The Alabama Historical Rehabilitation Tax Credit
Perhaps you have attended one of the recent performances at the newly renovated Lyric Theatre in the rebounding downtown Birmingham economic district. Or, perhaps on your last visit to Alabama’s port city, Mobile, you stayed at the newly renovated Admiral Semmes Hotel. If so, you have experienced the positive benefits of a valuable incentive passed by the Alabama Legislature in 2013. The real part that the Alabama Historical Rehabilitation Tax Credit (aka Alabama Historic Tax Credit, or AHTC) played in the success of these projects may be debatable.
Some might argue the projects would not have happened but for the existence of the AHTC. At a minimum, the AHTC made easier the completion of the project, given the financing options to developers afforded by the AHTC and the fact that it is a transferable credit. 1 Regardless of the actual impact on these and other projects around the state which have qualified for the AHTC, the presence of the incentive has created a lot of interest in repurposing old and idle buildings around the State of Alabama that deserve a second chance.
Unfortunately, based on the action, or rather inaction, of the Alabama Legislature during its most recent session, the AHTC is not being extended and has been allowed to expire during the current year. Projects that had already received allocations of the credit in the previous three years of the program are not affected. A number of projects that have been allocated credits are expected to be completed during 2016 or 2017. The expiration of the program, however, means that the economic viability of other possible projects being considered will have to be evaluated without the benefit of the AHTC.
This result occurred despite widespread support for the extension of the credit in the business community and the majority of the Alabama Legislature. Hopes were raised somewhat when the Alabama House of Representatives passed a bill by a vote of 91-4 to extend the AHTC program until 2022. The legislative session, however, ended with no vote on the program by the Alabama Senate, dooming the AHTC to expiration. In spite of widespread support, the actions of a few members of the Alabama Senate kept the program from ever getting to a vote on the Senate floor.
Regardless of your personal feelings on the AHTC program, for the program to be extended by one side of the legislature, and then blocked from voting on the other side due to the actions of a very small minority, seems to go against the spirit of representative government under which the legislature operates. Support for the credit is expected to lead another push to extend the program during 2017 legislative sessions. Again, regardless of which side of the AHTC debate you support, voice that opinion to your representatives in the Alabama Legislature and let us hope that the fate of the program will be decided by a vote of the full legislature, and not by the procedural posturing of a few opponents.
Written by Steven N. Smith, CPA, JD
1 The Alabama legislation governing the AHTC program provides that developers may transfer the benefit of the AHTC to taxpayers of the State of Alabama, who may claim the credits on their income tax returns. As a component of their overall financing arrangement for a project, the developer can sell the credits at a discount to the taxpayer. Thus, for example, a taxpayer can buy AHTC for 90% or some other market determined percentage of the face amount of credits being acquired.