Development Incentives for Downtown Lafayette
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Renovating an existing property or initiating a brownfield development venture can be costly, but the value of a developing urban areas is often much higher than greenfield projects. Luckily there are numerous federal, state, and local incentive programs to make urban development feasible. Here are some of the programs that developers and property owners in Downtown Lafayette can utilize to make new developments worthwhile.
Opportunity Zones are low income census tracts nominated by governors and certified by the U.S. Department of the Treasury into which investors can now put capital to work financing new projects and enterprises in exchange for certain federal capital gains tax advantages.
Opportunity Zones receive investments through Opportunity Funds, private sector investment vehicles that invest at least 90% of their capital in Opportunity Zones. U.S. investors currently hold trillions of dollars in unrealized capital gains in stocks and mutual funds alone – a significant untapped resource for economic development. Opportunity Funds provide investors the chance to put that money to work rebuilding the nation’s left-behind neighborhoods. The fund model will enable a broad array of investors to pool their resources in Opportunity Zones, increasing the scale of investments going to underserved areas.
Benefits of holding capital gains in an Opportunity Fund:
- The basis is increased by 10% if the taxpayer’s investment is held in an Opportunity Fund for at least 5 years
- The basis increased by an additional 5% if held for 7 years, potentially excluding up to 15% of the original gain from taxation
- Permanent exclusion from taxable income of capital gains from the sale or exchange of an investment in an Opportunity Fund if the investment is held for at least 10 years
Downtown Lafayette is one of seven census tracts designated as Opportunity Zones in Lafayette Parish. For more information on utilizing Opportunity Zones in Lafayette, visit investacadiana.org or download the Lafayette Opportunity Zone Prospectus.
New Markets Tax Credits
Established in 2000, the New Markets Tax Credit program (NMTC) attracts investment for the acquisition, rehabilitation, or construction of real estate projects in low-income communities. Approximately 43% of U.S. census tracts qualify for NMTCs.The U.S. Department of the Treasury competitively allocates tax credit authority to intermediaries known as Community Development Entities (CDEs). CDEs primarily consists of domestic corporations and partnerships. NMTC investors provide capital to CDEs and in exchange receive a tax credit against their federal income tax. The local government does not play a role in this tax incentive, as it is a federal program.
An investor must make an investment in a project for seven years to realize the maximum amount of benefits possible from the program. This includes:
- 5% of the investment for each of the first three years
- 6% of the investment for each of the remaining four years
This totals to a potential 39% of the initial investment. New Markets Tax Credits are often stacked with other incentives, further enhancing development opportunities.
EPA Brownfields Program
The EPA’s Brownfields Program provides grants and technical assistance to communities, states, tribes, and others to assess, safely clean up, and sustainably reuse Brownfield sites. Brownfields are properties that may have hazardous substances, pollutants or contaminants present. Grants are available for Phase I/II environmental assessments, clean-up (if necessary), and redevelopment. In addition, the program was expanded in 2006 to cover properties with petroleum contamination.
- Brownfields Assessment Grants provide funding for Brownfield inventories, planning, environmental assessments, and community outreach.
- Brownfield Revolving Loan Fund Grants provide funding to capitalize loans that are used to clean up Brownfields.
- Brownfield Job Training Grants provide environmental training for residents of Brownfield communities.
- Brownfield Clean-up Grants provide direct funding for clean-up activities at certain properties with planned greenspace, recreational, or other nonprofit uses.
- Brownfield Area-Wide Planning Grants provide funding to communities to research, plan, and develop implementation strategies for cleaning up and revitalizing a specific area affected by one or more Brownfield sites.
- Alternative funding/Assistance sources: State (LA DEQ), Local (APC), Regional TAB (Technical Assistance for Brownfields – Kansas State University)
Federal Historic Rehabilitation Tax Credit
Encourages and supports the preservation/rehabilitation of historic/older buildings through incentives. This credit applies to income producing properties that are individually listed on the National Register or a contributing element within a National Register Historic District. This incentive is a 20% federal tax credit of eligible construction costs and fees.
Low-Income Housing Tax Credit
The LIHTC Program is a tax incentive intended to increase the availability of low-income rental housing. The tax credit is a credit against regular tax liability for investments in affordable housing properties constructed, acquired and rehabilitated after 1986.
This indirect federal subsidy is used to finance construction and rehabilitation of rental housing for low-income individuals. It was created to incentivize private developers and investors to provide more low-income housing.
The Enterprise Zone, or EZ program is a jobs incentive program that provides Louisiana income and franchise tax credits to a new or existing business located in Louisiana creating permanent net new full-time jobs, and hiring at least 50% of those net new jobs from one of four targeted groups. The benefit provides: either a one-time $3,500 or $1,000 tax credit for each net new job created. An Enterprise Zone can result in a 4% rebate of sales and use taxes paid on qualifying materials, machinery, furniture, and/or equipment purchased or a 1.5% refundable investment tax credit on the total investment, excluding tax exempted items. The 4% or 1.5% rebate shall not exceed $100,000 per net new job.
The Quality Jobs, or QJ program provides a cash rebate to companies that create well-paid jobs and promote economic development. The program provides up to a 6% cash rebate on 80% of gross payroll for new direct jobs for up to 10 years. Effective July 1, 2018, the rebate is available on 100% of gross annual payroll. It can provide a 4% sales/use rebate on capital expenditures or a 1.5% refundable investment tax credit on the total capital investment, excluding tax exempted items.
Restoration Tax Abatement (Residential)
The Restoration Tax Abatement (RTA) program grants businesses and homeowners up to 10 years of property tax abatement to encourage the expansion, restoration, and development of existing commercial structures and owner-occupied residences in downtown, historic, and economic development districts.
State Historic Rehabilitation Tax Credit (Commercial)
This program encourages and supports the preservation/rehabilitation of historic/older buildings through incentives. It applies only to income producing properties that contribute to the significance of a designated Downtown Development District or a Cultural District in Louisiana. The incentive provides for a 20% state tax credit for eligible construction costs and fees that meet the Secretary of the Interior’s Standards for Rehabilitation.
Corporate Headquarters Relocation Program
This program provides for the granting of contracts for businesses to receive rebates of 25% of applicable relocation costs for relocating or expanding its headquarters in Louisiana. Louisiana Economic Development (LED) will determine the eligibility of a business based on criteria that include that the relocation or expansion will create at least 25 headquarters jobs, that program participation will be a significant factor in a highly competitive site selection situation, and that securing the project will provide a significant positive economic benefit to the state.
Digital Interactive Media and Software Program
Louisiana’s Digital Interactive Media and Software Program, statutorily known as Digital Interactive Media and Software Tax Credit — the strongest of its kind in the nation — is helping innovative digital media and software development companies of all sizes gain a competitive edge.
- Provides a 25% tax credit on qualified payroll for in-state labor and 18% for qualified production expenditures.
- No cap and no minimum requirement.
- Tax credit can be applied to state income tax liability and the state will refund any overages OR applicants can opt for 85% of the value earned as a rebate any time during the year.
Restoration Tax Abatement (Commercial + Residential)
Grants a 5-year deferred assessment of the ad valorem property taxes assessed on renovations and improvements with an option for a second 5-year exemption to commercial property owners and homeowners who expand, restore, improve, or develop an existing structure in a qualifying district. Administered by the Lafayette Parish Tax Assessor.