Protect the Federal Historic Tax Credit
As Congress and the administration begin serious negotiations on comprehensive tax reform, it is vital they recognize the critical importance of capital investments in our nation’s communities. In particular, the Federal Historic Preservation Tax Incentives Program is an incentive that should be strengthened, not diminished, by any tax proposal put forward by the Congress or the White House.
Commonly referred to as the Federal Historic Tax Credit (HTC), it was initially implemented in 1976 to encourage private investment in projects to rehabilitate historic buildings including vacant schools, warehouses, factories, retail stores, apartments, hotels, and office buildings throughout the country. The HTC provides a 20 percent credit for the rehabilitation of historical buildings and a 10 percent credit for non-historic buildings placed in service before 1936.
Through 2016, the HTC has resulted in the rehabilitation of more than 42,000 historic buildings and has created more than 2.4 million jobs nationwide. The rehabilitation and development of such valued national landmarks as The Humble Oil Building in Houston, Texas, the Mitchell Lewis Motor Company Building in Racine, Wisconsin, and the Tribune Building in Salt Lake City, Utah, were made possible through the use of the HTC. All of these projects have helped strengthen those communities both in terms of providing needed economic development and revitalizing valued historical buildings.
In my home state of Oklahoma alone, from 2002–2016, more than 100 rehabilitation projects were performed via the HTC program, representing more than $600 million in investment and creating more than 12,500 jobs for the state, according to figures provided by the National Park Service. Without the incentives created by this program, important historic rehabilitation projects would have never occurred due to higher costs, design challenges, and weaker market locations, which result in lenders and investors being unwilling to provide the capital investments necessary for their rehabilitation.
In addition to creating jobs, fostering economic growth, and revitalizing communities in need, the HTC actually returns more in revenue to the government than the tax credits themselves cost. In fact, the government receives $1.20–$1.25 in tax revenue for every dollar invested. According to a study commissioned by the National Park Service, 23.1 billion in federal tax credits have generated more than $28.1 billion in federal tax revenue from historic rehabilitation projects. Even in the context of budgetary limitations, there is no economic justification for ending or weakening the HTC.
Some critics of the program will argue that the HTC is unnecessary, as the projects that are developed using the HTC would have been performed even without those tax incentives. As someone who has spent his own time and financial resources on such historic rehabilitation projects, I can assure you that the HTC is an essential financial component in determining where investment dollars are driven. There is no doubt that without the HTC, many restoration projects of older, historic buildings — from Maine to California — would not be economically feasible. Eliminating the HTC would only serve to slow the economic growth of many of America’s communities.
Thankfully, there are leaders in Congress who understand the critical importance of the HTC. This year, the Historic Tax Credit Improvement Act was introduced. This bill would serve to strengthen the HTC by increasing the credit from 20 to 30 percent for projects with rehabilitation expenses of less than $2.5 million, simplifying the application process for small developers and creating greater flexibility for non-profit organizations to partner with developers in redevelopment projects. Support for this legislation even crosses party lines. In the House, 38 Republicans and 35 Democrats signed on as cosponsors; in the Senate, 9 Democrats and 4 Republicans have signed on. In both chambers, many of the cosponsors sit on the tax-writing committees.
Eliminating the HTC will hamper the rehabilitation of our nation’s historic buildings and slow the economic growth of many of our communities in need. This is why I hope that in reforming the nation’s tax code, Congress and the administration will keep or even strengthen the HTC.
Warren Ross is the President of the Tulsa-based Ross Group, a development, engineering and construction firm leading projects throughout the United States.