AGENDA ITEM #6
June 25, 2013
Public Hearing
MEMORANDUM
TO:
FROM:
SUBJECT:
County Council
Jeffrey
L.
zYOnt!!r:egiSlative Attorney
Public Hearing:
Expedited Bi1114-13, Historic Preservation - Tax Credit
Expedited
Bill
14-13, Historic Preservation - Tax Credit, sponsored by Councilmembers Rice,
Floreen, and EIrich, was introduced on June 11, 2013. A Government Operations and Fiscal
Policy Committee worksession is tentatively scheduled for July 8 at 2 p.m.
Expedited Bill 14-13 would amend the law related to the percentage of improvement costs on a
historic property that is eligible for a property tax credit. Currently, the historic preservation tax
credit is the maximum allowed by state law (10%). On July 1,2013, state law will allow a 25%
tax credit. The sponsors of the Bill wish to maximize the
tax
credit for qualified historic
preservation improvements.
This packet contains:
Expedited Bill 14-13
Legislative Request Report
Fiscal and Economic Impact Statement
Circle
#
1
3
4
F;\LAW\BILLS\1314 Historic Pres Tax Credit\PH Memo June 25.Doc
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Expedited Bill No.
_........!..:14:!....-~13~
_ __
Concerning: Historic Preservation - Tax
Credit
Revised: May 13, 2013 Draft No.
Introduced:
June 11, 2013
Expires:
December 11. 2014
Enacted: ____________
Executive: _ _ _ _ _ _ _ __
Effective: _ _ _ _ _ _ _ _ __
Sunset Date: -=-:,No::::,:n,.:.::e'---_ _ _ _ __
Ch. _ _, Laws of Mont. Co. _ __
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
By: Councilmembers Rice, Floreen, EIrich, and Riemer
AN EXPEDITED ACT
to:
(1) amend the law related to the percentage of improvement costs on a historic property
that are eligible for a property tax credit; and
(2) generally amend the laws a tax credit for qualified improvement to historic
properties.
By amending
Montgomery County Code
Chapter 52, Taxation
Section 52-43
Boldface
Underlining
[Single boldface brackets]
Double underlining
[[Double boldface brackets]]
* * *
Heading or defined term.
Added to existing law by original bill.
Deletedfrom existing law by original bill.
Added by amendment.
Deletedfrom existing law or the bill by amendment.
Existing law unaffected by bill.
The County Council for Montgomery County, Maryland approves the following Act:
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EXPEDITED BILL
No. 14-13
1
2
Sec. 1.
Section 52-43 is amended as follows:
Sec. 52-43. Use of tax credit.
(a)
The tax credit is [10] 25 percent of the taxpayer's qualified expenses under
section 52-42.
(b)
The tax credit applies to the next tax year after the year in which the work or
any part is completed. Any unused tax credit may be carried forward to as
many as 5 subsequent tax years. However, if the property is removed as an
historic site or excluded from an historic district on the applicable County or
municipal master plan or zoning map, any unused tax credit must lapse.
3
4
5
6
7
8
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10
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12
*
Sec. 2.
Expedited Effective Date.
*
*
The Council declares that this legislation is necessary for the immediate protection of
the public interest. This Act takes effect on the date on which it becomes law.
Approved:
13
14
15
16
Nancy Navarro, President, County Council
Date
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Approved:
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Isiah Leggett, County Executive
Date
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This is a correct copy o/Council action.
20
Linda M. Lauer, Clerk ofthe Council
Date
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LEGISLATIVE REQUEST REPORT
Expedited Bi1l14-13
Historic Preservation Tax Credit
DESCRIPTION:
The Expedited Bill would amend Charter 42 to allow an increased tax
credit for qualified improvements to a historic property. As
introduced, the tax credit would be increased from 10 percent to 25
percent.
The designation of a property as historic makes improvements
subject to an additional regulatory review. To offset this burden,
Maryland law allows a
tax
credit for a percentage of the
improvement. The law governing the allowable
tax
credit for
improvements to historic property was changed in 2013 (Chapter 189
of the 2013 Laws of Maryland). In the absence of amending the
Code, the allowable tax credit would be less than the state allows.
The state law becomes effective on July 1,2013.
It
is the goal of this Bill to allow the maximum allowable tax credit
for improvements to historic property.
PROBLEM:
GOALS AND
OBJECTIVES:
COORDINATION:
FISCAL IMPACT:
ECONOMIC
IMPACT:
EVALUATION:
EXPERIENCE
ELSEWHERE:
SOURCE OF
INFORMATION:
APPLICATION
WITHIN
MUNICIPALITIES:
PENALTIES:
Historic Preservation Commission and Planning Department
To be requested.
