In This Edition…
- Wisconsin Opportunity Zone Development Bill Garners Bipartisan Support
- Legislature to Focus on Workforce Housing Shortage
- Transportation Economic Assistance Grant Bill Considered by Lawmakers
- WEDA Supports New Economic and Workforce Development Proposals
Wisconsin Opportunity Zone Development Bill Garners Bipartisan Support
One of WEDA’s key goals during the current legislative session is to create a state Opportunity Zone program that enhances the federal program.
The bill would enhance Wisconsin tax benefits under the federal Opportunity Zones program, which was established by Congress in 2017 to drive long-term investments to economically challenged communities across the county.
The legislation, dubbed the Wisconsin Opportunity Zone Development bill, will be officially introduced in the Legislature in the coming days and has strong bipartisan support. Forty lawmakers from both sides of the political aisle are sponsoring the proposal.
Under the federal Opportunity Zones program, low-income community census tracts were used to determine eligible Opportunity Zones to ensure the program directs private investment to the nation’s most economically distressed communities. Wisconsin has 120 Opportunity Zones, which are in both urban and rural areas of the state.
Ultimately, the Opportunity Zones program aims to unlock billions of dollars in unrealized capital gains by offering tax incentives that encourage investors to re-invest their gains into Opportunity Zone projects, which will include residential development, business expansion projects and business start-ups.
The tax benefits for investing in Opportunity Zones – through qualified Opportunity Funds – include tax deferral on invested capital gains and tax-free growth on the Opportunity Fund investment earnings. In addition, investors receive a 10% reduction in the original capital gains tax if the Opportunity Fund investment is held for at least five years and a 15% reduction after seven years.
In 2018, Wisconsin incorporated the federal Opportunity Zones tax provisions into state law, which means the deferral and exclusion treatments apply when calculating state income taxes.
The Wisconsin Opportunity Zone Development bill would double the Opportunity Zones capital gains tax reduction at the state level for investors who invest in Wisconsin Qualified Opportunity Funds – which are required to hold at least 90% of their assets in Wisconsin Opportunity Zone projects.
That means investors would receive a 20% state capital gains tax reduction if they hold an investment in a Wisconsin Qualified Opportunity Fund for at least five years, and a 30% reduction after seven years.
The legislation will encourage Wisconsin investors to keep their investment dollars in Wisconsin, funneling much-needed private capital to communities across the state and accelerating economic growth and job creation.
The WEDA Government Affairs Team continues to actively lobby on the legislation and will keep members updated as it moves through the legislative process.
Legislature to Focus on Workforce Housing Shortage
It’s no secret that Wisconsin has a “brain gain” problem. We simply do a poor job attracting people –particularly college graduates – to Wisconsin. These lackluster in-migration rates have certainly contributed to Wisconsin’s worker shortage crisis. Another factor is the lack of available workforce housing in communities across the state. As many businesses have found out, it’s extremely difficult to attract workers and recruit businesses if employees can’t find an affordable place to live.
The key to solving Wisconsin’s housing crisis, which has been fueled by a construction labor shortage, high land costs and rising materials costs, rests with market-based solutions and creativity by stakeholders at the local level. However, the Legislature and statewide policies could also play an important role in easing the housing crunch and the negative impact its had on talent attraction efforts and additional economic growth.
To help keep and attract young talent and retain our current businesses, WEDA has proposed several legislative initiatives to help address the growing problem.
Among the legislative proposals WEDA is pursuing is the creation of a sales tax exemption on construction materials, supplies and equipment used in the development of workforce housing. We are also working on two TIF-related housing bills:
- Community Housing Stock Improvement Bill – Under current law, a municipality can extend the life of a TID by one year if the increment is used to improve housing stock within the community. This bill would increase the housing improvment TIF extention option from one year to three years.
- TIF Housing Expansion Bill – Under current law, mixed-use TIDs can incur costs for property/projects proposed for residential use. However, only 35 percent of the TID can be used for residential purposes. This legislation would increase the amount of property that can be used for residential purposes in a mixed-use TID to 50 percent.
