Preservationists and developers—and everyone in between—are united in their alarm over President Donald Trump’s failure to include the federal historic building tax credit program in his proposed tax reform package, Business Report Editor Stephanie Riegel writes in her latest column.
“It is almost impossible to overstate the importance of this program to the revitalization of historic neighborhoods and buildings, and almost inconceivable that Congress would allow it to die,” Riegel says. “But stranger things have happened in national politics in recent years, and no one should assume anyone in D.C. has the best interest of our communities at heart.”
The federal tax credit program, Riegel notes, was created nearly 40 years ago and allows developers to recoup 20% of the cost, dollar for dollar, of renovating a historic building.
In Louisiana, the program is often used in conjunction with the state commercial tax credit, which was enacted in 2002 and equals 25%.
“At a combined 45%, the tax credits are a huge incentive, no question,” Riegel writes. “But developers don’t get the credits—which they can use to pare down their own tax liability or monetize, at a slight discount, through a broker—until they’ve completed their project. More importantly, years of data suggest the program more than pays for itself because it returns buildings to commerce, enabling them to generate new tax revenues.”
Since its inception in 1978, the program has rehabilitated some 42,000 buildings across the country at a cost to the U.S. Treasury of $25 billion, according to a 2017 Rutgers University study.
“That’s not much when you consider that $25 billion led to some $132 billion in historic rehabilitation projects and generated nearly $30 billion in federal taxes alone,” Riegel says. “In other words, every $1 invested generated a $1.18 return. What’s more, rehabilitation projects have led to the creation of almost 2.5 million new jobs over the life of the program.”
Louisiana developers in particular have taken advantage of the program, she notes, adding that some 782 projects in the state totaling more than $2 billion were made possible by $430 million in federal historic tax credits from 2002-2016.
“Those projects went on to generate some $444 million in total taxes while also creating more than 38,000 jobs—and that’s not even counting the payback from the state’s program, which has had its own considerable ripple effect,” she says. “ … It also brings new life to communities. In downtown Baton Rouge, the state and federal historic tax credits—individually and combined—have made possible some 58 projects over the past decade.”
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