HB1204: establishing an historic homeownership mortgage credit program.

HB 1204-FN-A - AS INTRODUCED

2003 SESSION

03-2190

05/01

HOUSE BILL 1204-FN-A

AN ACT establishing an historic homeownership mortgage credit program.

SPONSORS: Rep. Hamm, Merr 34

COMMITTEE: Commerce

ANALYSIS

This bill establishes an historic homeownership mortgage credit program.

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Explanation: Matter added to current law appears in bold italics.

Matter removed from current law appears [in brackets and struckthrough.]

Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.

03-2190

05/01

STATE OF NEW HAMPSHIRE

In the Year of Our Lord Two Thousand Three

AN ACT establishing an historic homeownership mortgage credit program.

Be it Enacted by the Senate and House of Representatives in General Court convened:

1 Findings. The general court finds that:

I. The neglect, abandonment, and demolition of buildings of historic, cultural, and architectural importance within the state constitutes a serious problem and has resulted in the blighting of urban downtowns and neighborhoods and smaller communities and suburbs, the decline of local tax revenues, and the loss of irreplaceable historic, cultural, and architectural resources.

II. New incentives are required to stimulate the private sector to invest in the rehabilitation of such resources in a manner consistent with their historic character.

III. Historic rehabilitation mortgage credit certificates can provide an effective incentive for the rehabilitation of structures of historic, cultural, and architectural importance for use as owner-occupied homes.

IV. Affordable housing for moderate income persons is lacking.

V. Such credits can help to enable persons of modest means to achieve homeownership, revitalize decaying neighborhoods, downtowns, and smaller communities, and add to the tax base of local governments.

2 Department of Cultural Resources; Division of Historical Resources; Certified Rehabilitation of Historic Structures. Amend RSA 21-K:7 to read as follows:

21-K:7 Division of Historical Resources. There is hereby established within the department the division of historical resources, which shall also be known as the state historic preservation office, under the supervision of an unclassified director of historical resources, who shall be responsible for:

I. Administering the state historic preservation program in accordance with RSA 227-C.

II. Determining the historic eligibility of any structure for participation in the historic homeownership assistance act under RSA 205-D, and certifying the appropriateness of the rehabilitation for purposes of RSA 204-D:4.

3 New Paragraph; Business Profits Tax; Historic Homeownership Mortgage Program Tax Credit Allowance for Lender. Amend RSA 77-A:5 by inserting after paragraph XI the following new paragraph:

XII. The historic homeownership mortgage program tax credit as determined under RSA 205-D:4.

4 New Section; Business Enterprise Tax; Historic Homeownership Mortgage Program Tax Credit Allowance for Lender. Amend RSA 77-E by inserting after section 3 the following new section:

77-E:3-a Historic Homeownership Mortgage Program Credit. The historic homeownership mortgage program credit, in an aggregate amount not to exceed $1,000,000 in any one fiscal year, as determined under RSA 205-D:4, shall be allowed against the tax due under this chapter.

5 New Section; Community Development Finance Authority; Historic Homeownership Mortgage Program Credit. Amend RSA 162-L by inserting after section 10 the following new section:

162-L:11 Administration of Historic Homeownership Mortgage Program Credit. The community development finance authority shall be responsible for administering the historic homeownership mortgage program credit in accordance with RSA 205-D, including taking into account where less than all of the building is used as a principal residence and where more than one individual uses the same dwelling units as their principal residence.

6 New Chapter; Historic Homeownership Assistance Act. Amend RSA by inserting after chapter 205-C the following new chapter:

CHAPTER 205-D

HISTORIC HOMEOWNERSHIP ASSISTANCE ACT

205-D:1 Definitions. In this chapter:

I. "Certified historic structure" means:

(a) Any structure which is a certified historic structure within the meaning of section 47(c)(3) of the United States Internal Revenue Code;

(b) Any building which is designated as a state or local landmark or which is designated as being of historic significance in the target area; and

(c) Part of a multiple dwelling or multi-purpose building or a series of buildings, including a cooperative or condominium, that is a certified historic structure within the meaning of section 47(c)(3) of the United States Internal Revenue Code or that is designated as a state or local landmark or which is designated as being of historic significance to the target area.

