Last week we informed you that three important issues to the design & construction community were left to be resolved by the General Assembly before they adjourned for the remainder of the year. At that time we asked for your help in informing your legislators about these issues. Since the Legislature adjourned - sort of - for the year (see the last post in this blog) we wanted to give you an update on where these issues stand.
I. Historic Preservation Tax Credits
Update: Still In Limbo
The House did its part in trying to preserve as much of the current Historic Preservation Tax Credit program as possible. Unfortunately the Senate leadership has a very different opinion on tax credits in general.
The House included a modified form of the historic preservation tax credits in Senate Bill 763. The provision extends the law, due to expire at the end of this year, to January 1, 2020. The bill must now go back to the Senate for its approval.
The Senate completed its work on the State Budget the night of July 31 and recessed until August 14 at which time they will come back to Raleigh and deal with issues left unresolved during the short session. One of those issues will be the Historic Tax Credits. In addition the NC film credits and other tax law changes are in SB 763.
Key leaders in the Senate Republican Caucus have made it quite clear that they do not want to see any tax credits extended while they are attempting to totally revamp North Carolina's tax code. The intention by these leaders is to come back in 2015 and finish the overhaul of the tax code that fell short in 2013, by broadening the sales tax to include most all services (including architectural) while eliminating personal and corporate income taxes.
There seems to be a philosophical impasse between the two branches of the Legislature over tax credits so all we can ask of our members at this point is to stress to your elected officials how the loss of these credits will individually affect your business and the jobs associated with it. Continue to ask your senators to support Governor McCrory's proposal for a successor program to the Historic Tax Credits -- the Historic Rehabilitation Investment Program -- to continue investments in preserving our historic buildings. Details can be found in this presentation and in this summary.
We expect the issue to be addressed on August 14 so make your calls now!
II. Energy Code Roll Back
HB 201, the measure that originally would have rolled back the 2012 NC Energy Code to the 2009 version for all new construction, had been lurking around the Legislature since last year. A coalition of design, construction and clean energy business interests were successful in slowing its progress but in the waning days of the session the bill was amended in the Senate Rules Committee to offer existing buildings, and building additions an option to use the 2009 Energy Code.
This version made it through the full Senate and was concurred with back on the House side.
The details on how two separate codes can be applied to construction will now be left to the NC Building Code Council, as HB 201 did call for that regulatory body to come up with provisions on how to implement the measure.
The practical effect of HB 201's passing means that substantial new construction could be exempted from the provisions of the 2012 Energy Code. Hypothetically a 200,000 sq. ft. building will be able to add an additional 100,000 sq. ft. of additional space using the 2009 energy code. For all intend and purpose this is new construction.
The AIA argued that there really needed to be some limit and parity on the size and scope of buildings that enjoy a lower standard of energy efficiency and those that should meet a higher standard outlined in the 2012 Energy Code.
To this end we offered the limitations outlined from SB 668 (2007), G.S. 143-135.36(5)(6), which applied to state buildings for energy efficiency. The new definitions would have created a 20,000 sq. ft. threshold as the standard for meeting the 2012 Code for existing building additions. These amendments were rejected by leadership in the House and Senate.
As for building renovations we believe that most projects will opt to use the new 2015 NC Existing Building Code adopted in March of this year. In that code energy requirements were reduced for building renovations, in most cases less stringent than the 2009 Energy Code.
III. Local Sales Tax Options
Update: Still in Limbo
The Senate Finance Committee amended HB 1224 forcing a change on the future of local option sales taxes.The bill would set a cap of 2.5% for local-option sales taxes and would force counties to choose between public transportation or public education when utilizing the tax. This new law would replace the county's existing authority to levy unlimited 1/4 cent taxes for any public purpose authorized by the voters. In essence, it severely limits local communities' flexibility to use the sales tax to address their local capital construction needs including public schools, transit, parks, recreation, libraries, etc...
Last month the Governor signed HB 1043, which among other things, created a Blue Ribbon Commission to review the state's long-term building infrastructure needs and recommend funding alternatives to address those needs. It is anticipated that the local sales tax will be one of the funding mechanisms to be studied. HB 1224 would preemptively eliminate the inclusion of local sales tax in this broad study of how the state can best serve its long-term building needs.
As with the Historic Preservation Tax Credits, a whole host of tax issues are slated to be addressed when the General Assembly convenes on August 14 for a one day session. Of course, this as well as the 8 other legislative measures detailed in the adjournment resolution will be worked on by the General Assembly leadership prior to returning to Raleigh so any communication about this item needs to happen well in advance of August 14.
We urge our members to contact their senators regarding any of these important issues to the design and construction community. In advance, thank you for your assistance. Your legislator contact information can be found at www.ncleg.net .