Colorado Jobs & Main Street Revitalization Act (Colorado State Tax-Credit)

Rep. Leroy Garcia, Rep. Tim Dore
Sen. Pat Steadman, Sen. Larry Crowder

Main Streets Across Colorado are in Critical Need

Many of Colorado’s traditional main streets are at a tipping point. Many buildings are vacant, their historic facades in decay and their local economies in desperate need of investment and revitalization. Colorado was one of the first states to create a Historic Preservation Tax Credit in 1990, and now with the newly improved tax credit, Colorado remains competitive with neighboring states.  The credit can be better used to attract critical commercial reinvestment, rehabilitation and revitalization of main streets across our state.

The improved tax credit is modeled after successful, bipartisan legislation passed in other states that provide critical incentives to get languishing buildings back into viable use, while simultaneously spurring tremendous economic growth, job creation and historic preservation in rural and metro areas.

The Challenge

-Create jobs and boost new economic development in communities across Colorado
-Attract private capital investment that is currently flowing into other states to revitalize historic main streets and commercial buildings, creating    new business, housing, and shopping while generating local government revenue
-Protect Colorado’s unique historic structures while increasing cultural heritage tourism

The Answer

-The tax credit (a percentage of rehabilitation costs) can be taken directly by the property owner or transferred to a financial partner who provides  funds for the rehabilitation work
-State tax credits can be combined with additional federal incentives, driving new revenue into local communities and closing the “development  gap” that arises from the high cost of rehabilitating historic structures
-All rehabilitation must meet strict standards and retain the historic character of the building

Why a Tax Credit for Historic Commercial Properties?

Rehabilitation tax credits work. Studies in other states have proven that transferable tax credits for historic commercial projects create good paying jobs and have a ripple effect that brings rural main streets back to life.

-In Ohio, every dollar of state tax credit leverages $6.25 in investment. In Minnesota, every tax credit dollar creates $8.32 in economic activity  and in North Carolina it generates $12.51 in economic benefit
-In a 2008 study of Virginia’s tax credit over the last decade, $355M in tax credits (avg. $35M a yr) spurred the rehab of more than 1200 historic  buildings, generated an economic impact of over $1.6B to Virginia and created more than 10,700 jobs and $444 million in wages and salaries
-An effective tax credit, such as Colorado’s, will increase the use of the federal rehabilitation tax credit, bringing more federal dollars into the state  to help revitalize local communities and preserve Colorado’s unique rural and cultural heritage
-The new tax credit keeps Colorado competitive and attracts private capital to the state that is being invested in neighboring states
-Allows non-profits to take advantage of the tax credit if they invest in rehabilitation of historic buildings
-Promotes sustainability by creating housing and businesses in walkable, energy-efficient areas
-The tax credit reinforces the goals of both political parties to build a business-friendly environment, retain, grow and recruit companies to communities across the state and increase access to capital

Who Benefits?

-Cities and towns across Colorado – especially those damaged in recent disasters – seeking to create new jobs, reactivate historic buildings with  new businesses, add housing, preserve their cultural heritage and attract tourism
-Local leaders who need their property values and tax revenues to rise to pay for local services
-Property owners who currently can’t afford to rehabilitate their storefronts, convert upper floors or bring their property up to code
-Small businesses & non-profits seeking an attractive and convenient space to start or expand their operations
-The State of Colorado by spurring economic growth and tax revenue from new jobs and tourism

How the Bill Works

The bill is modeled after successful bipartisan legislation in other states and establishes two eligibility pools for the commercial tax credit, one pool for smaller projects and one for larger projects. The total amount of tax credits is currently capped at $5 million (split between the two pools). The pools:

Smaller Historic Rehabilitation Projects: One pool is set aside for smaller historic preservation projects with tax credits less than $1 million per project.

-Minimum expenditure to equal 25% of original purchase price, less land value
-All projects must be certified by the State Historic Preservation Office and third party audits are required on projects with Qualified Rehabilitation  Expenses (QREs) in excess of $250k.
-All credits are transferable and can be taken directly by the property owner or transferred to a financial partner who provides funds for  rehabilitation work
-Projects located in state and/or federal disaster designations will qualify for an additional state tax credit of 5% of QREs if placed in service up to  8 years following such designation
-Large Historic Rehabilitation Projects: The second pool is set aside for larger historic commercial projects with significant capital investment  with projected credits in excess of $1 million.
-All projects must be certified by the State Historic Preservation Office
-Minimum expenditure to equal 25% of original purchase price, less land value
-These projects will receive a 20% state tax credit for all QREs and credits are transferable with a per deal cap of $2 million
-Large projects located in state and/or federal disaster designations will qualify for a state tax credit of 25% of QREs if placed in service up to  8 years following such designation.

Performance Based with Strict Safeguards:

-The program is strictly structured so that the State approves applications up front but realizes no fiscal impact until after projects are  completed and all construction investments have been made.
-Only properties designated historic at the local, state or national level are eligible and a minimum expenditure is required equal to 25% of the  original purchase price of the property (less land value).
-Third party audits are required on projects with Qualified Rehabilitation Expenses (QREs) over $250k.

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Featured Project

Preservation for a Changing Colorado

The 2017 update, Preservation for a Changing Colorado, resulted from a partnership between Colorado Preservation and History Colorado and Colorado Preservation, Inc. Prepared by Clarion Associates, the new report and accompanying website document the economic benefits of rehabilitation projects, analyzes property values and neighborhood stability in local historic districts, and summarizes the increasing impact of heritage tourism, private preservation development and the success of Colorado’s Main Street program. In a key finding, researchers found that for every $1 million spent on historic preservation in Colorado leads to $1.03 million in additional spending, 14 new jobs, and $636,700 in increased household incomes across the state! The 2017 report also considers the important role preservation plays in helping Coloradans provide new spaces for creative communities and co-working, create and sustain meaningful places, respond to the state’s changing demographics, and address climate concerns. Click Here to see the full report, "Preservation for a Changing Colorado".

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