Rep. Kelly Helps Introduce Bipartisan Historic Tax Credit Preservation Act

Feb 23, 2017 Issues: Tax Reform

The Historic Tax Credit Improvement Act encourages building reuse and redevelopment in small, midsize, and rural communities

 

WASHINGTON – U.S. Senators Ben Cardin (D-MD) and Susan Collins (R-ME) and Congressmen Mike Kelly (R-PA) and Earl Blumenauer (D-OR) have introduced bipartisan, bicameral legislation (S. 425/H.R. 1158) that would encourage infrastructure development and job growth across the country by making common-sense changes and enhancements to the federal Historic Tax Credit (HTC). Projects that receive credits under the Historic Tax Credit Improvement Act help revitalize communities, encourage private investment, and create safer, more secure neighborhoods. The bill is cosponsored by Senators Thad Cochran (R-Miss.), Kirsten Gillibrand (D-N.Y.), Roger Wicker (R-Miss.) and Patrick Leahy (D-Vt.) in the Senate.

“We can create jobs by preserving the abundant history in Maryland and across America. Improving the Historic Tax Credit will save many historically significant buildings and homes nationwide while creating quality jobs, stimulating long-term economic growth and bringing life to forgotten neighborhoods,” said Senator Cardin, a member of the Senate Finance Committee. “The Historic Tax Credit has created over 2 million jobs nationwide since 1978.  By updating the program and expanding it to reach additional projects, especially in small and rural communities, we can create thousands of jobs renovating historic properties and working in many of the restored, modernized buildings.  This is an infrastructure and jobs program that has a true multiplier effect, with creating positive benefits that ripple through local communities.”

“The Historic Tax Credit incentivizes the restoration and preservation of historic buildings.  It is a proven tool for revitalizing communities and catalyzing economic development in Maine and across the nation.  Since 2008, the Historic Tax Credit has leveraged approximately $350 million in private investment in Maine alone,” said Senator Collins.  “Our bipartisan legislation will make the Historic Tax Credit easier to use, expanding its economic benefit and creating good-paying jobs for hardworking Americans.”

“From the Presque Isle Lighthouse in Erie to Independence Hall in Philadelphia, Pennsylvania is blessed with an abundance of historic properties and places. Unfortunately, many of these properties are at risk due to severe neglect,” Congressman Kelly said. “This bipartisan bill will make important changes to the tax code to better facilitate the reuse of historic buildings. This is about preserving the Keystone State’s history and heritage as well as fostering the growth of local jobs, economic development, and private investment in Pennsylvania neighborhoods. It’s a win-win for Pennsylvania’s past, present, and future.”

“We’re witnessing a growing trend of urbanization around the country. The Historic Tax Credit is an important tool to guide this interest and investment, celebrating and preserving our cultural resources while creating jobs and adding value,” said Congressman Blumenauer. “Strengthening the Historic Tax Credit will expand opportunities to build livable and equitable communities.”

Congress created historic preservation tax benefits in 1976 to encourage voluntary, private-sector investment in preserving historic buildings. The program is jointly managed by the National Park Service (NPS) and the Internal Revenue Service (IRS), in partnership with State Historic Preservation Offices.  Since its creation, the HTC program has generated $78 billion in historic preservation activity to rehabilitate more than 41,250 historic properties, including the creation of over 525,000 housing units, of which approximately 150,000 are low and moderate-income units.  Historic preservation programs have created more than 2.36 million jobs nationwide since 1978 (85,058 new jobs in FY 2015, the latest year for which data are available).  A recent study by the National Trust for Historic Preservation estimates that every $1 of credits generates a minimum of $4 of private sector investment.

“The federal historic tax credit is the driving force behind rehabilitation projects that have given new life to historic buildings, created millions of jobs and attracted billions in private investment,” Stephanie K. Meeks, president and CEO of the National Trust for Historic Preservation, said. “We commend Sens. Collins and Cardin and Reps. Kelly and Blumenauer for their leadership in proposing sound improvements to the federal historic tax credit. Now, more libraries, theaters, town halls and other buildings can be restored to serve their communities in new ways. Tax reform aimed at growing the economy should enhance the historic tax credit.”

In Maryland, the federal HTC has supported hundreds of projects that have spurred economic growth in communities around the state, ranging from the development of a multicultural service center to affordable housing units for teachers and office space for non-profit educational organizations.  In Maine, the federal HTC has supported numerous projects, from the renovation of the former Eastland hotel in Portland, to the redevelopment of the Moosehead Manufacturing Mill in Dover-Foxcroft.

The Historic Tax Credit Improvement Act makes changes to the HTC to further encourage building reuse and redevelopment in small, midsize, and rural communities.  It also makes the rehabilitation of community projects like theaters, libraries, and schools easier while maximizing the impact of state historic tax credits.  Finally, the bill would make more historic properties eligible to use the credit by updating program requirements to reflect current industry practices.  These reforms would be the first major changes to the HTC since the Tax Reform Act of 1986.

Text of the bill can be found here. A section-by-section summary can be found below.

SECTION-BY-SECTION SUMMARY

The Historic Tax Credit Improvement Act makes changes to the Historic Tax Credit to further encourage building reuse and redevelopment in small, midsize, and rural communities.  It also makes the rehabilitation of community projects like theaters, libraries, and schools easier.  Finally, the bill would make more historic properties eligible to use the credit by updating program requirements to reflect current industry practices.  These reforms would be the first major changes to the Historic Tax Credit (HTC) since the Tax Reform Act of 1986.

SEC. 1 SHORT TITLE “HISTORIC TAX CREDIT IMPROVEMENT ACT OF 2017”

SEC. 2 INCREASING THE REHABILITATION CREDIT FOR CERTAIN SMALL PROJECTS

Creates a 30% credit for smaller deals to make sure the rural west and non-urban areas have the same ability to take advantage of the credit. This small deal credit would be capped at qualified rehabilitation expenses of $2.5 million, changing the maximum small project credit allowed from $500,000 to $750,000 on the largest projects. 

SEC. 3 ALLOWANCE FOR THE TRANSFER OF CREDITS FOR CERTAIN SMALL PROJECTS

Allows the HTC, for small transactions, to be transferred as a tax certificate, making these deals easier for small project owners.

SEC. 4 INCREASING THE TYPE OF BUILDINGS ELIGIBLE FOR REHABILITATION

Changes the definition of substantial rehabilitation. This provision would change the threshold to qualify for the credit of 50% of adjusted basis instead of 100% of adjusted basis as the program currently requires.

SEC. 5 REDUCING BASIS ADJUSTMENT

Changes the amount of the depreciable basis adjustment from 100 percent to 50 percent of the amount of the HTC. This would place the HTC in line with renewable energy and new market tax credits. The Low-income Housing Tax Credit (LIHTC) has no depreciable basis adjustment.  

SEC. 6. MODIFICATIONS REGARDING CERTAIN TAX-EXEMPT USE PROPERTY.

Modifies the disqualified lease rules to limit the definition of a “disqualified lease” to those leases that are part of a sale leaseback arrangement involving a nonprofit that has used the property before certification as a historic rehabilitation. The other types of disqualified leases that inhibit the rehabilitation of these buildings: those with purchase options, leases in excess of 20 years, and leases in buildings that use tax-exempt financing, would be eliminated.

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