A plan to eliminate the Historic Tax Credit by the House Ways and Means Committee as part of its proposed tax reform bill will likely stymie efforts to continue preservation projects large and small, advocates said this week.
The committee’s vote to eliminate the HTC is part of an effort to simplify the tax code and pay for other tax cuts, ranking committee members said.
“While not unexpected, this policy proposal deals a significant blow to historic preservation,” the National Trust for Historic Preservation said.
The credit was passed in 1976 and had a fan in a Ronald Reagan. It was designed to encourage private investment in historical buildings. The National Trust says that more than 42,000 projects have been completed thanks to the HTC.
“The HTC has a four-decade track record of success in saving our nation’s historic buildings, creating over 2.4 million jobs, and actually generating revenue for the U.S. Treasury, returning $1.20 for every taxpayer dollar spent,” the National Trust said.
And that chilling effect will hamper efforts here at home, too, Preservation Dallas executive director David Preziosi said.
“This will greatly hinder preservation, especially large projects that really rely on the Historic Tax Credit to make them financially viable,” he said, citing powerhouse projects like the Statler Hilton renovation and the Drever at 1401 Elm as two projects that benefited from the credit.
“Losing the credit will jeopardize future projects like the Cabana Hotel,” Preziosi added. “If that tax credit is not there, it could mean that those projects could not get done — it’s very scary.”
“The tax credit is really the biggest tool we have for historic projects that are complicated,” he continued. “It’s really detrimental to revitalization efforts all over the country — and here in Dallas.”
And the preservation community is puzzled as to how repealing the credit would help save money — it’s long been seen as an economic motivator.
“It’s been around a long long time now, and it’s been proven to help revitalize communities all over the country,” Preziosi said. Hundreds of millions of dollars in investment in historic buildings have happened thanks to the HTC, he added, and even more are currently underway.
The cost savings from ending HTC is negligible, experts have said. Michael Novogradac, a managing partner with the San Francisco office of Novogradac & Company LLP, agreed with the National Trust’s assessment that the credit was actually a “net positive for the economy.”
“The National Park Service recently released the latest report on HTC from Rutgers University, which found that since its inception in 1978, the federal HTC has attracted $131 billion in private investment to the rehabilitation of 42,293 historic buildings, creating more than 2.4 million jobs and serving as a net-revenue generator for the U.S. Treasury: the $29.8 billion in federal taxes generated by HTC projects exceeds the $25.2 billion in credits allocated,” Novogradac’s analysis said.
The Historic Tax Credit Coalition — a nonprofit organization made up of several groups who have interests in historic preservation — also analyzed data from the National Park Service’s Rutgers report.
“Of special note is the $29.8 billion in federal tax revenue generated compared to the $25.2 million in credits allocated over this period, a return of $1.18 for every $1.00 in tax expenditures,” the group’s analysis revealed. “This incentive has helped rehabilitate and repurpose 42,293 buildings generating over $131 billion in total economic activity resulting in more than 2.4 million jobs including 109,000 in 2016 alone.”
Preziosi said it’s not easy to get the HTC, either.
“It’s not a handout,” he explained. “These investors have to invest quite a lot of money into these buildings to even qualify for the credit. They have to spend the value of the building minus the land.”
The Office of the Comptroller of the Currency explained the process and how it can benefit communities and partners in preservation projects.
“The HTC program encourages the rehabilitation of certified historic buildings (those listed on the National Register of Historic Places or architecturally contributing to a National Register district) through the provision of tax credits equal to 20 percent of the qualified rehabilitation expenditures,” the OCC said. “To receive the HTCs, property owners must complete the three-part application process for historic preservation certification managed by the NPS (National Park Service) and the relevant SHPO( state historic preservation officer).”
“We’ve had projects (that qualify for the HTC) in the $450,000 range all the way to the millions like the Statler,” Preziosi said.
“Support for the HTC is nationwide,” he said. “It’s very bipartisan as well.”
Preziosi said he makes yearly trips to Washington D.C. to lobby for the HTC. “I’ve been following it and tracking it for many years.”
The Historic Tax Credit Coalition said that so far 1,479 organizations have signed on to a letter asking members to preserve the HTC.
“The National Trust is making a big push to advocate for it,” Preziosi added. “We’ve been reminding our members to call and send emails to congressional offices as the tax bill moves through.”
“We want to keep the pressure on, and let the politicians know that these are local people behind it,” he added.
With such bipartisan support, will the HTC manage to hang on? Preziosi isn’t entirely certain.
“In talking to the National Trust folks, they say that the HTC is the thing that has had the most discussion in tax reform in terms of being in favor of keeping it,” he said. “But there’s also been this sort of mandate handed down to not allow any additional tax credits – and people are reluctant to cherry pick additional ones.”
Texas congressmen Sam Johnson (R), Kenny Marchant (R), and Lloyd Doggett (D), are on the House Ways and Means Committee, and Kevin Brady (R-Texas) is the chairman.
Bethany Erickson is the education, consumer affairs, and public policy columnist for CandysDirt.com. Contact her at email@example.com.