The Arkansas Historic Tax Credit (HTC) is an important financial incentive for property owners, developers, and investors who seek to revitalize our historic downtowns and neighborhoods, both urban and rural.
The state HTC leverages private investment, creates jobs, enhances communities, and preserves our heritage. The Arkansas General Assembly has an opportunity in this legislative session to improve the state HTC with the introduction of House Bill 1555 by state Rep. Joe Jett and Sen. Jonathan Dismang.
HB1555 would increase the annual cap on the state HTC from $4 million to $10 million, extend the program, and amend the use of fees collected by the Division of Arkansas Heritage.
In 2009, the Arkansas General Assembly passed legislation allowing Arkansans to claim a portion of the cost of renovating historic properties as a credit on their state income taxes. Properties must be listed in or eligible for the National Register of Historic Places to qualify.
Twenty-five percent of the approved rehabilitation expenses on a historic building may be claimed as a tax credit within the established per project caps. The maximum state HTC on an income-producing property is $400,000, and on a non-income producing property is $25,000.
Arkansas also placed an annual cap of $4 million on the total amount of state HTCs issued per fiscal year. This amount has not increased since the program began in 2009.
However, use of the tool has increased. Arkansas rehabilitation projects have depleted the annual allocation of $4 million in state HTCs the past two fiscal years. Some people have halted projects due to the delay in securing the credit. Others are anxiously awaiting the start of fiscal year 2022 in order to receive credit for projects they have already completed.
The state HTC is often an integral part of project financing. Without the state HTC, many historic properties would not have been rehabilitated. Increasing the yearly state HTC cap to $10 million will encourage owners, developers, and investors to continue working and rehabilitating Arkansas's historic properties.
The state HTC generates an excellent return on investment for the state of Arkansas. The Arkansas Historic Preservation Program commissioned the study Building on the Past for a Prosperous Future: The Impacts of Historic Preservation in Arkansas (2020) by PlaceEconomics to quantify the economic impact of the state HTC.
The study found that since the state HTC program was adopted in 2009, Arkansas has realized $224 million in private investment from the award of $21.5 million in tax credits. The state HTC has been used to rehabilitate 342 historic buildings in 24 cities.
Since 2009, Arkansas has seen a 58 percent increase in use of the federal HTC, reducing Arkansans' federal income tax liability and keeping more dollars at home. In 2019, for every $1 in tax credit awarded by the state, the private sector made an investment of nearly $18. Every $1 million invested in a historic rehabilitation project generated $708,700 in additional economic activity in Arkansas.
Based on the average amount of investment each year since the state HTC was implemented, the projects have generated 175.6 direct jobs and more than $7 million in direct income. Raising the state HTC annual cap will support existing jobs, create new ones, and increase direct as well as indirect income.
There are other compelling reasons to support the rehabilitation of historic properties and investment in historic downtowns and neighborhoods. Tourism is an important part of the Arkansas economy.
Arkansas is blessed with an abundance of unique historic resources that make our state a wonderful place to live and visit. It is time to improve the decade-old incentive that allows us to keep these assets in use. Support for HB1555 means support for private investment to enhance our communities, job creation, and the preservation of our heritage.
Rachel Patton is the Executive Director of Preserve Arkansas, and Patricia Blick is the Executive Director of the Quapaw Quarter Association.