Date: 04/09/2014

Final
BILL SUMMARY for HB14-1311

HOUSE COMMITTEE ON FINANCE

Votes: View--> Action Taken:
Adopt amendment L.001 (Attachment D) The motion pa
Refer House Bill 14-1311, as amended, to the Commi		PASS
PASS



02:55 PM -- HB14-1311

Representatives Garcia and Dore came to the table to present House Bill 14-1311. They explained that the bill creates an income tax credit for a property owner that completes a qualified rehabilitation project on a historical property. The credit will be available for tax years 2015 through 2018. Representative Garcia described how the bill will benefit local governments in Colorado and the success of similar programs enacted by other states. They distributed a summary of the bill (Attachment A) and a document illustrating projects that could benefit from the tax credit (Attachment B).

14HseFin0409AttachA.pdf14HseFin0409AttachA.pdf 14HseFin0409AttachB.pdf14HseFin0409AttachB.pdf

Representative Garcia also explained that the Office of Economic Development and International Trade (OEDIT) will annually certify $15 million in income tax credits to owners of qualified historical structures who wish to preserve the property. The office may charge a fee for processing the applications of these potential recipients of the credit. For commercial projects, a fee of up to $500 may be charged for a credit of $1 million or less, or $1,000 if the credit exceeds $1 million. In addition, OEDIT may charge an issuance fee when the owner claims the income tax credit. The issuance fee is up to 2 percent of the qualified rehabilitation expenditures. A reasonable fee may also be applied to applications for residential projects. The bill requires OEDIT and the Colorado Historical Society to develop standards for the approval of the historical structures for which the income tax credit is being claimed. Beginning in FY 2015-16, HB 14-1311 requires four annual transfers of $15 million from the Capital Construction Fund (CCF) to the newly created Tax Credit for Qualified Costs Incurred in the Preservation of Historic Structures Fund (Historic Structures Fund). These funds are to be used to offset the General Fund revenue loss from the tax credit. To qualify, the property must be included on a National Register of Historic Places or have been designated as a landmark by a certified local government. The credit is available for both income-producing properties, such as apartments and commercial properties, and residential structures. The rehabilitation must be "substantial," which means the rehabilitation costs must exceed 25 percent of the owner's original purchase price for commercial structures and $5,000 for residential structures. The taxpayer cannot claim the income tax credit until the project has been completed.

For commercial structures, the total amount of the income tax credit is equal to:

The value of the credit is capped at $2 million for each commercial structure project. The credit is not refundable but may be carried forward for up to 10 years. However, the taxpayer may chose to transfer all or a portion of the income tax credit to another taxpayer. For residential structures, the amount of the credit is equal to 20 percent of the rehabilitation costs, not to exceed $50,000 for each residential property. Income tax credits for residential structures are not transferable but may be carried forward for up to 10 years. Finally, if the property is located in an area that has been determined to be in a disaster area, the project qualifies for an additional income tax credit. The amount of income tax credit would increase by 5 percent in all the cost categories described above.

Amendment L.001 was distributed (Attachment C), along with an unofficial preamended version of the bill (Attachment D). The bill sponsors responded to questions on the transferability of the tax credit, the cap on the tax credit, and how the credit would work.

14HseFin0409AttachC.pdf14HseFin0409AttachC.pdf 14HseFin0409AttachD.pdf14HseFin0409AttachD.pdf

03:13 PM

Louis Pino, Legislative Council Staff, came to the table to speak to a request for clarity on how the credit can be carried forward into future tax years. The bill sponsors responded to questions on qualifying projects needing to have rehabilitation costs that exceed 25 percent of the owner's original purchase price for the property, how much of the rehabilitation costs will be covered by the owner in relation to the tax credit, whether proof exists that reducing the cost of rehabilitating a building will increase the rate of rehabilitation, and the cap on the application fee imposed on a qualified commercial structure as laid out on pages 11 and 12 of the unofficial preamended version of the bill. Committee discussion of the application fee cap ensued.

03:28 PM -- Steve Turner, representing History Colorado, spoke in favor of the bill. He said that Colorado currently has a tax credit for rehabilitating historical property, but that it is minor in relation to similar programs in other states and in need of expansion. He stated that the existing tax credit is the only incentive for commercial project rehabilitation in rural areas, and that the bill could provide a large incentive and economic revitalization in such communities. He responded to questions on the existing tax credit, the availability of funding within existing statute for the preservation of historical buildings, the transferability of the tax credit and who it will benefit, and the standard age for a building to be considered historic.

