Senate Proposal Would Reduce Historic Tax Credit to 10 Percent, Preserve New Markets Credit Allocations Through 2019 Round

by BakerHostetler

On Nov. 9, 2017, the Joint Committee on Taxation released its “Description of the Chairman’s Mark of the Tax Cuts and Jobs Act” (the “JCT Description”). The JCT Description summarizes the initial draft of the Senate Finance Committee’s tax reform proposal, which is not publicly available. You can access a copy of the JCT Description by clicking here. The JCT Description suggests the Senate is taking a different approach to both the Historic Tax Credit (“HTC”) and New Markets Tax Credit (“NMTC”) programs. Below is a summary of the Senate’s proposal as it relates to the HTC and NMTC programs and how it compares with the current House tax reform bill.

HTC Program

Under existing law, taxpayers are entitled to (i) a 20 percent credit for qualified rehabilitation expenditures (“QREs”) incurred with respect to certified historic structures and (ii) a 10 percent credit for QREs incurred with respect to pre-1936 buildings that are not certified historic structures. The Senate bill would continue the credit for QREs with respect to certified historic structures, but cut the credit rate in half to 10 percent. In addition, the Senate bill would repeal the credit available with respect to all pre-1936 buildings that are not certified historic structures. Like the House bill, the Senate version would allow a taxpayer to generate HTCs under the current 20 percent and 10 percent rules as long as such taxpayer owns or leases the building at all times after Dec. 31, 2017 and selects a 24-month rehabilitation period that begins not later than 179 days after the enactment of the final tax reform bill. Please refer to our prior alert for further discussion of the currently-proposed “transition rules.”

NMTC Program

The JCT Description provides that the Senate’s tax reform bill would maintain the prior legislative authorization of the NMTC program through 2019. As described in our prior alert, the current House tax reform proposal would eliminate NMTC allocation authority after the 2017 round.

The House Ways and Means Committee approved the House version of a tax reform bill on Nov. 9, and the full House expects to vote on the measure next week. The Senate Finance Committee plans to produce a markup of its tax reform bill on Nov. 13. The full Senate expects to vote on the Finance Committee’s markup by late November. Thereafter, the Joint Committee on Taxation must reconcile the differences between the House and Senate tax reform bills.


Although the Senate’s current tax reform proposal represents an improvement from the House version toward preserving the HTC and NMTC, cutting the historic credit in half for certified structures and eliminating the credit for non-certified structures would still have a strong negative impact on the feasibility of many HTC projects.

We are in the midst of the legislative process and now is the time for those who feel strongly about the importance of these programs to reach out to members of Congress and their staffs to advocate on behalf of the HTC and NMTC for retaining these programs in their current forms.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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