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As JCAR fails to block new Historic Preservation Tax Credit rules, lawmakers suggest revisiting policy next year

JEFFERSON CITY, Mo. — It was a policy versus statutory violation debate before a bipartisan committee of lawmakers convening Friday to consider new Department of Economic Development (DED) rules related to tax credits

The Joint Committee on Administrative Rules (JCAR) scrutinized new regulations from DED regarding its Historic Preservation Tax Credit application and program. The committee held a lengthy and technical hearing earlier this week but postponed some of its decision making until Friday. 

Ultimately, JCAR failed to block any of the proposed new rules, which were related to qualified census tracts, applications for excess credits, phased projects, and developer fees. On Tuesday, members voted to hold a provision related to the definition of qualified rehabilitation expenditures (QRE) in abeyance but vacated that decision Friday. 

The new rules will be filed with the Secretary of State’s Office next.

“The new rules will help enable the highest-quality historic rehabilitation projects and revitalize communities across the state, while ensuring the best returns possible on taxpayers’ investment of historic tax credits,” Michael Lanahan, director of business and community solutions for DED, told The Missouri Times. “We’re grateful for the committee’s decision to allow the proposed rules to go into effect, and we look forward to working with stakeholders to optimize the Historic Preservation Tax Credit program going forward.”

The changes stemmed from the passage of SB 590 in 2018 which, in part, lowered the tax cap from $140 million to $90 million for the rehabilitation of historic structures after the 2018 fiscal year. It allowed DED to activate an additional $30 million for the Historic Preservation Tax Credits for projects located in a qualified census tract — an area with at least a 20 percent poverty rate as determined by DED. 

Still, those wary of the new rules pointed to the lowered cap as having the potential to complicate projects — something legislators said would need to be revisited during session next year. 

Rep. Dean Plocher, a Republican, attempted to have the committee reconsider a rule regarding excess credits — but was ultimately unsuccessful. 

Committee members — including members of the same party — clashed over whether the provision violated state law and could result in a legal challenge or if legislative action should be taken instead. They also were at loggerheads over whether the transition rule would impact existing projects or just new applications.

Sen. Wayne Wallingford said the rules would “change considerably” how businesses are handing projects in Missouri. 

“These companies have been working on these projects for five, six, seven years and put multimillions [of] dollars in it, and now we say, ‘let’s change the rules’ in the middle of the game,” Wallingford said. “I think that’s wrong, I think we’re headed for a lawsuit, and I think they’ll win.” 

“If our goal is to get rid of historic revitalization in Missouri, then I guess we’ll be very successful in doing that,” Wallingford said. 

But fellow GOP Sens. Bill White and Bob Onder pushed back, arguing DED acted within its authority in drafting the new rules. White, in particular, suggested lawmakers revisit SB 590 next year.

“Their rule change is not violating any statutory [violation]. They have the ability to change the rules,” White said before adding, “I may not totally disagree with you on policy, but from an actual violation of statute, I don’t see it.”

Ultimately the committee failed to get six members to even bring the provision up for reconsideration. Those who voted for it were Plocher, Wallingord, Sen. Scott Sifton, Rep. Peter Meridith, and Rep. Gina Mitten. 

Democratic Sen. Jason Holsman sided with Republicans Onder, White, and Rep. Nick Schroer, the committee chairman. He said the legislature should take the issue up when it reconvenes in January. 

JCAR is a bipartisan group of state representatives and senators charged with reviewing rules and regulations filed by state agencies for compliance with Missouri law. It receives, on average, more than 1,800 filings per year to review, The Missouri Times previously reported.