To
be
requested.
To be requested.
To be researched.
Jeffrey
L.
Zyontz, 240-777-7896
To be researched.
None.
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ROCKVILLE,
MARYLAND
MEMORANDUM
June 18,2013
TO:
FROM:
Nancy Navarro, President, County Council
Jo~';;'h,
Director, Department
OfFin~
Bill 14-13, Historic Preservation - Tax Credit
JennifM~gheS,
Director, Office of Management and Budget
SUBJECT:
Please find attached the fiscal and economic impact statements for the above-referenced
legislation.
JAH:jfb:nm
c: Kathleen Boucher, Assistant Chief Administrative Officer
Lisa Austin, Offices of the County "Executive
Joy Nurmi, Special Assistant to the County Executive
Patrick Lacefield, Director, Public Information Office
Joseph F. Beach, Director, Department of Finance
Michael Coveyou, Department of Finance
Robert Hagedoom, Department of Finance
David Platt, Department ofFinance
Alex Espinosa, Office of Management and Budget
Erika Lopez-Finn, Office ofManagement and Budget
Naeem Mia, Office of Management and Budget
Henri Apollon, Office ofManagement and Budget
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Fiscal Impact Statement
Council
Bill 14-13
&
Historic Preservation - Tax Credit
1. Legislative Summary.
Bill 14-13 would amend the law related
to
the percentage of improvement costs on a historic
property that is eligible for a property tax credit. Currently, the historic preservation
tax
credit is
the maximum allowed by state law (10%). On July 1, 2013, state law will allow for a 25% tax
credit.
Bill 14-13 will modify the percentage ofthe credit to 25% (up from the current 10%) ofthe
amount expended by the taxpayer for the restoration or preservation ofa historic property, up
to the amount of County real property taxes due (credit is not refundable).
The credit shall
be
allowed for the tax year immediately following the work or any portion
thereof is completed, and any unused portion of this tax credit may be carried forward for up
to 5 tax years after which the credit lapses.
2. An estimate of changes in County revenues and expenditures regardless
of whether
the
revenues or expenditures are assumed
in
the recommended or approved budget.
The Bill does not affect County expenditures.
Based on data from the Department of Finance's Tax Expenditure report (June 2012), the
County has foregone the following amounts due to the historic preservation tax credit over
the last five years:
1m:
Year
2011
2010
2009
2008
2007
Foregone Revenue at 10%
credit level
$234,850
$232,556
$138,447
$221,996
$191,006
Number of
Recipients
141
115
65
111
96
Average Tax Credit Per
Recipient
$1,665
$2,022
$2,129
$2,000
$1,989
Based on the last two years' costs of approximately $230,000 per annum, Finance estimates
an annual fiscal impact of $345,000
in
tax revenue losses under the proposed bill.
l
Based on
an average of 128
reci~ients,
the average tax credit per recipient is estimated at
approximately $2,700.
$345,000 "" $230,000 x 1.5 (2.5 - 1.0) (tax credit increased by 150%)
2
Since historic preservation activities are limited
in
scope
to
specific properties, the vast majority ofhomeowners
are ineligible for the credit; therefore, the number ofrecipients
is
unlikely to increase (beyond a 2-year average of
128 recipients as based on 2010-2011 data) and the annual expenditures are un1ikely to increase beyond $345,000.
1
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3. Revenue and expenditure estimates covering at least the next 6 fiscal years.
Based on annual expenditures of $345,000, the total6-year cost is estimated at $2,070,000.
4. An actuarial analysis through the entire amortization period for each biII that would
affect retiree pension or group insurance costs.
Not applicable.
5. Later actions that may affect future revenue and expenditures
if
the bill authorizes
future spending.
Not applicable. The bill does not authorize future spending.
6.
An
estimate of the staff time needed to implement the bill.
Implementation costs are minimal- Department of Finance staff currently administers the
tax credit program at the 10% scenario and expects no additional staff time to implement the
program at 25% level.
M-NCPPC staff estimates an addition of25 applications per year due to the greater
tax
credit
incentives under this bill. M-NCPPC staff states the total increase
in
stafftime to process
these applications is 12 hours.
7. An explanation of how the addition of new staff responsibilities would affect other
duties.
Department of Finance and M-NCPPC do not expect any impact on other duties under the
proposed bill.
Applications for historic preservation status are administered by jurisdiction at the
appropriate historic preservation commission
in
an applicant's district (City of Gaithersburg,
City
of Rockville, or Maryland-National Capital Park
&
Planning Commission (for all other
properties).
