Credit Worthy News

House Tax Reform Legislation Eliminates Historic Tax Credit

Posted by Katherine Ferguson on Thursday, November 2, 2017

A day late, but nonetheless what we expected. The House tax reform bill released this morning does, in fact, eliminate the historic tax credit. This push for tax reform is still in early days and no doubt there will be many changes, maybe even the retention of the historic tax credit, but advocacy is still of the utmost importance. Perhaps now more than ever.


The release of the proposed legislation means that we now know what we are asking for: DO NOT REPEAL THE HISTORIC REHABILITATION TAX CREDIT. It means supporters of historic preservation and believers of economic prosperity driven by historic rehabilitations need to be very specific about what this program has to offer and what we stand to lose. Last year alone, over 1,000 historic rehabilitations were completed; 109,000 jobs were created; $1.7 billion federal, state, and local taxes were generated; and these projects generated $6.2 billion in GDP.

Over the lifetime of the program (1978-2016) these numbers are staggering:

  • 42,293 projects have been certified
  • 2.4 million + jobs have been created
  • $29.8 billion federal taxes have been generated for $25.2 billion credits allocated (that's a $1.20:$1 ratio that proves the program is revenue positive)
  • $144.9 billion has been contributed to GDP

These aggregate numbers are impressive. But it is also the unique placemaking that comes from the reuse of historic buildings in your very own communities that demonstrate the real value of the historic tax credit.

Why are these historic buildings important to you and your community? What positive change and economic development opportunities have you seen from these projects where you live, work, or play? In what state would these places and neighboring properties be without development that was incentivized by the historic tax credit? What projects will not get developed in the future without this incentive?

Consider these questions and take action now before it is too late. We still have a ways to go before the bill becomes law. But House and Senate Republicans are promising an aggressive approach to passage and we must take this very seriously. Losing our historic tax credit would change the landscape of future development in towns and cities across the country, making it more equitable to drastically alter or demolish our historic places. Once gone, we can never replace them.

The same can be said of the historic tax credit. Once gone, an effort to replace what is lost could have uncertain outcomes. We know what Gerald Ford's administration began and Ronald Reagan continued and supported works. We know that its foundation is strong and its bones are good. We know it should not be demolished.

Join us as we stand with the Historic Tax Credit Coalition and others throughout the country to support this historic tax credit. Your contribution of words and support could make all the difference.

Check out this list of important Republican legislators to contact today.


Topics: HTC, Historic Tax Credits, tax reform

Gov. Brown Leaves No Doubt About Future of State Historic Credits in California

Posted by Bill MacRostie on Wednesday, October 7, 2015

I’m attending the ULI Fall Meeting in San Francisco, and it’s a fantastic conference with heavy emphasis on future tech and demographic trends; their likely impact on cities, development and land use.

In a fascinating session at the end of the day Tuesday, George Marcus, Chairman of Marcus and Millichap, sat down with Gov. Jerry Brown and discussed topics ranging from closing the state’s $27 billion budget gap, possible reforms to the California Environmental Quality Act, the California drought, and the impact on California and the world of climate change.

As the session was wrapping up, the last question from the audience was from Brandon Hill of Fusion Advisory Services in Birmingham, AL. In an implied reference to the governor’s 2014 veto of a new state historic tax credit bill passed unanimously by both houses of the California legislature, Brandon pointed out the positive impacts across America of state and federal historic credits, and asked the governor about his views on the subject.

Brown responded with an account of the arcane budget rules in California where a tax incentive can be enacted by the legislature with a simple majority but rescinded only with a two-thirds majority, thus having the practical political effect of permanence in the tax code. Further, he felt the historic credit bill was a one-off effort relating to a single issue, while his preference would have been for a larger bill that took a more holistic view of development incentives. This seemed like a rational, reasonable defense of his veto.


The governor went on to describe in surprisingly personal and bitter terms a couple of his past encounters with the preservation community. While living in Sacramento in a residential loft building, he was prevented from installing double-paned windows with improved acoustics so that when the bar downstairs closed in the middle of the night, the patrons on the sidewalk downstairs would wake him up. And, while he was mayor of Oakland, the preservation interests blocked the demolition of a “tired, non-descript little building,” thereby preventing the development of a major project the he supported. He said, “in general, it’s just hard to develop in historic areas because of all the requirements.”

His last comments when the session wrapped up was, “Yeah, historic credits in California…don’t hold your breath.”

Well, at least we know where we stand and who we have to convince.

