Bill Caption

Relating to the sale or assignment of tax credits for the certified rehabilitation of certified historic structures.

Fiscal Notes

From the Legislative Budget Board: No significant fiscal implication to the State is anticipated.

Bill Analysis

SB 550 would amend the Tax Code to add that an entity that is rehabilitating a certified historic site or building to which all or part of a credit for up to 25% of the total eligible costs incurred is sold or assigned and that is subject to an insurance premium tax may claim all or part of the credit against that tax. An entity claiming all or part of a credit authorized would not be required to pay any additional retaliatory tax levied as a result of that credit.

To be clear, this legislation does not create a new tax incentive program; rather it expands an existing and very complex tax credit program designed to incentivize private business to take on historic restoration projects. The program allows for trading and selling of tax credits. The intent of this bill is to provide insurance companies with a tax incentive that they does not currently exist for them because of the way they are currently taxed. As the author's statement of intent says:

"An important feature of the preservation tax program is an entity’s ability to sell credits earned under the program to other entities for use against a franchise tax liability. This ability allows investors a way to monetize the credits, and that improves their return on investment."

Because insurance companies do not have a franchise tax liability, they have no way to participate in the Texas Historic Preservation Tax Credit System. This bill enables them to do so by allowing credits earned under the program to be used against the insurance premium tax.

Vote Recommendation Notes

This legislation expands access to a program which is entirely designed to manipulate the marketplace through the tax code by offering credits and allowing credits to be bought, sold, and traded. This kind of intervention in the marketplace violates the principles of limited government and free markets - it is not the proper role of government to leverage preferential tax treatment on a favored industry, product, service, or class of people. The best way for the government to approach historic preservation is to get out of the way and let private enterprise go to work. If the costs are too high for industry to take on restoration projects that should be a market signal that there is not enough demand for the project. If the cause of the high costs is government regulation, the regulations should be repealed rather than expand and perpetuate a gimmicky incentive program. For these reasons we oppose SB 550.