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Presidential Policy & the Federal Historic Tax Credit

Posted by Katherine Ferguson on Thursday, February 23, 2017
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Congress believes that the rehabilitation and preservation of historic structures and neighborhoods is an important national goal. Congress believes that the achievement of this goal is largely dependent upon whether private funds can be enlisted in the preservation movement.
- Tax Reform Act of 1976

A new president. An energized Congress. An aggressive approach to legislative reform. We have seen these themes dominate newspapers for the past month. In addition to the new administration, much has been made about legacies – that of the outgoing president and those of presidents past that are invoked for comparison’s sake.

President Trump and the 115th United States Congress have vowed to make tax reform a priority in 2017, and those paying attention will most assuredly draw comparisons between these efforts like the Tax Reform Act of 1986 that were overseen by the Reagan administration, a popular administration by which most Republican bodies benchmark policies and platforms.

For supporters of historic tax credits, these tax reforms were the birthplace of the current federal programs. Having originally been part of the Ford administration’s Tax Reform Act of 1976, early Reagan reform included the Historic Rehabilitation Tax Credit as part of the Economic Recovery Act of 1981.

Our historic tax credits have made the preservation of our older buildings not only a matter of respect for beauty and history, but of course for economic good sense.
- President Ronald Reagan, 1984 

Permanent changes were made to the federal Historic Rehabilitation Tax Credit in the Tax Reform Act of 1986 (the most extensive overhaul of the federal tax system since 1913) that reduced the income-producing credit from 25 percent to 20 percent while other real estate tax benefits were cut – a testament to the program’s value that was apparent to lawmakers. Those changes remain, 31 years later, as the basis for the program in its current form. 

Supporters of the federal historic tax credit are not just preservationists but also developers, investors, architects, local business owners, private citizens, government regulators, and elected officials – both Republican and Democrats. Architecture Magazine has called it a “model of governmental initiative” and the Internal Revenue Service in 2002 stated that the Historic Preservation Tax Incentives program “is the nation’s most effective Federal program to promote urban and rural revitalization and to encourage private investment in rehabilitating historic buildings.”

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The Federal Historic Rehabilitation Tax Credit | By the Numbers

  • Over 42,000 historic buildings have been rehabilitated
  • Over 2.3 million jobs have been created
  • Over $117 billion in private investment has stimulated local economies
  • On average, every $1 in federal credit yields $4 of private investment
  • For $23.1 billion in costs, the program has generated $28.1 billion in federal tax receipts.

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In short, the legacy and success of the Historic Rehabilitation Tax Credit is one that should be honored in upcoming tax reform. Sweeping change proposed by Speaker of the House Paul Ryan (R-WI) currently appears to eliminate altogether incentive programs like the historic tax credit. In addition, a reduction in the corporate tax rate could de-incentivize the program even if the program remained intact. While the primary goal of historic tax credits is to serve as an economic development tool, it is also as Reagan noted a matter of respect for beauty and history that is protected by an incentive that rewards good preservation.

(An argument can be made that is also a matter of sustainability. But a topic for another day.)

Topics: policy, federal HTC, tax reform