Topics: policy, HTC

North Carolina Rehabilitates Historic Tax Credit

Posted by Richard Sidebottom on Friday, October 2, 2015

NODA Mills | Charlotte, NC
NODA Mills | Charlotte, NC

For many years, North Carolina was the poster child for healthy historic tax credit programs (HTCs). It was a shining example of how a state program can spur private real estate and economic development. Numerous historic rehabilitations testify to the success of the former HTC and North Carolina Mill Tax Credit programs. Some impressive examples are Wake Forest Biotech Place in Winston-Salem, a master-planned development that transformed the former R. J. Reynolds Tobacco Company complex into offices and research laboratories, and the many abandoned mills around Charlotte brought back to life as affordable housing, breweries and mixed use developments. With a user-friendly state tax credit program and the outspoken support of a strong statewide preservation organization, Preservation North Carolina, the state was a hotbed for historic rehabilitations, with the sixth highest number of projects in the country just prior to. In 2014, 44 rehabilitation projects received Part 3 approvals with a total of more than $56 million spent by the private sector on qualified rehabilitation expenditures (QREs).

That is why it was so disappointing that the state HTC and the state Mill Tax Credit programs were allowed to sunset at the end of 2014. Even before the HTC was gone, a campaign driven by Governor Pat McCrory and Secretary Susan Kluttz of the Department of Natural and Cultural Resources was underway to reinstate some form of these instrumental revitalization programs for the Tar Heel State. According to the 2014 report, Decades of Success: The Economic Impact of Main Street in North Carolina, sponsored by the North Carolina Department of Commerce and North Carolina Main Street Communities, nearly 300 projects in Main Street districts alone used the historic tax incentive between its inception in 1998 and 2013, with private investment totaling over $190 million in rehabilitation costs.

Good news came in the last few weeks from the North Carolina legislature! A revised tax credit program combining the HTC and Mill Tax Credit programs was included in the budget bill recently passed by the legislature and signed by Governor McCrory. While final details of the program are subject to change, the program should begin on January 1, 2016 and will include the following:


  • Income-Producing (combines Commercial & Mill)
    • Reduces base credit rate to 15%
    • +5% for mill ($3M spending requirement has been eliminated)
    • +5% for economically distressed counties
  • Home-owner Residential
    • Reduces to 15% credit
    • Applies a cap per project QRE @ flat project ceiling ($150K)
    • $10,000 minimum over 24 months


  • Income-Producing (combines Commercial & Mill)
    • $0 to $10M base rate
    • $10M to $20M base rate reduced by 5%
    • Hard cap at $20M
  • Home-owner Residential
    • $150,000 cap

Can now be claimed all in one year. All credits claimable once building is placed into service with a 10-year carry forward.

Combined credits claimable against income taxes, grow premium taxes and corporate franchise taxes. 

The combination of the above results in a maximum per project cap of $4.5 million. This may not be as generous as the combination of the previous programs, but it will have a positive impact on a majority of the potential projects in the state and spur continued economic development. 

The North Carolina SHPO will be promulgating new regulations in the coming months and we will make sure to provide updates.

Contact us if you would like to know how these or other state HTCs can bring equity to your historic rehabilitation project. 

Topics: policy, North Carolina, HTC, MHA Southeast

Reflections from the Novogradac HTC Conference

Posted by Albert Rex on Friday, September 25, 2015


As I flew back to Boston from the Novogradac HTC Conference in San Antonio last week, I thought about the professional variety of attendees. It was reflective of the diverse group of skill sets needed to complete an HTC transaction: lawyers, accountants, syndicators, state and federal investors, banks, development consultants and developers. But other key team members in HTC transactions were less represented at the conference: architects, engineers, contractors and other consultants that design, permit and build the project.

A successful project takes a lot of skilled people working together to make it happen. And there is that one-person – syndicator, developer, lawyer – that has to push the project to closing. Each team member is an expert in their field; whether they are issuing a tax opinion or deciding that the building meets local codes, they need to understand the specifics of that aspect of the project.

In some cases, a broad understanding of all aspects of the project is required.

The Important Role of Historic Consultants

You might not think that a historic consultant is one of those people. You may think that all they have to focus on is the National Park Service (NPS) or the State Historic Preservation Office (SHPO) and meeting the Secretary of the Interiors Standards for Rehabilitation. That may in fact be the case in some situations. But a good historic consultant can often save the project money, especially from a timing perspective. 

Yes, the historic consultant is focused on the application process – getting Part 1, Part 2 and finally Part 3 approval – but the timeline for those approvals can have an enormous impact on project timing.

A successful Part 1 gives a developer confidence that the project can actually receive historic tax credits and may be an important part of the due diligence on seeing if the project is a “go” or “no go.” The Part 2 is the meat and potatoes of the application; here the design is approved and a developer can get a sense of whether they can actually get the yield they are looking for, like square footage or the number of units.

Good historic consultants are the experts of these necessary processes, often anticipating issues before they arise and drawing from their experience to offer solutions for these potential stumbling blocks. 

A good historic consultant is also keenly aware of the current forces at play in HTC policy and economics that will have a direct impact on their client’s project and financial structure. 

The Effect of Historic Boardwalk on HTCs

One of the prevalent topics of the conference was about the impact of the Historic Boardwalk case and the subsequent revenue procedure issued by the IRS. Prior to Boardwalk, a federal investor had greater protections against risk and the transaction could focus less on the real estate underwriting and more on the sponsor. Since this case, and subsequent revenue procedure, there is a much greater emphasis on underwriting the project and the entire transaction.