In addition to WEDA’s efforts, a group of key state legislators are working on a broad package of workforce housing legislation, which will include our workforce housing sales tax exemption proposal. WEDA has had an opportunity to review preliminary drafts of the other bills that may be included in the WisWorks Workforce Housing Initiative:
Housing Rehabilitation Tax Credit
This proposal would create an individual income tax credit for expenses related to the rehabilitation of older single-family homes.
Under the bill, individuals may claim a refundable tax credit that is equal to 10% of the amount the claimant spent on eligible home rehabilitation construction expenses.
To be eligible for the tax credit:
- The initial construction of the single-family home to which the tax credit claim relates must have been completed before 1980; and
- The home to which the credit relates must have a fair market value that does not exceed the county median price for single-family homes.
The legislation requires tax credit claimants to be full-year residents of Wisconsin. The bill specifies the tax credit cannot be claimed until the home rehabilitation project is complete.
Workforce Housing Tax Credit
The proposed legislation is based loosely on the state’s low-income housing tax credit program (which mirrors the federal LIHTC program). The bill would create a transferable, non-refundable income tax credit for workforce housing projects. The tax credit, which would be administered by WHEDA, would be capped at $10 million – funded by a one-time transfer of WHEDA surplus funds. Individual tax credits may not exceed 50% of the total workforce housing project cost. The program sunsets on Dec. 31, 2021.
To be eligible for the tax credit:
- The project must be in a rural county, defined as a county with a population density of less than 155 people per square mile.
- There must be a need for additional manufacturing workers in the area.
- The lack of available workforce housing in the area is an obstacle to the efforts of manufacturers to fill open jobs.
- The project is built for occupants that have a household income that will satisfy income guidelines for the WHEDA home mortgage program.
- The individual/project must first exhaust all available funding from CDBG programs, TIF financing and other WEDA financing programs.
The individual applying for the tax credit must be:
- The lender financing the project;
- The developer; or
- The business that is having the project built
Affordable Housing Donation Tax Credit
This legislation would create an affordable housing donation income tax credit administered by WHEDA.
Under the bill, transferable, non-refundable tax credits would be allocated to non-profit organizations that undertake an affordable housing project or a workforce housing assistance program and accept donations to cover costs for those projects.
The legislation authorizes a nonprofit organization that is allocated tax credits by WHEDA to transfer the credits to an individual who donates at least $10,000 to the nonprofit organization. The amount of tax credits transferred to an individual cannot exceed 50% of the individual’s total donations to the non-profit during the taxable year.
The total amount of credits WHEDA can allocate to qualified non-profit organizations each year cannot exceed $11 million for affordable housing projects and $2 million for workforce housing assistance programs.
DOA Housing Reports Storage & Dissemination
This bill would require DOA to collect data from housing affordability reports and new housing fee reports. The purpose is to provide greater transparency and create a “one-stop-shop” for developers, homeowners and other stakeholders to review a municipality’s housing fees.
The WisWorks package is expected to be officially introduced next month. The WEDA Government Affairs Team has fully analyzed the proposals and are encouraged by lawmakers’ interest in this important issue. Once introduced, WEDA will fully engage in the process, working to support and/or imporve the bills as they are debated by the Legislature.
Transportation Economic Assistance Grant Bill Considered by Lawmakers
Legislation championed by WEDA to ensure Wisconsin’s Transportation Economic Assistance (TEA) grant program continues to provide grant funding for projects that retain jobs in Wisconsin was considered by two key legislative committees last month.
The bill received a public hearing by both the Assembly and Senate Transportation Committees. We would like to thank the following WEDA members who testified in favor of the bill.
The bill, which is a top WEDA priority for the 2019-20 legislative session, has broad bipartisan support and should hopefully move through the legislative process with little controversy or opposition. In fact, the Senate Transportation Committee will vote on the bill next week.
As every WEDA member knows, communities across the state use a variety of approaches and programs to promote local economic growth and prosperity. The more tools a community has in their economic development toolbox, the better positioned they are for success.
Of course, one important economic development tool hundreds of Wisconsin communities and businesses have successfully used over the past 30-plus years is the TEA Grant program.
