2017 Tax Reform Bill Would Eliminate Federal Historic Tax Credit Program

One of the current tax code provisions that would be eliminated under the House-proposed tax reform bill is the popular federal Historic Tax Credit program (HTC). The HTC dates back to the Reagan Administration and currently provides a federal tax credit in the amount of 20 percent of qualified rehabilitation expenditures for any certified historic structure. Certified historic structures are those that are either listed in the National Register of Historic Places, or located in a registered historic district and certified as being of historic significance to the district. The tax credit, which can be taken over a five-year period following completion of the rehabilitation of the structure, has spurred a lot of “main street” revitalizations and funded everything from asbestos abatement to insulation replacement.

The obvious purpose of the program is to encourage redevelopment of historic and abandoned buildings. According to the National Trust for Historic Preservation, since the inception of the HTC program in 1981, it has been used to renovate more than 40,000 structures and channeled $117 billion into private investment to rehabilitate these structures.

The apparent purpose of eliminating the HTC program would be to increase tax revenue needed to offset tax cuts provided in the tax reform bill. Ironically, an economic impact report by the National Park Service and Rutgers University concluded that for every dollar of tax credits given under the program, $1.20 in construction activity, business taxes, income taxes and property taxes was created. The HTC program generated 86,000 jobs in 2015 alone. Id.

Loss of the HTC program would eliminate what has grown to be an important incentive for promoting public-private investment in revitalizing downtowns, neighborhoods across the country. In a further irony, President Trump used the HTC program to develop the Old Post Office in Washington, D.C. into the Trump International Hotel, which earned the developer $40 million in tax credits.

Minnesota also offers a 20 percent credit that largely follows the federal HTC, but must be taken against Minnesota state taxes. The Minnesota program would appear to be affected if the federal HTC goes away because in order to claim the Minnesota credit, the taxpayer must be allowed the federal credit.

While the tax reform bill is a long way from becoming law, provisions in the 400-page document will impact many programs in ways that are still coming to light, including the federal HTC program.