Urge your House Representative to cosponsor Historic Tax Credit improvement legislation!
Reprinted from National Trust for Historic Preservation Newsletter | April 5, 2021
On April 1, Representatives Earl Blumenauer (D-OR) and Darin LaHood (R-IL) introduced a new version of the Historic Tax Credit Growth and Opportunity Act (HTC-GO) in the House of Representatives. The legislation includes temporary tax provisions to bring relief to projects impacted by the pandemic, and contains permanent provisions that add value to the federal Historic Tax Credit (HTC), improve access to the credit, and increase investment in smaller rehabilitation projects. The introduction of companion legislation in the Senate is expected soon.
The HTC is a proven tax incentive for both revitalizing historic community assets and supporting economic development and recovery. Please contact your House Representative and encourage them to cosponsor the HTC-GO.
What’s in the new version of the HTC-GO legislation?
Temporary Provisions
Developers and building owners are experiencing challenges in rehabbing historic buildings. The financial markets have slowed to a crawl, making it difficult for projects to access capital and stalling complex historic real estate developments. The increased volatility in the market and project risk is forcing banking institutions to decrease their loan frequency and the overall amount while tightening underwriting requirements. Increases in material and construction costs and an uncertain tenant market have further impacted potential developments. As a result, many projects have stalled or are no longer feasible.
The HTC-GO legislation temporarily increases the rehabilitation credit (IRC § 47) to address projects impacted by the pandemic.
This provision increases the HTC percentage from 20% to 30% for 2020 through 2024.
The credit percentage is phased down to 26% in 2025, 23% in 2026, and returns to 20% in 2027 and thereafter.
Permanent Provisions
The following provisions would make important changes to the HTC to encourage more building reuse and redevelopment nationwide and would be particularly impactful for small, midsize, and rural communities. These provisions would not only make the credit easier to use and more historic properties eligible, but it would also enhance the value of the HTC and make the credit easier to use to create affordable housing.
Increases the credit from 20% to 30% for projects with less than $2.5 million in qualified rehabilitation expenses, making it easier to complete small rehabilitation projects.
Lowers the substantial rehabilitation threshold, making more buildings eligible to use the HTC.
Eliminates the requirement that the value of the HTC must be deducted from a building’s basis (property’s value for tax purposes), increasing the value of the HTC and making it easier to pair with the federal Low-Income Housing Tax Credit.
Makes the HTC easier to use by nonprofits for community health centers, local arts centers, affordable housing, homeless services, and others by eliminating IRS restrictions that make it challenging to partner with developers.