II. "Certified rehabilitation" means any rehabilitation of a certified historic structure in the target area which the state historic preservation office has certified as being consistent with the historic character of such property or the district in which such property is located.

III. "Income qualified individual or household" means any individual or 2 person household with a maximum income of 100 percent of the county median income and any 3 or more person household with a maximum income of 120 percent of the county median income, as established by the United States Department of Housing and Urban Development. If county median income figures are not established by the United States Department of Housing and Urban Development, then statewide median income figures shall be used.

IV. "Community development finance authority" means the public authority established by RSA 162-L.

V. "Principal residence" has the same meaning as when used in section 1034 of the United States Internal Revenue Code.

VI. "Qualified historic home" means a certified historic structure which:

(a) Has been substantially rehabilitated;

(b) Is owned by one or more individuals;

(c) Is, or will, within a reasonable time, be used by such individual or individuals as his or their principal residence; and

(d) Is in the target area.

VII. "Qualified rehabilitation expenditure" means any amount properly chargeable to capital account in connection with the certified rehabilitation of a qualified historic home, and for which depreciation would be allowable under section 168 of the United States Internal Revenue Code if the qualified historic home were used in a trade or business. "Qualified rehabilitation expenditure" does not include the cost of acquiring any building or interest therein, any expenditure attributable to the enlargement of an existing building, and any expenditure in connection with the rehabilitation of a building unless at least 5 percent of the total expenditures made in the rehabilitation process are allocable to the rehabilitation of the exterior of such building. If only a portion of a building is used as the principal residence of the individual, only qualified rehabilitation expenditures which are properly allocable to such portion shall be taken into account under this chapter.

VIII. "State historic preservation officer" means the director of the division of historical resources, department of cultural resources, as provided in RSA 227-C:2.

IX. "Substantially rehabilitated" means the rehabilitation of a certified historic structure provided that the qualified rehabilitation expenditures shall be at least $10,000.

X. "Target area" means locally designated historic districts, National Historic Districts, and main street communities as certified by the NH Main Street Center.

205-D:2 Historic Homeownership Rehabilitation Mortgage Credit.

I. Subject to the limitations and requirements in this chapter, an individual shall be entitled to receive an historic homeownership mortgage credit in an amount equal to 25 percent of the qualified rehabilitation expenditures made by the individual with respect to a qualified historic home. The credit allowed by this section with respect to any residence shall not exceed $50,000.

II. In the case of a building other than a building to which RSA 205-D:3 applies, qualified rehabilitation expenditures shall be treated for purposes of this section as made:

(a) On the date the rehabilitation is completed; or

(b) To the extent permitted by law, when such expenditures are properly chargeable to capital account.

205-D:3 Grant of Historic Homeownership Mortgage Credit for Purchase of Rehabilitated Historic Home.

I. In the case of a qualified purchased historic home, an individual shall be treated as having made on the date of purchase the qualified rehabilitation expenditures made by the seller of such home.

II. For purposes of this section, the term "qualified purchased historic home" means any substantially rehabilitated certified historic structure purchased by the individual if:

(a) The purchaser is the first purchaser of such structure after the date rehabilitation is completed, and the purchase occurs within one year after such date;

(b) The structure, or a portion thereof, will, within a reasonable period, be the principal residence of the purchaser;

(c) No mortgage credit was allowed to the seller under RSA 205-D:2 with respect to such rehabilitation; and

(d) The purchaser is furnished with such information as the community development finance authority determines is necessary to determine the credit under this section.

205-D:4 Historic Rehabilitation Mortgage Credit Certificate.

