As part of his strategy to stem the State of Rhode Island’s looming fiscal crisis, Governor Donald Carcieri has proposed legislation dramatically limiting the ability of taxpayers to use historic preservation tax credits to offset income for tax years 2007 going forward.
Under the Governor’s proposal, the state would honor only $20 million dollars in tax credits for tax year 2007 and $40 million dollars in tax credits for each tax year starting in 2008 and going forward. In the event that taxpayers collectively claim more than the amount permitted for any tax year, first priority would be given to those taxpayers with the least amount of carry forward years remaining. Any authorized amount still remaining would then be allocated on a pro rata basis among the remaining taxpayers attempting to claim the credit. The new legislation also imposes an onerous filing deadline of March 1, 2008, for taxpayers "to make application to the tax administrator" to use the credits for the 2007 tax year. There is no express provision for extensions. The nature of this application is unclear; rehabilitations are certified and credit certificates are issued by the Historic Preservation Commission, not the taxing authorities. As drafted, the legislation ostensibly applies retroactively to the 2007 tax year.
The Governor’s proposal has yet to be taken up by the General Assembly, which may enact, reject or modify his proposal. If the General Assembly joins the Governor and retroactively changes this program, many developers (and their lenders) who have relied upon tax credit proceeds to finance their projects, and taxpayers who have purchased credits or agreed to purchase credits will be seriously harmed. This issue ultimately may have to be resolved by the courts.
What can you do? In the event that the Governor’s proposal is adopted substantially as presented, taxpayers will be in the best position to argue that they are entitled to claim the credit if they have received the credit prior to legislative enactment. Thus, taxpayers who have not yet received certificates are encouraged to apply for and obtain their credits as quickly as possible. Taxpayers should also be prepared to use the credit by March 1, 2008, just over a month away.
In addition, taxpayers should also lobby the legislature that it is wrong to change the rules of the game after the game has started.