Michigan’s House and Senate may be in recess for most of the summer, but legislative issues continue to percolate. Advocates continue their work to move forward a range of legislation, including bills that would bring back tax credits for the redevelopment of historic buildings and another that would curb a controversial tax loophole. MiBiz checked in on the status of the two packages.
HISTORIC PRESERVATION TAX CREDITS
Tax credits that leveraged more than $1 billion in private investment during the 1990s and 2000s before being eliminated could see new life under legislation introduced earlier this summer.
Senate Bill 469, sponsored by Sen. Wayne Schmidt, R-Traverse City, would bring back the state’s Historic Preservation Tax Credits that went away in 2011 as part of Gov. Rick Snyder’s broader tax reform strategy.
Schmidt introduced the bill in late June, and it was assigned to the Senate’s Finance committee. Advocates hope that the legislation gets a hearing when legislators return from their summer break, said Nancy Finegood, executive director of the Michigan Historic Preservation Network. The Lansing-based advocacy group lobbies in favor of greater historic preservation around the state.
The MHPN is currently in discussions with a number of legislators — both Democrats and Republicans — about introducing a companion bill in the state House, Finegood said.
The legislation would allow individuals or companies to credit up to 25 percent of qualified expenditures when paired with federal tax credits, according to the legislation.
The state credits would be administered by the Michigan State Housing Development Authority (MSHDA).
“We felt the timing was good,” Finegood said of the bill’s introduction, adding the state has just adopted new economic development tools geared toward landing larger projects. “The historic tax credits work for any size project. I think there will be more support because this can be used in Main Street communities. We want to bring back that opportunity to revitalize small towns.”
A spokesperson for Gov. Snyder declined to comment for this report, saying he wanted to see how the bill moves through the legislative process before speaking further.
Snyder has been vocal in the past about his preference of moving away from tax credits in favor of lower all-around taxes.
While the credits ended in 2011, Finegood and other sources noted the state’s Community Revitalization Program (CRP) has in many ways helped to fill the gap for historic redevelopment projects. The proposed tax credits would be open both to individuals and developers, whereas CRP exists as a loan and is only available for commercial projects.
Sam Cummings, managing partner of Grand Rapids-based CWD Real Estate Investment Inc., said the firm only “sporadically” used the credits in its projects to renovate historic commercial buildings in the city’s downtown, noting that the credits and the CRP tend to be costly and time-consuming.
Still, Cummings said that if the state could work some predictability into the legislation and limit liabilities, the return of historic tax credits could work to benefit cities across the state.
“Any tool that fosters greater investment in quality restoration is, I think, a great thing,” Cummings said. “But it’s very difficult for the state to understand its liabilities (with a tax credit system). If there’s a way to clean it up and make it simpler … it makes sense.”
During the 11-year period when the credits were available, the legislation leveraged nearly $1.5 billion in private investment and created 36,000 jobs, according to data from the MHPN.
“Michigan had the best state tax credit in the country,” Finegood said. “We feel strongly that these buildings should be maintained. They should offer an incentive to do that.”
A handful of Michigan legislators and lobbyists continue their fight to close the so-called “dark store” tax loophole as the issue continues to gain steam in other states.
Under the loophole, big box retailers like Meijer Inc., Home Depot and Walmart challenge their municipal property tax assessments for new store buildings, which are often pegged to the cost of construction. In doing so, they argue their assessments should be lowered and based on the values of comparable stores, including vacated “dark” properties, because the company-specific designs render the facilities functionally obsolete the moment they open.
It’s a tactic Walker-based Meijer Inc. has used in West Michigan and across its multi-state footprint, including in neighboring Wisconsin.
In July, Meijer filed a lawsuit against the city of Wauwatosa, Wis. after the municipality assessed a store at $23.3 million, according to a report in the Milwaukee Journal-Sentinel. Meijer says the store, which opened in 2015, is worth about $7.9 million. The company also filed a similar lawsuit in Kenosha, Wis.
In Michigan, the Michigan Municipal League (MML) continues to push legislation it hopes will curb the practice.
Local units of government around the state have been left with large budget deficits after being forced to repay big box retailers after they successfully challenged assessments to the Michigan Tax Tribunal, the state body that oversees such cases.
Michigan House Bill 4397 would close much of the loophole and offer a sense of security to local governments, according to Chris Hackbarth, director of state and federal affairs for the MML, an Ann Arbor-based advocacy group that lobbies on behalf of the state’s municipalities.
The bill, sponsored by Rep. David Maturen, R-Brady Township, has gotten considerable bipartisan support in the House, but it has yet to gain traction in the Senate, Hackbarth said. The MML hopes to engage Senators on the issue upon their return from summer break, he added.
That the dark store issue continues to gain headlines in other Midwest states proves the practice has become somewhat contagious, according to Hackbarth.
“This is a big regional issue, a national issue,” he said.