On March 30, 2011 Governor Haley Barbour signed into law House Bill 1311, amending Section 27-7-22.31 of the Mississippi Code, related to tax credits generated in connection with the rehabilitation of certified historic structures. Under the previous law, if the tax credit exceeded the taxpayer’s tax liability, the taxpayer could carry the tax credit forward for a ten year period. For project owners that generate more than $250,000 in tax credits, the new legislation gives taxpayers the option to elect a refund in the amount of 75% of the excess credit to be paid over a two year period. The new legislation requires project owners that are pass-through entities, such as limited liability companies, to make the election at the entity level. It also provides that unused credits generated prior to January 1, 2011, that have been allocated to a pass-through entity will be eligible for the 75% refund.
The new legislation ensures that project owners will receive a greater economic benefit from the tax credits generated. Under the previous law, since many project owners did not have the necessary tax liability to utilize the tax credits, the project owners would partner with investors that would make contributions to the project owners in return for an allocation of the tax credits. For various reasons, the amount contributed by investors usually represented less than 75% of the amount of the tax credits. It is anticipated that most project owners will now elect to receive the 75% refund instead.
In addition to the increased benefits for the project owners, the new legislation should also result in a less expensive program for the State of Mississippi. For those project owners that elect the refund option, the State will be paying 75 cents per every $1 in tax credit, instead of foregoing the entire $1 in revenue.