As Congress and the administration begin serious negotiations on comprehensive tax reform, it is vital they recognize the critical importance of capital investments in our nation's communities. In particular, the Federal Historic Preservation Tax Incentives Program is an incentive that should be strengthened, not diminished, by any tax proposal put forward by Congress or the White House.
Commonly referred to as the Federal Historic Tax Credit (HTC), it was initially implemented in 1978 to encourage private investment in projects to rehabilitate historic buildings including vacant schools, warehouses, factories, retail stores, apartments, hotels, and office buildings throughout the country. The HTC provides a 20 percent credit for the rehabilitation of historical buildings, and a 10 percent credit for non-historic buildings placed in service before 1936.
Through 2016, the HTC has resulted in the rehabilitation of more than 42,000 historic buildings and has created more than 2.4 million jobs nationwide. In Little Rock and North Little Rock, we have seen the transformation of several landmark properties including the Albert Pike Hotel, Chandler House, the Capital Hotel, the Lynch Apartments, the Fulk Building, Blass Department Store, the Packet House and many more.
All of these projects were made possible through the use of the HTC. They have helped strengthen our community both in terms of providing needed economic development and revitalizing valued historic buildings.
In Little Rock and North Little Rock alone, from 2002-2016, more than 70 rehabilitation projects were performed via the HTC program, representing more than $113 million in investment and job creation for the state, according to figures provided by the National Park Service. Without incentives created by this program, important historic rehabilitation projects would have never occurred due to higher costs, design challenges, and weaker market location; this results in lenders' and investors' unwillingness to provide the capital investments necessary for their rehabilitation.
In addition to creating jobs, fostering economic growth, and revitalizing communities in need, the HTC actually returns more in revenue to the government than the tax credits themselves cost. In fact, the government receives $1.20 to $1.25 in tax revenue for every dollar invested.
According to a study commissioned by the National Park Service, $23.1 billion in federal tax credits have generated more than $28.1 billion in federal tax revenue from historic rehabilitation projects. Even in the context of budgetary limitations, there is no economic justification for ending or weakening the HTC.
Some critics of the program will argue that the HTC is unnecessary, as the projects that are developed using the HTC would have been performed even without those tax incentives. We know, however, that the HTC is an essential financial component in determining where investment dollars are driven.
There is no doubt that without the HTC many restoration projects of older historic buildings would not be economically feasible. Eliminating the HTC would only serve to slow the economic growth of many of America's communities.
Thankfully, there are leaders in Congress who understand the critical importance of the HTC. This year, the Historic Tax Credit Improvement Act was introduced. This bill would serve to strengthen the HTC by increasing the credit from 20 percent to 30 percent for projects with rehabilitation expenses of less than $2.5 million, simplifying the application process for small developers, and creating greater flexibility for nonprofit organizations to partner with developers in redevelopment projects.
This support is bipartisan--in the House, 38 Republicans, including Congressman French Hill, and 35 Democrats signed on as co-sponsors; in the Senate, nine Democrats and four Republicans have signed on.
Eliminating the HTC will hamper the rehabilitation of Little Rock's and North Little Rock's historic buildings, like the Woodruff House, the Boyle Building, and the Donaghey Building; growth in many other communities in Arkansas also could be slowed. This is why I hope that in reforming the nation's tax code, Congress and the administration will keep or even strengthen the HTC.
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Patricia M. Blick is executive director of the Quapaw Quarter Association, dedicated to preserving greater Little Rock's historic places.
Editorial on 11/27/2017