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A Better Partnership


Feb 2009
February 03, 2009

Historic Preservation Tax Credit Program Expands

A pair of bills signed into law on January 9, 2009, will add greater flexibility to Michigan's historic preservation tax credit (HPTC) program, while providing additional credits for certain projects. Public Acts 447 and 448 will also bring Michigan's program more in line with certain requirements under the federal rehabilitation tax credit program.

The HPTC - a state tax credit for a percentage of qualified rehabilitation expenditures - is available to entities that will preserve historic buildings, structures and sites. Applications for rehabilitation are certified by the state after an evaluation to determine whether the applicant's project meets the U.S. Secretary of the Interior's "Standards for Rehabilitation."

Transferring Credits

HPTCs can be applied against a person's Michigan Business Tax or Michigan income tax. In the past, HPTCs could also be "sold" or assigned, but this required that an assignee become an owner in the entity receiving the HPTC and to remain an owner for an unspecified period of time.

In a move to encourage the efficient transfer of the credits, the HPTCs may now be freely transferred to assignees without requiring them to become an owner of the entity receiving the HPTC. The HPTC assignee is also now authorized to reassign all or a portion of the credit.

These and other much-anticipated changes will assist developers in attracting investors who can provide the capital needed for rehabilitation projects. Further, any recapture of the HPTC applies only to the taxpayer that received the certificate of completed rehabilitation, and not an assignee. These changes in state law do not affect rules regarding the federal rehabilitation tax credit program.

Other Changes

The new provisions amend sections of the Michigan Business Tax Act and the Income Tax Act to do the following with regard to the HPTC, effective January 1, 2009:

  • Allow a qualified taxpayer, for tax years beginning on or after January 1, 2009, to claim an additional "Tier 2 Credit" if the taxpayer had a pre-approval letter issued on or before December 31, 2013. The Tier 2 Credit cannot exceed the lesser of the percentage of the qualified expenditures set forth in the preapproval letter or the percentage of the qualified expenditures actually incurred by the taxpayer. Under this provision, the total of federal, state and Tier 2 credits could be as much as 40 percent of the qualified expenditures.

    • For a rehabilitation plan with $1 million or less in qualified expenditures (Small Tier 2 Credits), the additional credit would be at least 10 percent, but not more than 15 percent, of qualified expenditures, and must be approved by the director of the Department of History, Arts and Libraries (HAL).

    • For a rehabilitation plan with more than $1 million in qualified expenditures (Large Tier 2 Credits), limit the credit to no more than 15 percent of qualified expenditures and require the approval of the HAL director and the president of the Michigan Strategic Fund (MSF).

    • Provide that the annual total of all Tier 2 Credits not exceed an amount ranging from $8 million in 2009 to $12 million in 2013, and require that at least 25 percent of the annual total to be allocated to Small Tier 2 Credits. However, if the total of the Small Tier 2 Credits authorized for a calendar year on or before October 1 of that year is less than the minimum allotted amount, the remainder could be approved for Large Tier 2 Credits.

  • Allow the HAL director, subject to the approval of the MSF president and the state treasurer, to approve additional credits of up to 15 percent of qualified expenditures (Tier 3 Credit). Up to three Tier 3 Credits could be approved in 2009, and two each in 2010, 2011, 2012 and 2013, for "a high community impact rehabilitation plan that will have a significantly greater historic, social, and economic impact" than Tier 2 rehabilitation plans. Under this provision, a taxpayer or assignee would be limited to claiming up to $3 million in Tier 3 Credits in any taxable year, but the excess can be carried forward. Under this provision, the total of federal, state and Tier 3 Credits could be as much as 40 percent of the qualified expenditures.

  • Provide that those expenditures paid or incurred during the time periods prescribed for the rehabilitation tax credit under federal law could be considered qualified expenditures for Michigan's program.

  • Provide that, if a certificate of completed rehabilitation is issued on or after January 1, 2009, and the credit amount is less than $250,000, a qualified taxpayer could choose to receive a refund of 90 percent of the amount of the HPTC that exceeds its tax liability for that year, instead of carrying the balance forward.

  • Allow qualified expenditures to count toward calculating the HPTC if the historic resource is subject to a historic preservation easement.

These changes should have a positive impact on development within historic districts throughout the state. If you have questions about the new law, or are interested in seeing how it will affect projects you are planning, contact Cam DeLong at 616.752.2155 or, Kurt Brauer at 248.784.5182 or, or any member of Warner's Economic Development Incentives Group.

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