Opportunities for Main Street in the Historic Tax Credit Growth and Opportunity Act

June 18, 2019 | Opportunities for Main Street in the Historic Tax Credit Growth and Opportunity Act | By Shaw Sprague, Senior Director of Government Relations for the National Trust for Historic Preservation | 
The two buildings at 321 and 323 Salinas Street in Syracuse, NY (center) prior to being rehabbed with the federal rehabilitation tax credit. Photo credit: Rick Moriarty

One of the key tools to help improve life on Main Street is the federal historic tax credit (HTC). For over 40 years, this incentive has directed capital toward the rehabilitation of historic buildings in every state in the nation. When you consider that roughly half of the more than 44,000 rehabilitated buildings that have used the credit are smaller-scale projects with qualified rehabilitation expenses of less than $1 million, it becomes clear this incentive has a Main Street focus.

Importantly, efforts continue at the federal level to make improvements to the historic tax credit that will benefit our Main Streets. The “Historic Tax Credit Growth and Opportunity Act” (H.R. 2825)(HTC-GO) was introduced on May 17th in the House by Representatives Earl Blumenauer (D-OR), Darin LaHood (R-IL), Terri Sewell (D-AL), Mike Kelly (R-PA), Brian Higgins (D-NY) and Michael Turner (R-OH). These downtown revitalization and HTC champions are taking the lead in making improvements to the credit for the first time since the incentive was made permanent in 1986. HTC-GO is also a response to changes made to the HTC in the “Tax Cuts and Jobs Act” (TCJA), which passed at the end of 2017 and was the first major tax reform bill enacted in a generation.

While Congress reaffirmed the importance of the HTC by keeping the 20% historic tax credit a permanent part of the tax code in the TCJA, the credit was modified so that it must be claimed over a five-year period instead of being claimed all at once. This change, combined with the repeal of the 10% non-historic tax credit for rehabilitating buildings built before 1936, was key to preserving the HTC by saving nearly $2.6 billion to the U.S. Treasury over a 10-year period. A significant consequence of this change, however, was that the value of the credit was sharply reduced in the process, making rehabilitation more difficult – especially for smaller, Main Street-scale projects.

The HTC-GO legislation addresses this loss in value by assembling several leading ideas for how to improve and enhance the HTC, including:
  • Making it easier to complete small deals (defined as qualified rehabilitation expenses of $2.5 million or less) by increasing the credit from 20% to 30% for these projects;
  • Allowing the credits to be transferred outside the development partnership for small deals;
  • Ensuring more buildings are eligible for the credit by lowering the substantial rehabilitation threshold;
  • Eliminating the requirement that the amount of the HTC must be deducted from a building’s basis, or tax valuation, when ownership of the property changes; and
  • Making the HTC easier to use by non-profit organizations, which often use the credit to create community health centers, local art centers, workforce development opportunities and community services. These projects are often the first to occur in a neighborhood and they become catalysts for increased investment in economically distressed areas.

These ideas represent practical updates to the HTC that will make preservation of historic buildings more accessible, affordable and efficient in our Main Street communities. These necessary changes will help restore lost value to the credit and direct more private investment into our smaller communities that are working to create jobs and grow their economies.

HTC Helps Fuel Downtown Resurgence
Despite the diminished value of the HTC, recent examples can still be found where the credit is revitalizing downtowns across the country. One such case can be found in Syracuse, New York, where city leaders point to the important role HTC’s played in the rehabilitation of Whitney Lofts. In late 2017, the New York Main Street program awarded $500,000 in grant funding to the Downtown Committee of Syracuse to prioritize commercial and residential development, which resulted in a $37,500 grant to help complete the Whitney Lofts project.

Whitney Lofts has helped address the lack of housing in the neighborhood and has fueled the resurgence of the city’s central business district. Located near courthouses, City Hall, the County Library, Armory Square, hotels, restaurants, and retail and office space, Whitney Lofts has spurred investment and growth in an area of the city that needed quality housing. In the last 10 years, downtown Syracuse has experienced 77 percent growth in its residential population, expanding to nearly 4,000 people who currently live downtown where there is a nearly full occupancy rate. The creation of 16 additional market rate loft apartments in the downtown area continues this trend while commercial tenants located on the ground floor of the project are expected to create 20 full-time, permanent jobs. New York state and federal HTCs contributed $1.7 million toward this exemplary rehabilitation project that would not have happened without these important preservation incentives.

Enacting HTC-GO will lead to more success stories like Whitney Lofts and help revitalize our nation’s historic downtown areas and Main Street communities. Please contact your House Representative today and encourage them to co-sponsor HTC-GO (H.R. 2825).

Photo: The Whitney Lofts post rehabilitation The $4.2 million gut rehabilitation of the formerly vacant buildings features 16 new apartments, and is home to three new restaurants: Oh My Darling, Clementine and a 1920s speakeasy, The Fitz. Photo courtesy of nyrej.com.