Historic Tax Credit
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| Historic Tax Credit | |
|---|---|
| Name | Historic Tax Credit |
| Type | Tax incentive |
| Established | 1976 |
| Jurisdiction | United States |
| Administered by | National Park Service; Internal Revenue Service |
| Related legislation | Tax Reform Act of 1976; Economic Recovery Tax Act of 1981; Tax Reform Act of 1986 |
Historic Tax Credit The Historic Tax Credit is a federal financial incentive designed to promote the rehabilitation of certified historic structures through tax benefits tied to preservation standards. It connects preservation practice with fiscal policy by linking projects to standards administered by the National Park Service and tax rules enforced by the Internal Revenue Service, encouraging private investment in heritage properties across the United States. The program has influenced redevelopment projects in cities such as New York City, Chicago, Boston, Philadelphia, and San Francisco.
Overview
The credit provides a percentage-based income tax credit for the qualified rehabilitation of certified historic structures, aligning tax policy with preservation goals like those embodied in the National Historic Preservation Act of 1966 and the Secretary of the Interior's Standards for Rehabilitation. Major projects often intersect with programs run by the National Trust for Historic Preservation, state historic preservation offices like the New York State Office of Parks, Recreation and Historic Preservation and agencies involved in urban revitalization such as the Department of Housing and Urban Development. Prominent beneficiaries include adaptive reuse of properties in Lower Manhattan, SoHo–Cast Iron Historic District, The French Quarter, and the Alamo environs.
History and Legislative Development
The credit traces to the Tax Reform Act of 1976 which introduced incentives for rehabilitation, later expanded by the Economic Recovery Tax Act of 1981 and shaped by the Tax Reform Act of 1986. Legislative debates involved stakeholders like the National Trust for Historic Preservation, philanthropic entities such as the Ford Foundation, and banking institutions including Bank of America and Citigroup that provide financing. Major amendments and state-level complements emerged during administrations of presidents such as Jimmy Carter, Ronald Reagan, Bill Clinton, George W. Bush, and Barack Obama, and were influenced by landmark projects in municipalities like Baltimore, Pittsburgh, Seattle, and New Orleans following events including Hurricane Katrina.
Eligibility and Types of Credits
Eligibility typically requires that a structure be listed on the National Register of Historic Places or located in a registered historic district and certified by the National Park Service; state-level credits mirror federal rules in jurisdictions such as Texas, California, Illinois, and Georgia. Types include the Federal Historic Rehabilitation Tax Credit and various State Historic Tax Credits; combined stacking of credits often involves entities like Historic Tax Credits Coalition, state historic preservation offices, and financial intermediaries such as community development financial institutions exemplified by Local Initiatives Support Corporation. Projects vary from commercial rehabilitation like conversions in Tribeca to affordable housing retrofits in neighborhoods such as Harlem and mixed-use redevelopment in Savannah.
Application and Certification Process
Applicants submit a multi-part certification to the National Park Service in coordination with state historic preservation offices, often following a pre-application review, Part 1 (evaluation of significance), Part 2 (description of rehabilitation), and Part 3 (certification of completed work) workflow aligned with the Secretary of the Interior's Standards for Rehabilitation. Financial structuring frequently involves underwriters from firms like Goldman Sachs, legal counsel experienced with preservation easements such as The Trust for Public Land, and tax advisors familiar with Internal Revenue Service procedures. High-profile certified projects have included rehabilitations in Lower East Side, Brooklyn Navy Yard, Ponce City Market, and historic textile mills in Greensboro.
Economic and Preservation Impacts
Research by academic institutions such as Harvard University, University of Pennsylvania, Columbia University, and policy centers like the Brookings Institution indicates the credits stimulate private capital, create construction jobs, and catalyze downtown revitalization in cities including Cleveland, St. Louis, Detroit, and Milwaukee. Preservation outcomes include retention of historic fabric in districts like Georgetown (Washington, D.C.) and reuse of landmark properties such as Union Station (Washington, D.C.) and Faneuil Hall. The credit interacts with programs like Low-Income Housing Tax Credit and federal grant initiatives administered by the National Endowment for the Arts and the National Trust for Historic Preservation.
Criticisms and Controversies
Critics from think tanks such as the Cato Institute and oversight entities including the Government Accountability Office have raised concerns about cost-effectiveness, instances of gentrification in neighborhoods like Wicker Park and Fulton Market District, and abuse through ineligible expenditures. Litigation and policy disputes have involved developers, preservation groups, and financial institutions such as Lendlease and Trammell Crow Company over credit allocation, syndication practices, and interpretation of the Internal Revenue Code. Debates persist over reform proposals championed in congressional hearings by members of the United States House Committee on Ways and Means and the United States Senate Committee on Finance.