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House of Representatives
Session of 2021 - 2022 Regular Session


Posted: March 22, 2021 03:11 PM
From: Representative Robert Freeman and Rep. R. Lee James
To: All House members
Subject: Strengthening the Historic Preservation Tax Credit Program
In the near future, we plan to introduce legislation that would resolve an issue with the allocation of the Pennsylvania Historic Tax Credit.
As you may be aware, the Historic Preservation Tax Credit Program encourages private sector investment in the rehabilitation and re-use of historic buildings since its creation in 2012. Projects that included a nonprofit partner have been included in the program and received allocations since the program’s inception.
As a 501(c)(3) organization, a nonprofit does not have a tax liability, which makes them tax exempt. To use historic tax credits, the nonprofit must create a for-profit entity. If the nonprofit plans to complete a syndication deal, this same for-profit will also be used as a member of the entity formed between the nonprofit and the investor. The purpose of this partnership is for the nonprofit to raise construction equity from the investors in the partnership, and for the investors to use the tax credits to reduce tax liability. Many affordable and senior housing projects, commercial and office development projects, and social service projects have been funded this way throughout the Commonwealth.
However, in a 2019 review of applications for the Historic Preservation Tax Credit Program, the Department of Revenue determined that some applicants affiliated with a nonprofit organization were not eligible for the program. They were flagged as a “disregarded entity of a nonprofit group” and their applications were rejected.  
No other state has made this determination, and in fact, several states have included specific language in their laws that allows nonprofits to be part of a development group for a historic preservation project. As such, we are working with Senator Argall on legislation that mirrors his proposal to allow nonprofits to be part of a development group for a historic preservation project. 
I hope you will join us in co-sponsoring this bill.

Introduced as HB1253