GSU beefs up tax clinic

Georgia State’s law school is looking to hire a new, full-time professor for their low-income taxpayer clinic.  (Hat tip to TaxProf Blog.)  The Philip C. Cook Low-Income Taxpayer Clinic has been providing legal representation to low-income taxpayers throughout Georgia for over 20 years.  The job announcement is available here.

Lawmakers push to expand historic property rehab tax credit

While federal officials are considering cuts to income tax credits for rehabilitation work on historic properties, state lawmakers are considering an expansion of the state credit. Legislators are recommending that the existing cap on state tax credits for historic properties be increased dramatically. House Bill 308 would raise the cap on credits from $300,000 to $60 million. 

However, the measure could face an uphill climb in the state senate. During a legislative roundtable discussion I attended in Atlanta on Nov. 12, the chairman of the state Senate finance committee, Judson Hill, expressed frustration over the existing 115 tax credits in Georgia. Hill said that he’s generally supportive of tax credits if they’re fiscally responsible, sustainable, and “as long as we can quantify results” in terms of economic development, but in the long run he would like to reduce the number of credits and broaden the tax base. Whether the cap and sunset provisions of HB 308 would satisfy Hill’s concerns is unclear at this point.

The Savannah Morning News editorialized earlier this month that it’s an idea worth considering for economic development as long as it’s researched carefully and the state budget can afford it:

Editorial: Historic tax credit bill needs work

HOW FAR should Georgia’s state government go in using the tax code to pick winners and losers?

That question is at the heart of a debate that’s emerging in Atlanta. State lawmakers from Savannah are apparently pushing statewide legislation, expected to be introduced this week, that would eliminate Georgia’s existing cap on state income tax credit for developers who rehabilitate historic property. 

It’s a debate worth having.

Savannah is known far and wide for its success in historic preservation, a main driver of Savannah’s robust tourism economy. And while tax policies may sound dry and boring. they affect the lifeblood of the economy. 

It’s noteworthy that State Rep. Ron Stephens, R-Savannah, is behind this measure. He chairs the committee in the House where bills that affect economic development generally spring from. 

The specific property prompting this bill is the decommissioned power plant on West River Street. Hotelier Richard Kessler sees this distinctive, century-old, brick structure as the centerpiece of a five-building, $235 million hotel project, which would go on a relatively undeveloped part of the riverfront and create an estimated 700-800 jobs. 

Current state law on historic tax credits allows developers to recover 25 percent of the cost of rehabbing historic property, up to $300,000. Twenty other states have similar provisions. Some cap the maximum tax break, ranging from a skimpy $50,000 to a generous $5 million. Fifteen have no caps at all. 

A $9.7 million increase
If lawmakers vote to remove the cap, Mr. Kessler would reap an estimated $10 million tax break from his investment— a net $9,700,000 increase over $300,000, a 5,233-percent jump. 

Coincidentally, Mr. Kessler paid $9 million for the riverfront property when he bought it on Jan. 1, 2013. Two months later, he laid out impressive plans to redevelop the site.
Given his sterling reputation as the developer of The Mansion and Bohemian hotels, he quickly gained public support, convincing City Council to grant a variance on the new buildings’ heights and to build a $14 million extension of the river walk. 

But nothing was mentioned publicly two years about the need to change the rules of the game to help complete Mr. Kessler’s project. Why now? 

“Those tax credits are crucial,” said Mark Kessler, president and COO of the development company behind this project. “Three-hundred thousand is not an incentive to do anything.” 

It’s true that 300k isn’t much of a carrot to someone spending $235 million. But if scrapping the tax credit is crucial to the success of the Kessler project, why is the bill just going before the Georgia Legislature now, two years after hotel plans were first proposed? That seems backward. 

Tax breaks work
That said, there’s much to like about incentivizing projects that create good-paying jobs. Tax breaks work. Those who insist that government must always take a hands-off approach to tax breaks should consider one example: Savannah-based Gulfstream. 

Two years ago, state lawmakers approved an extension of the sales-tax exemption on parts used to repair airplanes. It’s a powerful incentive for owners of corporate aircraft, who can afford to fly anywhere, to do their preventive maintenance in the city and state where their planes are manufactured. This tax break helps keep thousands of well-paid, skilled blue-collar jobs here at home. 

Preservation groups, including the Historic Savannah Foundation, are right to see tax credits as a way to save buildings with historic value from the wrecking ball. But at this point, this bill needs more work. Supporters suggest that Georgia may be losing by capping these credits. How? What about raising the existing cap instead of scrapping it? 

One early version of the proposed bill is a non-starter: Tying elimination of the cap to freezing property values for tax purposes. Such a move unfairly robs local governments of revenue they count on. There’s no legitimate reason to hamstring them. 

The bigger question for the Georgia Legislature is whether the benefits from eliminating the $300,000 cap outweigh the hit to the state’s treasury. It could be particularly hard sell this year, given the need to plug a $1 billion hole in Georgia’s road-building budget...

Inclement weather announcement

The Decatur Revenue Division (tax office) is open today during regular hours 8:00 a.m. to 5:00 p.m., although we may have limited staffing from 2:00 p.m. through 5:00 p.m. depending on weather conditions.  Tentatively we plan to open late tomorrow at 10:00 a.m., although conditions may change.  If you need immediate tax or business license information after hours, please use our website at www.decaturgatax.com.

The DeKalb County tax commissioner's office and tax assessors office are closed today, but their tax records are available online at www.dekalbcountyga.gov/taxcommissioner or by calling 404-298-4000.

Deducting property taxes paid from your income taxes

If you are itemizing deductions on your 2014 federal income tax return, you can deduct property taxes paid during 2014 on real property (land and structures) that you own.

Local fees are a different matter. IRS Publication 530 says that “itemized charges specific to property or people,” cannot be deducted because they are fees not taxes, even if they are paid to a taxing authority. The publication lays out specific examples of nondeductible fees, stating that “a periodic charge for a residential service (such as a $20 per month or $240 annual fee charged for trash collection)” is nondeductible. Payments for Decatur’s residential sanitation and stormwater utility may fall into this category of nondeductible charges. For a single-family home in Decatur in 2014, the residential sanitation charge was $237, and the stormwater charge was $75. Other nondeductible payments include penalties and interest on delinquent taxes paid if applicable. Tax payments toward the five funds listed on Decatur tax bills (capital, DDA, bond, the general fund, and school taxes) are deductible.

If you are deducting real estate taxes paid from your income taxes, you’ll want to keep a copy of your second installment Decatur property tax bill, which is a restatement of your total taxes owed and paid for the year (and a copy of your DeKalb tax bill) in your income tax file. You can access a bill reflecting your payments or a receipt at www.decaturgatax.com.

This blog post is intended solely to bring awareness of the distinction that the IRS draws in its publications on the property tax deduction, and is not intended as instructions on how you should file or how much you should deduct. Since individual circumstances vary, please contact an income tax professional for verification and further guidance.