Preservationists say tax incentive protects historic buildings


Photo and data courtesy of Renee Kuhlman from the National Trust for Historic Preservation (Craig Johnson/DD)

National threats to the Historic Tax Credit has local activists worried about its future as an economic development tool in downtown Phoenix.

According to a document provided by Arizona Preservation Foundation Board of Directors President Jim McPherson and Renee Kuhlman from the National Trust for Historic Preservation, the Historic Tax Credit (HTC) encourages private investment in the rehabilitation of historic buildings.

“The credit attracts private capital–$120.8 billion since inception–to revitalize often abandoned and underperforming properties that have a financing gap between what banks will lend and the total development cost of the transaction,” the document said.

The HTC is administered by the National Park Service and the Internal Revenue Service in conjunction with the State Historic Preservation Offices, according to the sheet. A 20 percent credit applies to certified historic structures.

In order to be eligible for the tax credit, a building has to be at least 50 years old and should have some historical significance. A building must be in the process of getting historic preservation status in order to be eligible.

Donna Reiner, secretary-treasurer of the Arizona Preservation Foundation in Phoenix, said tax credits are most importantly used as a stop gap for the funding projects have already been able to get.

“It’s kind of a two-fold, so it’s not only the immediate economic award, but it’s the long-term recognition that this is a historic property,” Reiner said.

Reiner said the tax credits are used for helping with the restoration of buildings. The document noted particular difficulties historic properties have such as higher costs, greater design challenges and weaker market locations.

“They can’t necessarily use it for everything they think they might be able to use it for. I don’t think there’s always a good understanding of what those historic tax credits are and can be used for,” Reiner said. “That’s part of, I think, the preservation community’s responsibility is to explain what they are.”

Reiner said developers might then realize that there’s some other things they might do to be able to help their project along.

“Sometimes it depends on what the building’s original use was and then what the proposed new use is,” Reiner said. “There are lots of little angles in there to consider whether tax credits are your best avenue to help your project.”

Reiner said if developers understand what tax credits are used for, then they could be used to further the cause of historic preservation.

According to Jim McPherson, president of the Arizona Preservation Foundation, the tax credits have done that work throughout the country and in Arizona.

“We would love to see it continued as a tool for downtown reuse and preservation development,” McPherson said. “We will continue to promote it to the development community that they can use to help revitalize their communities.”

Downtown Phoenix Projects:

Several downtown projects have received tax credits in fiscal years 2002-2015.

“I think one of the most recent ones, and it’s really spectacular considering the age of the building and how long it was vacant, is the Hilton Garden Inn,” said Reiner.

According to Roger Brevoort, the historic preservation consultant for the Hilton Garden Inn, the building received the tax credit in August of 2016.

Brevoort said the Hilton Garden Inn used the tax credits to replicate the detail in the lobby.

Reiner said some buildings in the warehouse district are most likely eligible for the tax credit but haven’t applied.

What’s Next?

President and CEO of the National Trust for Historic Preservation Stephanie K. Meeks addressed the tax credit’s future in a recent statement. The statement said that in late January, House and Senate Republicans were at a policy retreat in Philadelphia discussing their “Better Way” tax reform blueprint, which generally proposes to eliminate many tax credits and deductions, which would include the Historic Tax Credit.

Reiner said that she hopes future tax credits could help save some of the downtown Phoenix buildings where developers are more interested in the property instead of the buildings.

Reiner said there is concern that the federal government will drop the Historic Tax Credit, but according to Brevoort, no one knows what will happen at this point.

“It seems to be safe vis-à-vis what we hear from people who have been involved in congress before,” said Brevoort. “Those of us who are involved in the field are all assuming that it’s safe, but given the current political climate, no one really has any certainty at the moment. Most of us are confident it will survive.”

Brevoort said it is logical that any credit that creates jobs, creates economic incentive and creates investment is a logical thing to keep but that it is hard to say how current projects applying for the tax credit would be affected if the federal government did drop it.

“It would depend on how the legislation would come down. There’s no definitive answer to that at the moment,” Brevoort said. “Most projects are moving forward anyway assuming the credits will survive.”

According to Reiner, if the tax credit were dropped by the federal government, a lot of downtown and national projects would be affected.

“Economically it would be devastating, I think, across the country, because when you start looking, it never funds the whole project, so it’s just a portion of it,” Reiner said. “What you would be losing is buildings getting built, reused, all the construction jobs that would be associated with doing whatever they have to do, and then any of the jobs that would be related to the reuse of the building,” she said.

A state historic tax credit is also currently in the works, according to Brevoort.

“It would be an additional credit allocated at the state level,” Brevoort said. “If the two credits were combined it would have a huge impact on the credits as an investment incentive tool.”

Brevoort said the state historic tax credit is a brand-new effort that will most likely be debated in the legislature for the next two years.

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