Repercussions of the Boardwalk case have led to a greater level of due diligence and a greater emphasis on overall project compliance during construction relative to NPS approvals and leading up to the Part 3 Final Certification. This level of due diligence and construction oversight is even more important to new investors entering the market (especially those who have been involved with Low-Income Housing Tax Credit (LIHTC) investments in the past). 

The Current Market for HTCs

Another takeaway from the conference relates to the relative strength of the HTC market. Despite the continued concerns over 50(D) and having a revenue procedure compliant transaction, there continues to be a growing interest in utilizing the federal HTC as a source of equity. Some of this is the need to fill the gap as banks continue to focus on the loan-to-value ratio. Some of it is likely due to the increase in opportunities with state HTC programs. Once a developer commits to one, why not get both?

The Wednesday sessions prior to the conference, focusing on the fundamentals of HTCs and state programs, were well attended, reinforcing the importance of strong state tax credits in the health of the HTC market. Fortunately, we have seen legislators from many states - such as Texas, Georgia, and most recently, North Carolina - agree that HTCs are an important economic growth tool.

At MHA, it is our goal to help our clients to benefit from these state (and federal) programs, knowing that they can be an integral part of their capital stack. And we are happy to be that team member for HTC projects across the country.

Contact us today to recruit us for your team.

Topics: HTC

The Financial Benefits of Chicago's Class "L" Designation for Historic Properties

Posted by MacRostie Historic Advisors on Thursday, September 10, 2015
Wrigley Building | Photo Credit: Jon Miller of Hedrick Blessing Photographers
Wrigley Building | Photo Credit: Jon Miller of Hedrick Blessing Photographers

Chicago appreciates its architecture more than most cities. And it should. This city was the crucible for arguably the most influential American architectural events in the late 19th and early 20th centuries:  the 1893 World’s Columbian Exposition which sparked a renaissance of neoclassical architecture throughout the country, and birthplace of the skyscraper, a product of “Chicago School” engineering, innovation, and design.

Chicago is also a leader in creating developer incentives for the preservation and reuse of historic buildings. Acknowledging the positive impact of the City’s historic built environment on the local and regional economy, the Cook County Class “L” Property Tax Incentive Program was created in 1997 to offer specific financial incentives for rehabilitation of buildings designated as Chicago Landmarks. 

Under the Class “L” program, owners of qualifying commercial and industrial properties designated as “landmarks” and undergoing “substantial rehabilitation” can have their property tax assessment levels reduced for a twelve-year period.  Where commercial and industrial properties are typically assessed at 25% of market value, Class L buildings are assessed at only 10% for ten years, 15% in year 11 and 20% in year 12.

Old Republic Building To qualify, owners must invest at least 50% of the Assessor’s full market value of the landmark building in an approved rehabilitation project and must be determined a Class “L” property prior to the commencement of construction. The ordinance is intended to foster projects that contribute to long-term growth in the economy, employment opportunities, and property tax base of the city and Cook County.
The incentive applies to the assessment of the building only. The land continues to be assessed at the standard levels of assessment for commercial property and industrial property (i.e., 25% of market value), except where the entire building has been vacant for at least 24 continuous months prior to application for the incentive, in which case, the incentive assessment levels apply to the land as well as the building.

In Chicago, developers frequently utilize the Class “L” incentive in conjunction with the federal 20% historic rehabilitation tax credit as the two programs share many of the same requirements:

  • Both require that a building be designated as historic (that means Chicago Landmark status for the Class “L” program and National Register designation for the federal program).  
  • Both require a baseline investment in the rehabilitation work (that’s 50% of the Assessor’s opinion of the building’s full market value for the Cook County program and 100% of the building’s adjusted basis for the federal tax credits).  
  • And under both programs, the rehabilitation work is required to meet the Secretary of the Interior’s Standards for Rehabilitation.


Virgin HotelIn our experience and in that of our clients, these incentive programs generally complement each other and there is often an economy of scale in pursuing concurrent applications and coordinating project reviews with the applicable local, state, and federal agencies.
The programs are also complementary in how they deliver financial incentives for a rehabilitation project. The federal program provides a tax credit equal to 20% of total qualifying rehabilitation expenses (both hard and soft costs) that can be monetized to bring equity into a transaction while the project is under construction.  The Class “L” is a benefit that impacts annual operating expenses.

It is worth noting, that the proceeds of federal historic tax credits may not be used to satisfy the Cook County investment requirement.

Given these considerations, it is clear why developers are actively utilizing the Cook County Class “L” Property Tax Incentive, a powerful preservation tool for the City of Chicago that is much more carrot than stick.

Post by Allen F. Johnson, Partner | Director, MHA Midwest and special contributor Elizabeth L. Gracie, Partner in the law firm, O'Keefe Lyons & Hynes

Topics: policy, Chicago, O'Keefe Lyons & Hynes, HTC, MHA Midwest