Lawmakers `close' to accord on tax credit

Disagreement remains on whether to set limits

April 03, 2002|By Howard Libit | Howard Libit,SUN STAFF

House and Senate leaders are nearing agreement on new limits to Maryland's historic tax credit program, the first effort to curb a tool described as crucial for the redevelopment of Baltimore's older neighborhoods.

The two chambers still differ on whether to place an overall limit on the program. The Senate believes it can change the rules enough to the keep costs under $50 million, but the House leadership wants a firm $50 million cap - a provision included in a bill passed by the House last week.

"We're getting real close," said Del. Sheila E. Hixson, a Montgomery County Democrat and chairwoman of the House Ways and Means Committee.

Developers can now claim a tax credit worth 25 percent of the cost of the rehabilitation of buildings in historic areas. If their tax liability is less than the credit, the developers receive money back from the state.

During the past few years, use of the credit has grown, particularly as older Baltimore neighborhoods have become a popular target for redevelopment. Legislative analysts estimate that unless limits are imposed, the potential cost to the state could grow to between $50 million and $84 million a year - alarming lawmakers worried about the state budget.

The bill approved by the House would cap the program at $50 million in tax credits per year, but keep the credit at 25 percent of eligible project costs. It also would direct some of the tax breaks to smaller projects and some to larger ones.

A Senate committee approved a competing measure this week that would reduce the tax credit from 25 percent to 20 percent. It also would limit the maximum credit per project to $3 million. Analysts estimate those changes would keep the program under $50 million and permit all but the largest projects to go forward.

"We were trying to make a reasonable approach to limits without benefiting only the biggest developers," said Sen. Barbara A. Hoffman, a Baltimore Democrat and chairwoman of the Senate Budget and Taxation Committee.

The Senate also added language clarifying that the General Assembly's intent is to limit the tax credits to $50 million per year. If the cost exceeds that amount, the Assembly's fiscal leadership would be notified and legislation would be drafted for the next session to impose a $50 million cap.

Hoffman said placing a limit on the program would create uncertainty about whether projects would be rejected because they exceed it, and that uncertainty could hurt developers trying to arrange loans and other financing.

But House Speaker Casper R. Taylor Jr., whose legislation helped create the program several years ago, said he believes a firm cap is necessary.

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