The program, administered by the Wisconsin Department of Transportation (DOT), was
established in 1987 to respond quickly to economic development opportunities that encourage businesses to invest in Wisconsin. TEA Grants provide funding for transportation improvements critical to business expansion or relocation projects that retain and create jobs in Wisconsin.
The program has an annual appropriation of approximately $3.4 million and offers grants that provide $5,000 per job created or retained, up to 50% of the total cost of the transportation improvement project. Individual grants are generally capped at $1 million and require a 50% local match from a non-state source, such as a community or business.
Since its inception, the program has awarded over 350 grants statewide totaling more than $110 million. In addition, TEA Grants have helped fund transportation projects that have resulted in the creation of over 27,000 new jobs and the retention of more than 19,000 jobs.
After a recent legal review of the program, the DOT determined it did not possess the statutory authority to provide grant funding for jobs retained – and going forward could only support projects that create new jobs. Unfortunately, this change not only diminished the value of TEA Grants as an economic development tool, it disregards the importance of job retention in maintaining vibrant communities.
The proposal would simply restore the TEA Grant program’s long history of awarding project funds for both job creation and job retention.
Given the success of the TEA Grant program in facilitating transportation projects that retain and attract private sector employment and capital investments, the WEDA Government Affairs Team is optimistic the bill will be approved by the full Legislature.
WEDA Supports New Economic and Workforce Development Proposals
In every legislative session, numerous economic development-related bills are introduced by legislators from both sides of the aisle. This session is no exception. When new bills are proposed, the WEDA Legislative Committee closely examines the legislation and decides whether to take a position on the bill by asking the following questions:
- Is it of benefit to a majority of WEDA members?
- Is it politically feasible?
- Is it fiscally possible?
If the answer to all the questions are yes, recommendation for support is made by the committee, which recently voted to support for the following proposed legislation:
Soo Lock Funding Bill
This legislative proposal would provide $5 million per year (for three years) – for a total of $15 million – to cover Wisconsin’s share of the Soo Locks improvement project.
The federal government (Army Corp of Engineers) plans to construct a new Soo Lock chamber to prevent possible failures of the existing chambers and to improve the existing chambers. Federal funding has been allocated for a portion of the construction costs and the federal government has asked Great Lakes states to provide a match to fund the remainder of the project. Other Great Lakes states have provided matching funds, and this bill would provide Wisconsin’s share of the match. Under the legislation, state funds will be released only if the Federal government funds the project.
The Soo Locks upgrade and improvement project would ensure the continued operation of the locks and energize the Midwest economy – generating an estimated 1.5 million labor-hours for middle class workers and $77.4 million dollars in economic annual benefits.
Non-traditional Student Scholarship Bill
This bill would create a new $1.25 million per year scholarship program for non-traditional students to help incentivize adults to attain a higher education, obtain a new skill and ultimately help fill Wisconsin’s unmet workforce needs. Individual grants under the bill would be limited to 50% of the total tuition and fees charged by an academic institution.
The legislation defines a non-traditional student as an individual who: 1.) Is at least 25 years old; 2.) Does not hold a post-secondary credential; and 3.) Intends to enroll in a technical college, UW-System school, or a tribal college or private nonprofit institution of higher education. To be eligible for the grant, the individual must also: 1.) Be Pell Grant eligible; 2.) Have completed the federal Free Application for Federal Student Aid; 3.) Be considered an independent student for purposes of federal financial aid; and 4.) Be a resident of Wisconsin.
In addition, the bill also includes an additional appropriation of $500,000 that will be given to the 60 Forward initiative for a marketing campaign to encourage non-traditional students to use the scholarship to earn a credential.
But those aren’t the only bills that WEDA is actively working on in the State Capitol to help provide the policies, programs and tools our members need to drive their local economies.
In an effort to help WEDA members track legislation that could have an impact on the direction of the state’s economy and the economic development profession, we created the WEDA Legislative Tracker tool to allow you to stay up-to-date on key bill proposals.
The Tracker lists and allows members to follow and learn more about the bills WEDA is lobbying on and monitoring as they work through the legislative process. The Tracker includes the bill number, a brief description of the bill, its status and WEDA’s position on the proposal.
Click here to review the WEDA Legislative Tracker.