Brief ⁽¹⁾

HB 2128, as amended, would provide state income tax credits of 25 percent for qualified expenditures incurred in the restoration and preservation of a qualified historic structure pursuant to a qualified rehabilitation plan. "Qualified rehabilitation plan" would be defined as a project consistent with rehabilitation standards and guidelines adopted by the federal Secretary of the Interior and further approved by either: (1) the Kansas State Historical Society's Cultural Resources Division; or (2) a local government certified by the Division. All expenditures under such plans would qualify for the 25 percent credit if the total amount is $5,000 or more.

The tax credits would be nonrefundable, but unused credits could be carried forward for up to ten years.

Background

Unlike federal law, which generally allows historic preservation and restoration income tax credits only for income-producing properties, the state credits authorized by HB 2128 also would be available to residential and other properties not producing income.

The practical impact of the bill is that it would authorize qualifying projects on income-producing property to obtain combined state and federal tax credits amounting to a 45 percent subsidy. (The federal credit is equivalent to 20 percent of qualified expenditures, and the state credit would be 25 percent of such expenditures.) Qualifying residential property would be eligible for the 25 percent state credit.

Proponents of the legislation indicated that the bill is similar to a law on historic preservation credits already authorized by Missouri. According to research by the Kansas State Historical Society, some form of state tax credit is available in at least 17 states.

The House Taxation Committee amendment was recommended by a subcommittee chaired by Representative Hutchins. That amendment makes HB 2128 more closely mirror the federal tax credit in Section 47 of the federal Internal Revenue Code.

Based on the latest fiscal information available from the Department of Revenue, which includes the impact of the subcommittee amendment, the initial amount of qualified expenditures would be $2.2 million and could be expected to grow by 10 percent per year. The fiscal note further assumes that 2/3 of the credit would be used in each year and the remaining 33 percent would be carried forward against the next tax year's liability. Such a scenario produces the following fiscal notes:

1. *Supplemental notes are prepared by the Legislative Research Department and do not express legislative intent. The supplemental note and fiscal note for this bill may be accessed on the Internet at http://www.ink.org/public/legislative/fulltext.cgi