8. An estimate of costs when an additional appropriation is needed.
Not applicable - additional appropriations are not needed.
9. A description of any variable that could affect revenue and cost estimates.
The number oftax credit applicants/recipients is a variable that affects tax revenue estimates.
Another variable that affects expenditure estimates is the amount ofthe tax bill that a County
taxpayer receives.
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10. Ranges of revenue or expenditures that are uncertain or difficult to project.
The number oftax credit applicants/recipients is difficult to project - an increase in the tax
credit percent amount may increase the number of applicants.
However~
since historic
preservation activities are limited in scope to specific
properties~
the vast majority of
homeowners are likely ineligible for the credit and the total number of tax credit
applicants/recipients is not likely to increase beyond the two-year average of 128.
11.
If
a bill is likely to have no fiscal impact, why that is the
case.
Not applicable.
12. Other ilScal impacts or comments.
Taxpayers are eligible for the credit in the tax year after the work is completed. There may be
some taxpayers who will not receive the full amount oftheir credits. If a tax credit is not
fully used in a single year, the remaining amount can be carried forward for an additional
five years. For example, if there is $250,000 in approved preservation costs, that would yield
$62,500 in credits (using 25%). If the annual County tax bill is $5,000, the taxpayer can
apply a total of $30,000 (current year plus an additional 5 years), leaving $32,500
in
unused
tax credits that will lapse.
Funds can
also
lapse if the property is removed as a historic site or excluded from a historic
district.
13. The following contributed to and concurred with this analysis:
Robert Hagedoorn, Department of Finance
Erika Lopez-Finn, Office of Management and Budget
Amy Wilson, Office of Management and Budget
Date
Office of Management and Budget
J
J
(j)
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Economic Impact Statement
Expedited Bill 14-13, Historic Preservation - Tax Credit
Background:
Bi1114-13 would amend the law related to the percentage of improvement costs on a historic
property that is eligible for a property tax credit. Currently, the historic preservation tax credit is
the maximum allowed by state law (10%). On July 1, 2013, state law will allow a 25%
tax
credit
and this bill would adopt the same 25% tax credit for qualified historic preservation
improvements.
This tax credit may be granted against the County real property tax, based upon the amount
expended by a taxpayer for restoration or preservation ofa historic property. A property must be
a historic site designated on the master plan for historic preservation, or within a historic district
designated on the master plan for historic preservation. A
tax
credit will be allowed only for
work which is the subject of an approved historic area work permit; or for ordinary maintenance
expenses, when the amOlmt expended exceeds $1,000.00.
A credit will be approved for exterior work only, and no credit shall be granted for new
construction. Under the proposed legislation, the amount ofthe credit would be equal to 250 of
the amount expended by the taxpayer for the restoration or preservation ofa historic property, up
to the amOlmt of County real property taxes. The credit shall be allowed for the tax year
immediately following the work or any portion thereof is completed, and any lmused portion of
this tax credit, may
be
carried forward for up
to
5 tax years, after which the credit lapses.
The impact ofthe credit based on prior year tax collections is below:
Levy Year
Amount
Recipients
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
234,850
232,556
138,447
221,996
191,006
170,407
213,712
203,335
224,513
181,268
115,669
104,993
118,954
73,821
141
115
65
111
96
107
107
117
115
114
98
79
99
73
1. The sources of information, assumptions, and methodologies used.
Page 1 of2
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Economic Impact Statement
Expedited Bill 14-13, Historic Preservation - Tax Credit
This bill has no economic impact as it serves only to increase the rate ofthe historic
preservation
tax
credit for those who receive the
tax
credit.
2. A description of any variable that could affect the economic impaet estimates.
This bill should not have an economic impact as it serves only
to
increase the rate ofthe
historic preservation
tax
credit for those who receive the
tax
credit. It is assumed that the
credit will not incentivize increased historic preservation related expenditures because only
those that are necessary should be incurred.
Provided the County Cotmcil approves real property tax levies at the level permitted under
Section 310 ofthe County Charter, there should not be an impact on property
tax
collections
though it will reduce the applicable real property tax bill for eligible applicants.
3. The Bill's positive or negative effect,
if
any on employment, spending, saving,
investment, incomes, and property values in the County.
The bill has no economic impact as it serves only to increase the rate ofthe historic
preservation
tax
credit for those who receive the
tax
credit.
4.
If
a Bill is likely to have no economic impact, why is that the case?
The bill has no economic impact as it serves only to increase the rate ofthe historic
preservation tax credit for those who receive the
tax
credit.
5. The following contributed to and concurred with this analysis:
David Platt and Mike
Coveyou, Finance.
JO~~
Department of Finance
Date
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