I. For purposes of this section, the term "historic rehabilitation mortgage credit certificate" means a certificate:

(a) Issued to an income qualified individual or household, as determined by the community development finance authority, that meets the rehabilitation standards, as determined by the state historic preservation officer with respect to a certified rehabilitation;

(b) The face amount of which shall be equal to the mortgage credit to which such individual is entitled under RSA 205-D:2 or 205-D:3 with respect to such rehabilitation;

(c) Which may only be transferred by such individual to a lending institution (including a non-depository home mortgage lending institution) in connection with a loan:

(1) That is secured by the building with respect to which the mortgage credit relates; and

(2) The proceeds of which may not be used for any purpose other than the acquisition or rehabilitation of such building; and

(d) In exchange for which such lending institution provides to the individual an amount equal to the face amount of the certificate, which shall be applied, as directed by the individual, in whole or part:

(1) To reduce the principal amount of the loan;

(2) To reduce the rate of interest on the loan; or

(3) To reduce the individual's cost of purchasing the building under RSA 205-D:3.

II. The amount of the credit specified in the certificate shall be allowed to the lender to offset up to 100 percent of the state taxes of such lender due under RSA 77-A and RSA 77-E. The lender may carry forward all unused credits under this section until exhausted. Notwithstanding any provision in this section, a lending institution shall not be required to accept an historic rehabilitation certificate from any person. A lending institution that accepts an historic rehabilitation mortgage credit certificate under this section shall be entitled to rely in good faith on the information contained in and used in connection with obtaining the certificate by the individual or entity providing such information including, without limitation, the amount of qualified rehabilitation expenditures.

III. No state taxes shall be incurred as a result of the receipt, transfer, or use of an historic rehabilitation mortgage credit certificate.

205-D:5 Administration. The community development finance authority shall be responsible for administering the historic homeownership mortgage program credit in accordance with the purposes of this chapter, including taking into account where less than all of the building is used as a principal residence and where more than one individual uses the same dwelling units as their principal residence. The department of cultural resources, division of historical resources, shall be responsible for determining the historic eligibility of any structure for participation in the program, and shall certify the appropriateness of the rehabilitation.

7 Effective Date. This act shall take effect July 1, 2004.

LBAO

03-2190

9/3/03

HB 1204-FN-A - FISCAL NOTE

AN ACT establishing an historic homeownership mortgage credit program.

FISCAL IMPACT:

The Department of Revenue Administration indicates this bill will decrease state unrestricted general fund revenue and state restricted education trust fund revenue by a total of $1 million in FY 2005 and each year thereafter. The Department of Cultural Resources indicates state expenditures will increase by an indeterminable amount in FY 2005 and each year thereafter. There is no fiscal impact on county and local revenue or expenditures.

The Community Development Finance Authority (CDFA) indicates Authority expenditures will increase by $38,300 in FY 2005, $38,458 in FY 2006, $39,972 in FY 2007, and $41,545 in FY 2008.

METHODOLOGY:

The Department of Revenue Administration (DRA) states that this bill grants a credit against the Business Profits Tax and Business Enterprise Tax for lenders that issue mortgages which meet the criteria of the historic homeownership mortgage program as stated in this bill. The DRA assumes that the entire amount of the credit will be used, which is capped at $1 million per year statewide. The Department cannot determine what the revenue decrease will be for the general fund or the education trust fund, because it will depend on which tax the lender takes the credit against.

The Department of Cultural Resources states that the increase in state expenditures to determine the historic eligibility of any structure for participation in the historic homeownership assistance program are indeterminable.

The Community Development Finance Authority (CDFA) states that to administer this program, the CDFA will require a 50%-time professional with knowledge in the construction industry and familiarity with the principles of historic preservation, a 10%-time clerical support staff position, travel expenses to inspect sites, and legal costs to prepare and review documents. The table below summarizes these costs:

LBAO

03-2190

9/3/03

Page 2

FY 2005 FY 2006 FY 2007 FY 2008

Salary & Benefits $35,200 $36,608 $38,072 $39,595

Travel 600 650 700 750

Legal 2,500 1,200 1,200 1,200

Total $38,300 $38,458 $39,972 $41,545

The Banking Department states that the Department will not incur any costs as a result of the passage of this legislation. Any incidental costs can be absorbed within their existing budget.