By Matt Nolley and Justin Hage, both of Bingham Greenebaum Doll LLP
Senate Enrolled Act 563 was signed by Governor Eric Holcomb on May 1, 2019. SEA 563 includes the creation of a new Redevelopment Tax Credit (RTC) to replace the existing Industrial Recovery Tax Credit (IRTC). After December 31, 2019, the Indiana Economic Development Corporation (IEDC) may not make awards under IRTC. The RTC becomes effective on January 1, 2020.
The RTC provides a tax credit for qualified investment within a qualified redevelopment site, which includes any of the following:
- land on which a vacant building or complex of buildings was placed in service at least 15 years before the date of the application;
- land on which a vacant building or complex of buildings was placed in service at least 15 years prior to their demolition for either the health, safety and welfare of the community or as a facility placed in service as a public building, owned by a governmental entity and remains undeveloped;
- vacant land; or
- a brownfield consisting of at least 50 acres.
The following changes have been made as part of SEA 563:
- There is no minimum building size under the RTC.
- The RTC does not require any type of structure to be located on the site.
- IEDC has discretion (with the percentage below as statutorily set maximums) in determining the applicable credit percentage under the RTC.
- The applicable credit percentage under RTC can be higher if the qualified redevelopment site is part of a development plan of a regional development authority (“RDA”).
- The applicable credit percentages may not exceed the following:
- 10% (15% for RDA development plan) if the qualified redevelopment site was placed in service at least fifteen years ago but less than thirty years ago, or is vacant land or a brownfield.
- 20% if the qualified redevelopment site was placed in service at least thirty years ago but less than forty years ago and is part of RDA development plan.
- 15% (25% for RDAs) if the qualified redevelopment site was placed in service at least forty years ago.
- IEDC may increase the credit amount under RTC by not more than 5% if the qualified redevelopment site is located in a federally designated qualified opportunity zone or the project qualifies for federal new markets tax credits.
- RTCs that exceed $7,000,000 shall include in a provision in the tax credit agreement that requires the taxpayer to repay the portion of the RTC that exceeds $7,000,000.
- Depending on the repayment terms and interest rate, this limitation will likely serve as a soft cap.
- IEDC may enter in agreement with a local unit of government that has jurisdiction over the real property that is subject to qualified investment, through which the local unit makes the repayment (on the taxpayer’s behalf) to IEDC using revenue generated by the redevelopment project.
- IEDC may only award $50,000,000 in RTCs per state fiscal year.
- RTCs can still be: assigned; and/or paired with other applicable credits (i.e. low-income housing and/or new market).
- RTCs are applied against a taxpayer’s state, not federal, tax liability.
The changes made by SEA 563 to create the RTC make the credit a more flexible tool and align the credit with existing programs geared towards redevelopment and the overall push towards regionalism. However, the $50,000,000 limit will likely result in significant competition for the RTCs.
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