In 1986 when the Federal Historic Tax Credit was included in his administration’s pro-growth tax code, President Ronald Reagan described the program as “not only a matter of respect for our beauty and history, but good economic sense.”
The incentives are for private investment in historic buildings.
In today’s fervor for what promises to be the biggest tax reform since 1986, the House Ways and Means committee axed the Federal Historic Tax Credit in its first draft tax bill, and the Senate could very well do the same.
It is astonishing that with the stated goal of economic growth Congress would eliminate a proven incentive that creates jobs, stimulates local economies, revitalizes communities, and creates net positive revenue for the federal treasury. It should be one of the top credits retained in proposed tax reform legislation.
The Kentucky Heritage Council administers the Federal Historic Tax Credit program in partnership with the National Park Service.
A tax credit lowers tax owed. It differs from an income tax deduction which lowers the amount of income subject to taxation. A tax credit is a dollar-for-dollar tax liability reduction: every dollar of tax credit reduces the amount of income tax owed by one dollar.
Few programs have had the far-reaching and sustainable financial, historic and cultural return on investment that the federal HTC delivers. The facts speak for themselves. From 2002 to 2016:
▪ More than $131.8 billion in private investment has been leveraged because of $25.2 billion in Federal Historic Tax Credits. In Kentucky, $558 million in private investment was leveraged with $92.7 million in federal tax credits.
▪ Nationwide, more than 2.4 million jobs have been created by the Federal Historic Tax Credit. In Kentucky, 4,535 construction jobs and 5,048 permanent jobs were created.
$25.2 billion in allocated Federal HTC have returned an estimated $29.8 billion to the federal treasury. In Kentucky, the Federal HTC has generated a combined total of $27.7 million in state and local taxes.
▪ On average, more than $5 of private investment is leveraged by every $1 of Federal HTC funding.
Nationwide, 42,293 historic buildings have been rehabilitated and preserved with the Federal HTC. In Kentucky, 345 historic rehabilitation projects were completed with the HTC. Historic tax credits are a powerful tool for downtown revitalization,saving historic buildings, often through adaptive reuse.
This preserves the architectural integrity of the buildings, while making them work better for current and future needs of businesses or residents — often making them more energy-efficient.
Preservation efforts increase the taxable value of empty, decaying buildings many times over.
In blighted areas the Federal HTC is a catalyst for investment. It works in large urban areas such as Louisville, Lexington and Northern Kentucky, in smaller cities like Frankfort, Paducah and Pikeville, and in rural communities such as Jenkins, Bloomfield and Buffalo.
Instead of abolishing the Federal Historic Tax Credit Program, Congress should explore ways to expand it and make it more feasible for smaller projects.
Kentucky ranks fourth among states in terms of the most sites on the National Register of Historic Places and consistently places in the top 10 states with projects utilizing the Federal HTC.
More than 40 years of federal HTC projects have made far-reaching impacts on Kentucky’s tourism, bourbon, agricultural, real estate, building trades and retail industries.
Without the tax credit, many Kentucky historic building projects would never have started. Still more will not be completed if the tax credit is eliminated.
Leaving the Federal Historic Tax Credit out of the tax reform package will be devastating — costing Kentuckians millions in lost revenue from payroll, property and sales tax, and damaging industries and communities where our heritage and historic buildings play major roles.
Betsy Hatfield is executive director of Preservation Kentucky, the statewide nonprofit whose advocating for preservation-friendly legislation on local, state and national levels.