An important legislative initiative, the “Rebuilding Communities” bill, House bill 246, is currently under consideration by the State Senate, which will vote during the session ending May 15. This law is designed to build on the state historic credit that became law in January of 1998, which is already having tangible effects on rehab in many historic neighborhoods, including Skinker-DeBaliviere.
The new law also builds on the 1998 “Rebuilding Communities Law”, which gives incentives to certain types of businesses to locate in distressed communities (defined to include the entire City of St. Louis). Businesses which start up or locate in the City obtain 3 years of state tax credits, more than offsetting the city earnings tax for the company and its employees. These businesses can offer investors substantial tax credits and other benefits. The law has been called the best in the United States for revitalizing distressed communities.
Attorney Jerry Schlichter, who initiated these pieces of legislation and who has played an active role in obtaining passage of the earlier legislation, has furnished the following information about how the legislation will work. According to Schlichter, it is very important for anyone interested to write or call Governor Carnahan (573-751-3222), speaker of the House Steve Gaw (573-751-2135) and Senate President Ed Quick (573-751-4524) with your support of the upcoming vote in the Senate session ending May 15. Our 4th District State Senator Lacy Clay can be reached locally at 367-2596.
The Rebuilding Communities bill now pending would create strong incentives for development of owner-occupied, market rate houses in distressed communities, which includes, like the former bill, the entire city of St. Louis, including Skinker-DeBaliviere. It would do the following:
- Provide a tax credit of 35% of the cost of rehab to a developer or homeowner who substantially rehabilitates (spends over half the cost) a home for owner occupancy — if the home is over 50 years old and located in a distressed community (anywhere in the city);
- Provide a tax credit of 15% of the construction cost to a developer or homeowner who builds a new market rate owner-occupied home in a distressed community (anywhere in the city);
- Provide a tax credit of 25% of the cost of modest renovation (above $5,000) to the owner of a home over 50 years old in a distressed community or a broader range of communities (which in this area would include many of the older inner ring of suburbs) up to a maximum of $20,000 in tax credit for a single home.
The bill has a cap of $10 million for the whole state. Project funding will be on a first-come first-served basis requiring the approval of the state Department of Economic Development (which also approves the state historic tax credit.)
The tax credits can be sold so a homeowner or developer can go back and apply the credit to each of the last 3 years’ income and go forward 4 years, entirely eliminating state taxes for seven years.
In addition, for single family homes, the credit can piggy-back on the state historic tax credit so that in a historic neighborhood such as Benton Park the two can be used together for, get this, a 60% tax credit for substantial rehabilitation of a home!
Here’s how this can work for you: Assume a couple making $50,000 per year buys a house for $50,000 and spends $60,000 rehabbing it. That produces a credit of $21,000. Missouri taxes on their income are 6% for a total of $3,000 per year. They take the credit in the current year and go back 3 years for a total of $12,000 in tax credit taken. They can also go forward three more years and take another $9,000 in credit, eliminating their state income taxes for seven years.
