THE LOUISIANA DEPARTMENT OF ECONOMIC DEVELOPMENT RESTORATION TAX ABATEMENT (RTA)

The Restoration Tax Abatement Program (RTA) is an economic development tool for use by local governing authorities to encourage expansion, restoration, improvements, and development of existing commercial structures in downtown development districts, economic development districts, or historic districts.

Under normal circumstances, if an owner improves, renovates or adds on to a building, the assessed value goes up and so do the property taxes. Under the recently expanded Restoration Tax Abatement Programs, the assessed value and the property taxes can be frozen at the pre-improvement level for five years, resulting in substantial tax savings.

This program can be used in combination with the federal historic preservation tax credit program, resulting in even more substantial savings. It should be noted that the tax relief provided by the Restoration Tax Abatement Program is not automatic; rather it must be granted by the local taxing authority, generally the municipality and the Louisiana Board of Commerce and Industry.

WHAT PROPERTIES QUALIFY

The tax abatement program is available for buildings individually listed in the National Register of Historic Places or buildings that are considered historic components of Register districts. It is also available for existing buildings in downtown or economic development districts. It should be noted that unlike the federal historic preservation tax credit program, the state tax abatement program can be used both for commercial structures and owner-occupied private homes. Improvement projects proposed for historic buildings (i.e., listed individually on the National Register or historic components of Register districts) must be approved by the Louisiana Division of Historic Preservation.

Commercial property owners that expand, restore, improve or develop an existing structure in a qualifying district will pay property taxes based on the assessed valuation of the property prior to making the improvements. The RTA program defers the assessment of property taxes normally assessed on improvements to existing structures for five years with a provision of a five-year renewal if approved by the local governing authority. Notification to the Department of Ecomonic Development is required prior to beginning renovations by filing an Advance Notification Form. An Application should also be filed prior to the beginning of renovations providing a detailed description of the project and the following documentation included:

A. Proof of ownership
B. Legal property description
C. Picture of structure before and rendering of the after
D. Names and addresses of all owners
E. Assessed value of structure (only) and taxes paid on structure
F. Copy of the tax invoice for the prior year
G. Written certification from the local governing authority designating for this program.

FINANCIAL CONSIDERATIONS

Unlike the federal tax credit program, the State Restoration Tax Abatement Program does not generally have a financial threshold requirement for commercial structures. That is, for most projects, there is no set minimum amount of money an owner must spend in order to qualify. In most cases any project, however small, would be acceptable. The only exception to this is that projects on owner-occupied dwellings must be valued at least 25% of the assessed valuation of the building. In this case, the assessed valuation is generally figured at 10% of the appraised market value.

Example: Total fair market value of building before any renovation or improvements: $1,200,000. Assessed value= $1,200,000 x Assessment Rate of 15%= Assessed value of $180,000 x 202 mills = $36,360 in ad valorem taxes.

Assume permanent/fixed improvements to the building of $1,250,000. Assessed value of improvements = $1,250,000 x Assessment Rate of 15% = $187,500 x 202 mills=annual tax savings of $37,875 under the Restoration Tax Abatement Program.

Another important feature of the state abatement program is that, in most cases, the financial benefit applies to additions to a building as well as to work on the building itself, thus increasing the tax savings. An owner’s tax abatement is established by a contract through the Louisiana Department of Economic Development with the Board of Commerce and Industry.

For more information, please contact Robert Berling, Financial Incentives Division, Office of Commerce and Industry, Department of Economic Development, P.O. Box 94185, Baton Rouge, LA 70804-9185, phone (225) 342-5401.

In Shreveport, the city has developed a policy of waiving permit fees for buildings being renovated in downtown.

LOUISIANA’S ENTERPRISE ZONE PROGRAM provides tax credits and sales and use tax refunds to businesses locating or expanding in designated enterprise zone areas. The business must create a minimum of five new permanent jobs and fulfill other employee criteria, including certifying that 35% of its new employees were unemployable by traditional standards, lacking in basic skills, receiving some form of public assistance or are residents of an enterprise zone in that parish.

Specifically, Enterprise Zone benefits include:

One-time tax credits of $2,500 for each net new permanent job created ($5,000 for certain aircraft-related enterprises). These tax credits can be applied to any state income tax or corporate franchise tax obligation. If the entire credit cannot be used in the year claimed, the remainder can be applied against income of franchise taxes for the succeeding ten years or until used up, whichever occurs first.

Refunds on applicable state and local sales/use taxes (exept where local sales taxes are encumbered toward payment of bond indebtedness or are school taxes), on purchases of building construction materials, machinery and equipment by businesses that build or renovate facilities in Louisiana Enterprise Zones. Sales tax benefits (refunds) are only in effect for the duration of the initial construction period (2 year maximum).

Job tax credit example: A company creates 150 full-time and 400 part-time jobs. (With regard to this program, 2 part-time jobs equal 1 full-time job.) 350 full-time jobs x $2,500=$875,000 tax credit that can be applied against State income and/or franchise tax liability for up to ten years, or until the credit is used up, whichever comes first.

State and local sales tax refund example: Assume $600,000 cost in building construction materials and $1,000,000 cost in machinery and equipment. Total eligible state and local sales tax: 6.5%. 6.5% x $1,600,000 + $104,000 refund.

For more information contact: Enterprise Zone Program Marylyn Friedkin Financial Incentives Division Office of Commerce and Industry Department of Economic Dev. P.O. Box 94185 Baton Rouge, LA 70804-9185 phone (225) 342-9228 fax (225) 342-5364

Louisiana Historic Tax Credits
Up to $250,000 per building

The Louisiana Division of Historic Preservation and State Department of Revenue are currently writing the rules for this new incentive. Click here for a copy of ACT 60, the legislation creating the state historic tax credits.Tax Credit Legislation

FEDERAL HISTORIC TAX INCENTIVES
Tax Credits (dollar for dollar) with the IRS