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A Better Partnership

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Apr 2008
03
April 03, 2008

Brownfield Incentive Changes Spur Development

New brownfield legislation recently passed by both the House and Senate offers enhanced tax incentives that should spur development in Michigan's core cities and other urban areas. HB5511 will create a tremendous window of opportunity for developers by creating tax incentives of up to 20 percent to help revitalize urban development.

Developers can expect a 12.5 percent brownfield tax credit (an increase of 2.5 percent) on qualifying projects--both new construction and rehabilitation projects--and a tax credit of up to 20 percent for projects located in a designated urban development area. These credits could prove to be significant. For example, a developer seeking brownfield tax credits for a downtown Grand Rapids project with a price tag of $20 million would currently be eligible for a credit of $2 million. Under the new legislation, if the property qualifies as an urban development area, the credit doubles to $4 million. There are a dozen more proposed changes to the law that are favorable to development. A detailed summary of those changes is available here.

State officials are hoping the new laws, combined with the Act 381 amendments that were approved in December 2007, will spur development in many of Michigan's urban areas. The December changes already allowed for new "eligible activities," which included demolition and lead and asbestos abatement on brownfield property anywhere in the state. In other words, those expenses are no longer limited to core communities. The December amendments also allow for reimbursement of certain pre-brownfield plan environmental activities while eliminating the work-plan approval requirement for some activities.

Warner Norcross & Judd attorneys were instrumental in developing House Bill 5511 and the December amendments. If you need help sorting through the amendments or proposed changes to the tax incentive law, contact John Byl (616.752.2149), Troy Cumings (616.752.2731), Jan Barger (616.752.2221) or Jared Belka (517.679.7414). We have recently strengthened our team with the addition of Jared Belka to our Lansing office. Before joining Warner, Jared was a Brownfield Redevelopment Program Specialist with the Michigan Economic Development Corporation, where he reviewed Michigan Business Tax credit and tax increment financing applications to ensure compliance with statutory and policy requirements. He also processed and prepared for approval all amendment requests for previously approved brownfield projects.

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