New law ‘opens the pipeline’ for development.
Working in a nonprofit often means a constant and ongoing search for funding. But on July 12, Missouri enacted new legislation that should make the quest a little easier.
In the past, it was difficult for nonprofit organizations to utilize funding from the Historic Preservation Tax Credit Program (HTC), a state program designed to be an incentive for developers to rehabilitate historic structures in the state.
The new law, however, allows nonprofits to access Missouri historic tax credits. The $134 million allotment should open multiple new opportunities for historic construction projects across Missouri.
“It’s been a barrier in the past,” said Kari Wolff, a partner at MarksNelson in assurance and business advisory services. “This really opens the door to additional funding sources for nonprofits to be able to use that money against debt service or operating their building. And in the spirit of the program, you're saving historic buildings and you're providing community service.”
Wolff said that while there are still challenges for nonprofits to access historic tax credits at the federal level, an effort to change Missouri law had been growing for many years.
“It's been in the works for a long time,” she said. “It has been a tireless effort by many in the historic revitalization industry to push for positive improvements in the program and make the state a leader in the historic tax credit space.”
The law also increases the amount of historic tax credits from 25% to 35% for projects located in cites and towns outside of Kansas City and St. Louis.
The credits are awarded based on “qualified rehabilitation expenditures,” typically defined as improvements to the building (e.g., building components, windows, HVAC, etc.). If a client spends $1 million on qualified improvements, for example, the project would now be eligible for up to $350,000 in credits (instead of $250,000 under the previous law).
“Any little bit helps,” Wolff said. “Especially if you're in a smaller town, you can only fundraise so much. So, if you've got another source of funds to help service some debt or use for cash flow down the road, it is welcome.”
Firm serves as a partner through process
With the passage of the new law, MarksNelson can now work directly with developers and owners on all types of projects – including those associated with a nonprofit – to help them maximize their project funding from the HTC program.
The firm will work closely with the nonprofit when applying for the credits, helping them with budgets and estimates. But the team’s primary focus, Wolff said, is certifying the costs that get submitted to the state, which then determines how many tax credits are awarded.
The MarksNelson team can help connect clients with the people or institutions buying the historic tax credit. “Banks are usually the biggest buyer of state historic tax credits,” Wolff said. “It’s wonderful to see community banks supporting local projects, especially those that are of mixed-use supporting main streets.”
At the end of the project, the firm also helps with the required state reporting to ensure delivery of the tax credit certificate, as well as the filing of the cost certification, a document that lists all the costs of the project and what qualifies for tax credits.
The team then continues to serve as an intermediary between the state and the owner or developer to help answer questions and ensure a smooth process.
Streamlined program generates hope and excitement
Other components of the new law are also designed to ease the process for HTC application and reduce bureaucratic red tape, including requiring a 60-day deadline for state reviews and allowing a project to begin before its final designation on the National Register of Historic Places.
State Sen. Steven Roberts (D-St. Louis) sponsored the bill and wrote in a release he applauds the bipartisanship that led to its passage and the “significant reforms” that were long overdue:
“These reforms will address the unnecessary and what I believe are intentionally burdensome regulatory attempts to suffocate the program by establishing deadlines for application responses and requiring standards that match its national counterpart.”
Historic Revitalization for Missouri, a nonprofit focused on town squares, downtown commerce and neighborhoods, said the new law will “open the pipeline for millions of investments” and will serve as “an overall boost to development efforts” in the state.
The new law takes effect Aug. 28.
