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State Group Warns Against Elimination of Federal Historic Tax Credit

Preservation Kentucky is upset about the elimination of the federal historic tax credit in the Tax Cuts and Jobs Act bill released last week. The new plan from Republicans in Washington aims to be the largest tax reform effort in two decades.

“The Federal Historic Tax Credit is a critical economic development tool with a successful track record.  Eliminating it is terribly misguided,” said Betsy Hatfield, executive director of Preservation Kentucky, the statewide nonprofit that advocates for preservation-friendly legislation on the state and national level.

“If left out of Congress’s tax reform package, the impact on Kentucky would be devastating,” said Hatfield, “eliminating thousands of jobs and costing Kentuckians millions in lost revenue from payroll, property and sales tax.  It would kill an economic incentive that has encouraged historic building owners and real estate developers to rehabilitate buildings that draw businesses, residents and tourists to towns throughout our state and are the centerpiece of most communities.”

The tax credits have been viewed as critical for the revitalization of urban centers around the country. The Northern Kentucky Chamber of Commerce has called for the expansion of the tax credit at the state level for the past two years.

Between 2001 and 2016, the federal tax credit in Kentucky leveraged private investment for 345 projects, created 9,583 construction jobs (5,048 permanent jobs), and generated a combined total of $27,703,700 in state and local taxes, Preservation Kentucky stated. Nationally, the program has generated nearly $132 billion in private investment involving nearly 43,000 projects.

“The Federal Historic Tax Credit costs taxpayers nothing,” said Hatfield. “The $25.2 billion in tax credits used generates more than $29.8 billion in federal tax revenue, returning more four billion dollars to the Treasury than it costs.”

The Federal HTC is administered by the National Park Service and allows participants to take up to 20 percent of eligible improvement expenses off their federal taxes.  The credit can go to building owners or project developers to offset their tax liability, or to other investors of the project who then claim the tax credit on their federal tax return. Credits are paid out in installments over a five-year period after the project is completed, and no federal dollars are at risk if plans are scrapped. A 2015 study by Rutgers University found that the Federal HTC generated $1.20 in construction activity and tax revenue for every dollar of credit issued by the federal government, in addition to the estimated 86,000 jobs it created that same year.  

The Federal HTC also reinvests in what might otherwise be blighted communities where redevelopment is challenging, fueling the economic engine that is revitalizing downtowns, neighborhoods and Main Streets in communities large and small throughout the Commonwealth and nation, Hartfield said. Projects throughout Kentucky would not have happened without the Federal HTC and current projects could be threatened, even terminated – especially those not in a central business district – and some buildings could even be demolished, she said.

“The historic tax credit is a multiplier,” said Hatfield. “It’s a catalyst that spurs redevelopment in neighborhoods, downtowns and Main Streets that may otherwise stay blighted.  All 120 Kentucky counties can benefit from the tax credit.”

Former President Ronald Reagan, whose administration made the Federal HTC a permanent part of the tax code, described it as “not only a matter of respect for our beauty and history, but good economic sense.”

“Eliminating a quantifiably proven program founded on conservative economic principles makes absolutely no sense,” said Hatfield.  “If our Congressmen and Senators cares about Kentucky jobs and Kentucky’s economy, then they’ll see that the Federal Historic Credit is included in tax reform.”

Hatfield said Preservation Kentucky is asking Kentuckians to call their Congressman and Senators and tell them to keep this vital economic development tool in tax reform.

-Staff report