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Katherine Ferguson

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Meet MHA Southwest Associate, Amanda Barry

Posted by Katherine Ferguson on Wednesday, June 6, 2018

In October 2017, MHA opened our Southwest office in Houston. In February, Amanda Barry joined director Anna Mod as our first MHA Southwest associate. Her long passion for and professional background in historic preservation brings important expertise to the fast-growing historic rehabilitation industry in Texas and beyond.

Here is a little bit about Amanda. We think you'll see why we are excited to have her on board.

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How did you become interested in historic preservation? It is an absolute cliché, but I first became interested in historic preservation in middle school when I visited Mt. Vernon. Although it did take some time to identify my career path, I knew at that young age that I had a love of history and a love of old buildings. I don’t know of many 6th graders who know they want to be preservationists!

What is your favorite type of architecture? That’s a toughie. I’m going to cheat and say “New Orleans style” architecture so I can include everything from Creole Cottages to Neoclassical. I grew up near New Orleans and have always loved the city’s architectural diversity.

Why do you believe that historic tax credits are important? Tax credits make it possible to breathe new life into historic buildings. They provide vital financial assistance for the rehabilitation of buildings that might otherwise be overlooked, neglected, or worse – demolished.

Tell us about one of your projects with MHA Southwest.

St. Elizabeth’s Hospital | Houston, Texas
Project client | Fifth Ward Community Redevelopment Corporation

stlizhospitalBuilding History |
St. Elizabeth’s is an Art Moderne style hospital building, constructed in several phases between 1945 and 1988. The hospital opened in 1947 in Houston’s Fifth Ward, a historically black neighborhood northeast of downtown Houston. The city was segregated and inadequate access to health care inspired local doctors, concerned civic leaders, and the Missionary Sisters of the Immaculate Conception of the Mother of God, a Catholic order of nuns, to raise funds, construct and then run the hospital. The Sisters of the Immaculate Conception operated the hospital until 1981 when it was sold or transferred to the Houston-based Sisters of Charity of the Incarnate Word who continued its operation until they closed the hospital in 1988. The next year, a group of local doctors purchased the hospital, and it reopened briefly as the Drew Medical Center, which closed in 1990. In 1992, the hospital was purchased and used as an inpatient drug rehabilitation facility, and then closed in 2014. To date, the hospital remains vacant. The property is slated for rehabilitation as an affordable housing complex.

Rehabilitation Challenges & Solutions |
Over time, there were several alterations made to the building, resulting in a hodge-podge of contributing and noncontributing resources that have all been subjected to neglect, extreme weather and vandalism – including arson. Extensive forensic investigation was used to determine which resources still contribute to the character of the property and which resources are viable for rehabilitation.

Community Impact |
Fifth Ward CRC is dedicated to the collaborative fostering of holistic community development. By using the federal HTC along with the Texas HTC, Fifth Ward CRC is able to provide affordable housing within the community while preserving a historic, community landmark.

Learn more about the federal HTC     Learn more about the Texas HTC

Stay tuned for more interviews with our expert team members.

Topics: Affordable Housing, MHA Southwest, Texas

Historic Preservation and Opportunity Zones

Posted by Katherine Ferguson on Friday, May 25, 2018

Sibley_Mill
Sibley Mill | Augusta, GA

Reviews of the new tax reform bill have been mixed. Historic tax credits were retained, but the terms of claiming the credit changed. Other tax incentive programs were modified or done away with entirely. Depending on whom you ask, these changes can be positive or negative.

One change of the tax reform of 2017 that has gotten a lot of attention is the addition of Opportunity Zones. This program was championed by Senators Tim Scott (R-SC) and Cory Booker (D-NJ) and advertises to inject economic incentives to combat geographical inequality. US Census Bureau statistics point to stagnation in primarily rural counties where jobs and businesses have dropped over the last decade. In the 1990s, more than 50 percent of all counties grew at the national rate. Now only 25 percent do.

What is an Opportunity Zone?

The Opportunity Zones program is set up to benefit investors who invest in new businesses and development in census tracts approved as an Opportunity Zone (OZ). The program is market-based and requires no public money. Up to 25 percent of a state’s low-income census tracts - determined by population, income, and local input - are designated by governors and approved by the U.S. Treasury and the IRS.

Any corporation or partnership may self-certify an opportunity fund as an investment vehicle for capital gains tax deferment on the sale of another investment. While IRS rules are still being written, there is not expected to be a minimum or a maximum on the funds. Time is the primary constraint as it is expected that the fund will have to invest 90 percent of its assets in OZ projects within six months. And currently these investments must be made by the end of 2019 to get the full benefit of a 15 percent reduction in deferred taxes for investments owned seven years as the program is due to sunset December 31, 2026. (Investments owned for five years are reduced by 10 percent.)

