Michigan Replaces Historic and Brownfield Credits with the Community Revitalization Program

The Michigan Corporate Income Tax, which became effective January 1, 2012, eliminates Historic Preservation and Brownfield Credits. In lieu of the credits, Michigan has adopted the Community Revitalization Program, which will provide loans and, in some cases, grants for redevelopment projects. The Program is administered by the Michigan Strategic Fund.

Eligible Investment. Generally the same types of investments that qualified for Brownfield Credits are eligible for the Community Revitalization Program: construction, rehabilitation, site improvements, demolition, equipment, and architectural and engineering costs.

Project Criteria. The Community Revitalization Program requires the Strategic Fund to consider several criteria before approving a loan or grant including the following:

• importance of the project to the community;
• whether the project will be a catalyst for revitalization of community/region;
• applicant's financial need for the incentive;
• creation of jobs;
• the extent of the reuse of historic structures;
• preference for mixed use projects;
• local community support;
• extent of contamination;
• whether the project is financially sound;
• sustainability and increased density; and
• whether the project addresses underserved markets.

Program Incentives. Community incentives may not exceed 25 percent of a project's eligible investment, up to $10 million. A loan is limited to $10 million and a grant is limited to $1 million. While both grants and loans may be combined in a single project, the total incentive may not exceed $10 million.

Generally, the Strategic Fund may not approve more than three $10 million projects per fiscal year and not fewer than five small projects (i.e., $1 million or less) per fiscal year.

The applicant must agree to the repayment of the grants and to pay penalties if certain conditions are not satisfied, including failing to timely meet specific conditions related to the project.

Transition Rules

If a project has been approved before 2012 for Historic or Brownfield Credits, the assignee of the credits may still claim the credits. To do so, however, the assignee must continue to complete its tax returns and file the returns under the now-repealed Michigan Business Tax. Alternatively, the project owner can claim a refund from Michigan at the rate of $0.90 for each $1.00 of credit. We expect most projects to use the exchange approach, since most credit investors will not have an overall benefit if the investor must file under the MBT.

Dykema attorneys worked with government officials and other parties in helping design the Community Revitalization Program. If you have a project that might benefit from the program, please contact any of the listed attorneys.

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