The Historic Tax Credit Improvement Act encourages building reuse and redevelopment in small, midsize, and rural communities.
Washington, D.C. – U.S. Senators Susan Collins (R-ME) and Ben Cardin (D-MD) today introduced bipartisan legislation that would encourage economic 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 Historic Tax Credit encourages the rehabilitation and preservation of historic buildings, helping to revitalize communities in Maine and across the nation,” said Senator Collins. “Since 2008, the Historic Tax Credit has leveraged approximately $350 million in private investment in Maine alone. Our bipartisan legislation will make the Historic Tax Credit easier to use and expand its economic impact - spurring growth, development, and the creation of good-paying jobs for hardworking Americans.”
“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.”
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 their 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). 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.
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. 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.
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.
A section-by-section summary can be found below:
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 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 Historic Tax Credit (HTC) since the Tax Reform Act of 1986.
SEC. 1 SHORT TITLE “HISTORIC TAX CREDIT IMPROVEMENT ACT OF 2016”
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 credit allowed from $500,000 to $750,000 on the largest projects. The definition of a small deal is reduced to $2.5 million in this version from $5 million in earlier versions.
SEC. 3 ALLOWANCE FOR THE TRANSFER OF CREDITS FOR CERTAIN SMALL PROJECTS
Allows the HTC, for small transactions with rehabilitation expenditures not over $2.5 million, 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 SPECIAL RULES FOR DISPOSITIONS OF STATE HISTORIC TAX CREDITS
Changes how the federal government taxes state historic tax credit proceeds.
SEC. 7. 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.