What does this mean for historic rehabilitation projects?

OZ funding will not be enough on its own to fund a project. Combined with incentives like historic tax credits, however, OZ funding can help fill the capital stack for projects in economically depressed areas. Because of this, we expect that there could be interest in historic rehabilitation in areas that previously may not have been fully feasible before.

It may not be possible to draw a straight line between OZ funding and HTCs, but there might be parallels. Many people in the industry have likened the program to New Markets Tax Credits (NMTC), a program that is occasionally twinned with HTCs to fund rehabilitation projects. They have been sibling programs, but do not directly correlate in terms of usage.

The new OZ approach may create opportunities for investments in historic assets that that NMTCs do not necessarily create. Theoretically, an individual, or small group of individuals, could form a corporation or partnership to make smaller investments in OZs. Because of the complexity of the NMTC structure, it isn’t often economically feasible for a small NMTC project, while smaller projects may dovetail nicely with a combination of HTCs and OZ investments.

In addition to new businesses, many states are focused on making funding available for workforce and affordable housing opportunities that can utilize the OZ program. Technical guidance from the IRS suggests that LIHTC, HTC, and NMTC projects will be qualified investments; however, there are expected to be exclusions for projects that include “sin businesses” like golf courses, country clubs, massage parlors, gambling venues, or stores where the principal business is sale of alcoholic beverages for consumption off premises.

We know that historic preservation is a function of community revitalization. If the program incentivizes investment in these communities as it is designed to do, it will make these projects all the more probable as new businesses are encouraged to move in. But the bottom line is that the potential impact of OZs is yet unknown. We must wait and see how guidance is structured and how investors will respond.

Stay tuned...

This article was written with help from George Morrison of McNair Law Firm, PA and information from the SC Dept. of Commerce.

Further resources:

IRS.gov Opportunity Zones FAQs

McNair Law Firm, PA Opportunity Zones FAQs

Topics: policy, Historic Tax Credits, Opportunity Zones

May is Preservation Month

Posted by Katherine Ferguson on Wednesday, May 9, 2018

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Rainwater Building | Florence, SC

Since 1973, May has been designated as Preservation Month. Events are planned by the National Park Service, National Trust for Historic Preservation, and many statewide and local preservation organizations to encourage interest in historic preservation.

Historic tax credits (HTCs) are an excellent economic tool for private developers, local governments, and communities. But at their heart, historic tax credits are about preserving historic resources for future generations.

  • HTCs require good stewardship. The core requirement of the HTC program is that projects must meet the Secretary of the Interior's Standards for Rehabilitation. These 10 standards guide every design review by state historic preservation offices and the National Park Service. Because of this, successful HTC projects have followed best-practices for rehabilitation, including the inclusion of historic materials and sensitive adaptations of interior spaces.

  • HTC projects encourage new preservation. Once one historic rehabilitation is undertaken, it is almost guaranteed that others will follow. This is apparent on Main Streets, in former mill villages, and throughout disinvested urban neighborhoods. And the marketable success of these districts of preservation is also pollenated to other communities.

  • HTC projects are essential to placemaking. Speaking of marketable success, historic preservation is often the center of placemaking efforts. By using existing resources and their historical commentary about the development of a community, historic buildings are often the cornerstone for new design and planning activities aimed at revitalizing economic activity.

Preservation is much more than HTC projects. But HTC projects are always preservation. Cultivating appreciation for our historic built environment is the mission of outstanding organizations around the country.

In May (and every other month), we encourage you to seek out ways to learn more about the history of your place and how you can support good preservation that is supporting your community.

Topics: National Trust for Historic Preservation, National Park Service

Affordable Housing and Historic Preservation

Posted by Katherine Ferguson on Monday, April 23, 2018

Loring HouseLoring House | Portland, ME

Housing affordability is a problem across the country. In fact, one National Low-Income Housing Coalition study found that in 2017 there was no state that is untouched by this issue. 

Low-income housing tax credits have been a legislative both the federal and state level for several decades. In some states, legislators have added incentives for historic preservation that supports the creation of preservation of affordable units. In the April 2018 issue of the Novogradac Journal of Tax Credits, we examine how some of these state programs are structured. 

Read the full story here | 
Linking Affordable Housing to Historic Preservation Using Tax Credits

 

Topics: State HTC, Novogradac Journal of Tax Credits, Affordable Housing

Historic Preservation and the Tax Code

Posted by Katherine Ferguson on Wednesday, April 18, 2018

Appreciation of historic buildings comes in many forms: well-curated house museums; impressive civic spaces turned cultural hubs; highly-valued homes in historic districts; popular breweries in old warehouses and industrial spaces; grassroots campaigns to save endangered places; tax policy.

Yes, tax policy.