03:45 PM

Mr. Turner responded to questions on whether the bill has a provision to address rural communities or areas that have experienced a natural disaster, which buildings would qualify for the tax credit, and the application fees for qualified residential structures as laid out on line 15 of page 12 of the unofficial preamended version of the bill.

03:51 PM -- Cathy Garcia, representing the Action 22 organization, spoke in favor of the bill. She stated that Action 22 is a regional advocate organization, and distributed a copy of some photographs of historic buildings in Colorado (Attachment E). Ms. Garcia said that the bill would create jobs in rural communities and help their economies grow.

14HseFin0409AttachE.pdf14HseFin0409AttachE.pdf

3:56 PM -- John Batey, representing Downtown Colorado, Inc., spoke in favor of the bill. Mr. Batey said that financing tools are a critical piece of downtown development, that Denver is in need of more financing tools, and that the bill would provide this additional funding. He added that without increased financing, vacant buildings will become increasingly economically inviable for rehabilitation. He responded to questions on Downtown Colorado, Inc.'s process for rehabilitating buildings and finding tenants to occupy the buildings, and whether there are any safeguards built into the bill that will guarantee the use of a building after rehabilitation.

04:05 PM -- Dan Sheehan, representing Commerce Bank, spoke in support of the bill. He stated that the transferability of the tax credit is important in terms of financing for a potential rehabilitation project.

04:08 PM -- Brittany Morris Saunders, representing the Downtown Denver Partnership, spoke in favor of the bill. She said that the bill would support redevelopment and revitalization of buildings in downtown Denver and would preserve the inner city.

04:09 PM -- Meghan Storrie, representing the Colorado Municipal League, and Bill Clayton, representing Colorado Counties, Inc., spoke in favor of the bill. Ms. Storrie stated that the bill will incentivize the restoration of historic buildings in Colorado.

04:12 PM -- Scott Peterson, representing the Colorado Association of Realtors, spoke in support of the bill. He stated that the bill would allow property owners in the state to rehabilitate qualifying historic properties, which would have an immediate positive impact on surrounding communities and their economies.

04:15 PM -- Joe Kiely, representing the Town of Limon and the Economic Development Council of Colorado, spoke in favor of the bill. He told the committee that the bill would grow Colorado's economy. He responded to a question on the impact of the tornado that hit the town of Limon.

04:18 PM -- Rebecca Goodwin, representing Colorado Preservation, Inc., spoke in favor of the bill. She stated that the communities represented by her organization and the buildings within them would benefit greatly from the bill. She provided the committee with examples of how the bill would make a difference in rural Colorado and spoke to programs in other states that are helping ensure the preservation of historic buildings.


04:27 PM

Representative Dore explained Amendment L.001, which he stated removes all references to an appropriation from the Capital Construction Fund, limits the years the tax credit will be available, implements safeguards, sunsets the bill in FY19-20, and makes other changes. The committee discussed the amendment, and Representative Dore responded to questions on the amendment and the fiscal impact of the bill.
BILL:HB14-1311
TIME: 04:35:00 PM
MOVED:Court
MOTION:Adopt amendment L.001 (Attachment D). The motion passed on a vote of 12-1.
SECONDED:Melton
VOTE
Becker
Yes
DelGrosso
Yes
Foote
Yes
Joshi
Yes
Kagan
Yes
Melton
Yes
Pabon
Yes
Priola
Yes
Saine
Yes
Swalm
Yes
Wilson
Yes
Labuda
No
Court
Yes
YES: 12 NO: 1 EXC: 0 ABS: 0 FINAL ACTION: PASS


04:36 PM

The committee discussed the merits of the bill with Representative Dore.
BILL:HB14-1311
TIME: 04:50:04 PM
MOVED:Court
MOTION:Refer House Bill 14-1311, as amended, to the Committee on Appropriations. The motion passed on a vote of 10-3.
SECONDED:Pabon
VOTE
Becker
Yes
DelGrosso
Yes
Foote
Yes
Joshi
Yes
Kagan
Yes
Melton
Yes
Pabon
Yes
Priola
No
Saine
No
Swalm
Yes
Wilson
Yes
Labuda
No
Court
Yes
YES: 10 NO: 3 EXC: 0 ABS: 0 FINAL ACTION: PASS