor would have been entitled to use the credit and
13 may carry forward any unused credits over to each next
14 succeeding taxable year for up to 15 years commencing with
15 the taxable year in which the credit was allowed. Each
16 assignee must perfect the transfer by notifying the
17 department and the Department of Revenue in writing within 30
18 calendar days following the effective date of the transfer
19 and must provide such information as required by the
20 department and the Department of Revenue to administer and
21 carry out the provisions of this section.
22 (8) Neither credits authorized by this section nor the
23 proceeds of the sale, assignment or transfer of credits shall
24 constitute income taxable under Article III of the Tax Reform
25 Code of 1971.
26 Section 5. Penalty.
27 (a) Imposition.--The Department of Revenue may impose an
28 administrative penalty on a person that breaches a covenant
29 under paragraph (3) of the definition of "historic commercial
30 site" in section 2 (relating to definitions).
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1 (b) Amount.--The penalty shall be equal to the recapture
2 percentage of the awarded credit. The recapture percentage shall
3 be calculated under section 50(a)(1) of the Internal Revenue
4 Code of 1986 (Public Law 99-514, 26 U.S.C. § 50(a)(1)).
5 Section 6. Review.
6 By November 30, 2008, the commission, the department and the
7 Department of Revenue shall file with the Secretary of the
8 Senate and the Chief Clerk of the House of Representatives a
9 report on the program under section 4 (relating to tax credits)
10 for fiscal years July 1, 2005, through June 30, 2008.
11 Section 29. Expiration.
12 (a) General rule.--Except as set forth in subsection (b),
13 this act shall expire June 30, 2014.
14 (b) Exception.--Credits under section 4(b) may be carried
15 over to taxable years ending before July 1, 2029.
16 Section 30. Effective date.
17 This act shall take effect in 60 days.
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