To commemorate the tax season that's upon us, here is a brief history of how and why historic preservation became a political issue and necessarily found it's way into the federal tax code:

urbanrenewal

  • 1950s & 60s | After World War II, there was a dramatic increase in interstate highway building and the raising of undesirable buildings through a practice called "Urban Renewal" that was sanctioned by government policy. Historic preservation at this time was associated primarily with house museums honoring prominent historic figures. Tax code at this time favored demolition over preservation.
  • 1954 | The Revenue Act of 1954 expanded methods of accelerated depreciation for real assets as a way to counterbalance a mild recession of the era and stimulate the economy. The provision was only extended to new construction, thus disadvantaging maintenance, repair, and preservation of older buildings.

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  • 1963 | Pennsylvania (Penn) Station in New York City was demolished. This event is seen as a turning point in the preservation movement as the public began to view the preservation of monumental and architecturally significant buildings as important to the fabric of their communities.

  • 1965 | President Lyndon Johnson included historic preservation principles in his White House Conference on Natural Beauty. Under Johnson's administration, many social issues were addressed using tax policy and he remarked that "the greatest single force that shapes the American landscape is private economic development. Our taxation policies should not penalize or discourage conservation and the preservation of beauty." The Townscape Panel of the conference included two full paragraphs on the topic in its formal report.

  • 1966 | With Heritage So Rich was published as a product of the Townscape Panel meeting in 1965 and included a forward by First Lady, Lady Bird Johnson. Recommendations for the role of federal government in historic preservation included tax policy including deductibility of preservation expenditures and gifts of easements. Poet George Zabriskie contributed the essay "Window to the Past" that most directly advocated for tax reform that would save old buildings.
As long as we have a society in which the profit motive is operable, we cannot condemn property owners for wishing to profit from their holdings. We can, however, study tax laws at all levels, with the hope of adjusting them to permit profitable remodeling and retention of sound buildings of architectural and historical importance. [Zabriskie]
  • 1966 | The National Historic Preservation Act of 1966 (NHPA) was passed with a late addition for a mandated Advisory Council on Historic Preservation tasked with recommending studies including in such areas as "the effects of tax policies at all levels of government on historic preservation."

  • 1969 | To raise revenue in the wake of the Vietnam War, the Nixon administration passed the Revenue Act of 1969 which favored demolition for tax purposes, reducing the after-tax profitability and attractiveness of historic rehabilitation by comparison.

  • 1972 | Ernest Connally, head of the NPS Office of Archeology and Historic Preservation was given an audience with President Nixon and presented the dilemma of demolition of old buildings being advantaged through tax code versus the rehabilitation of them. As a result, Nixon included tax provisions in the Environmental Protection Tax Act of 1972 (EPTA). Owners who demolished certified historic structures would no longer be allowed to deduct the cost of demolition, demolition expenses were added to the adjusted basis of the property, and limited owners to a straight line method of depreciation on any new construction on the same site. This provision bolstered the interest in the National Register for Historic Places, which at the time had only existed a few years and contained approximately 2,800 properties.

  • 1973-1976 | After effective study and advocating by the National Trust for Historic Preservation and Preservation Action, Senator J. Glenn Beall of Maryland introduced S. 2347, the "Historic Structures Act of 1973." It was included in the Ford Administration's Tax Reform Act of 1976.
The time has clearly come for us to harness the constructive energies in our nation's tax system so as to bring private funds and commercial interests actively and enthusiastically into the field of historic preservation. The time has clearly come for the Congress to wipe away many of the existing tax incentives which run directly counter to our national goals. [Beall]
reagan
  • 1981 | Reagan's Economic Recovery Act of 1981 bolstered historic preservation in the tax code by setting the federal historic rehabilitation tax credit (HTC) at 25 percent. In 1984, more than 3,200 projects received Part 2 approval.

  • 1986 | Despite President Reagan's vocal support of the historic tax credit program, his 1984 Tax Reform Act reduced the credit from 25 percent to 20 percent. This greatly reduced the number of applications and approvals through the remainder of the 1980s.

  • 1990s & 2000s | While the lowest number of Part 2 approvals were recorded in 1993, the program grew and thrived without significant changes despite recessions in the past few decades. State HTC programs also began to gain traction during this time and have created additional incentive for real estate developers to invest in local economies.

  • P2017 | The Tax Cuts and Jobs Act of 2017 included the first major change to the HTC since 1986. Projects acquired and started after December 31, 2017 must now take the 20 percent credit in equal installment over five years versus taking the credit in full the year the project is placed in service. While this change will have an affect on future projects, the retention of the 20 percent credit is continuing to stimulate the rehabilitation of historic buildings around the country.

Acknowledgements: For a deeper look at the history of historic preservation and tax policy, read When Preservation Came to the Tax Code, a Spring 2013 ForumJournal article by Andrew Potts.

 

Topics: federal HTC