BILL NUMBER: S9071
SPONSOR: KAVANAGH
 
TITLE OF BILL:
An act to amend the tax law and the parks, recreation and historic pres-
ervation law, in relation to authorizing the pass-through or transfer of
the credits for rehabilitation of historic properties
 
PURPOSE OF BILL:
To allow for greater allocation of the New York State Historic Tax Cred-
it to parties or investors currently ineligible to receive this credit,
and to permit non-profit entities to serve as a Historic Tax Credit
conduit to reduce the state capital needed to generate affordable hous-
ing.
 
SUMMARY OF PROVISIONS:
Sections one through three of this bill amend three separate provisions
of the New York Tax Law by adding the same language to each provision,
respectively.
Section one of the bill amends subdivision 26 of section 210-B of the
tax law by adding new paragraphs (g) and (h). Subsection (i) of para-
graph (g) permits bifurcation of the federal rehabilitation credit and
New York State historic rehabilitation tax credit (HTC), as it author-
izes the allocation of HTC with respect to a federally certified histor-
ic structure to investors and pass-through entities other than those to
which the federal tax credit has been allocated on said property.
Subsection (ii) of paragraph (g) permits tenants of certified historic
structures subject to a lease arrangement to receive a transfer of the
HTC from a landlord. Where the landlord of a certified historic struc-
ture under a lease arrangement elects to pass the federal rehabilitation
credit through to the tenant taxpayer, the landlord may opt to either
retain the HTC or to also pass it down to the tenant taxpayer.
Subsection (ii) also defines the term "landlord" for purposes of this
subdivision. Subsection (iii) of paragraph (g) identifies article 14-A
of the parks, recreation and historic preservation law as setting forth
the parameters for transferring the HTC.
Paragraph (h) directs the commissioner to annually report on the aggre-
gate amount of credits claimed pursuant to this subdivision on returns
filed during the preceding calendar year and to make such report public-
ly available on the department's website.
Section two of the bill amends subsection (oo) of section 606 of the tax
law by adding new paragraphs 7 and 8 with the same language as in
Section one.
Section three of the bill amends subsection (y) of section 1511 of the
tax law by adding new paragraphs 7 and 8 with the same language as in
Section one.
Section four of the bill amends the parks, recreation and historic pres-
ervation law by adding new Article 14-A, Historic Rehabilitation Tax
Credit Transfer Program.
Section 14.15 of Article 14-A defines key terms, including "federal
rehabilitation credit," "pass-through entity," "qualified rehabilitation
expenditures," "regulations," "rehabilitation credit," "transferee," and
"non-profit transferee."
Section 14.16 of Article 14-A authorizes a single transfer of the HTC,
in whole or in part, from one taxpayer, or from a pass-through entity
that may report the rehabilitation credit or otherwise elect to pass the
federal rehabilitation tax credit through to a tenant taxpayer, to
another taxpayer, provided that a transfer conducted through a non-pro-
fit conduit to another taxpayer shall be deemed to satisfy the single-
transfer limit. A partial transfer of the HTC may be for no less than
twenty-five percent of the full HTC claimed by the taxpayer, and a
transferee shall use or report the rehabilitation credit in the year it
is allowed.
Section 14.17 of Article 14-A directs the taxpayer, or a pass-through
entity that may report the credit or otherwise elect to pass the federal
rehabilitation credit through to a tenant taxpayer in accordance with
applicable federal law, to provide an information statement to the
commissioner which includes specified threshold information.
Section 14.18 of Article 14-A authorizes the commissioner to promulgate
rules and regulations.
Section five of the bill sets forth the effective date.
 
JUSTIFICATION:
The Federal Historic Rehabilitation Tax Credit provides for a 20% feder-
al income tax credit to support substantial rehabilitation of buildings
that are on the National Register of Historic Places, if the project is
approved by the National Park Service. The New York State Historic Tax
Credit (HTC) is similarly designed to subsidize rehabilitation of
historic income-producing properties, providing a credit for 20% of
qualified expenditures under $5 million, or 30% of qualified expendi-
tures under $2.5 million. The Legislature and the Governor extended the
State program for five additional years in the State budget enacted in
May 2023.
Current State law requires the NYS HTC to be allocated in the same
manner and to the same parties as the federal credit, such that projects
may get a total credit of 40% for projects with expenditures under $5
million or 50% for projects with expenditures under $2.5 million. Howev-
er, when both the federal and state HTC are allocated to the same inves-
tor, the pricing of the credits is typically less than if the NYS HTC
could be allocated and sold separately from the federal HTC, because
there is a smaller number of investors willing to competitively purchase
both. This problem is compounded in affordable housing historic rehabil-
itation projects, where the federal and NYS HTC are combined with the
federal Low-Income Housing Tax Credit (LIHTC). In these cases, the same
credit investor must take the federal HTC, the NYS HTC, and the federal
LIHTC together. This depresses the pricing of all three credits, as the
investor pool for such projects, especially in those areas most in need
of housing investment, is extremely limited.
As federal LIHTC is one of the largest sources of funding for affordable
housing projects, the inability for New York to attract different inves-
tors for federal and state HTC hurts affordable housing development in
historic buildings statewide and creates funding gaps in such projects
because of the depressed pricing across all credits. State taxpayers end
up picking up the tab for these funding gaps, as the state housing agen-
cy, New York State Homes and Community Renewal (HCR), must then fill
these gaps with limited state capital money. And with limited available
capital, some projects competing for resources may not happen, meaning
affordable units do not get developed and buildings would not be
preserved. The bifurcation of federal and NYS HTC investments is there-
fore critical to the generation of affordable housing in New York.
This legislation also increases the value of the HTC by allowing a non-
profit entity like a non-profit affordable developer or a historic pres-
ervation organization to sell the credits on behalf of the project. As
non-profit entities are tax exempt, this means that the credit sale will
be exempt from federal tax, resulting in more capital for the project,
which in turn lowers the need for any HCR subsidies to fully finance a
historic preservation and affordable housing project.
 
LEGISLATIVE HISTORY:
This is a new bill.
 
FISCAL IMPLICATIONS:
To be determined.
 
EFFECTIVE DATE:
This act shall take effect immediately and shall apply to taxable years
beginning on and after January 1, 2025.

Statutes affected:
S9071: 210-B tax law, 210-B(26) tax law, 606 tax law, 606(oo) tax law, 1511 tax law