Historic Preservation Tax Credit: A Stepping Stone to Preserve Heritage Buildings
Preserving the country’s architectural and cultural heritage is integral to America’s identity and history. With significant contributions to the history and culture of the United States, historic properties and buildings are an essential part of the country’s national identity and heritage. To prevent these historic properties from deteriorating and disappearing without leaving any mark in history and to encourage the preservation of our past, the federal government has initiated a Historic Preservation Tax Credit (HPTC) program.
The historic preservation tax credit program is a financial incentive program that aims to encourage private investment in the rehabilitation and preservation of historic buildings. In this article, we will delve into the history, objectives, eligibility, and benefits of the Historic Preservation Tax Credit and the impact it has on historic properties and buildings.
Origin and History of the Historic Preservation Tax Credit Program
The process of preserving historic buildings in America started in the early 20th century when groups of architects, preservationists, and history enthusiasts started to promote awareness about the need to save historic buildings from demolition. They urged the government to create incentives and regulations to encourage the preservation of historic buildings. However, it wasn’t until the 1960s that Congress started to create historic preservation programs.
The Historic Preservation Act of 1966 was signed into law by President Lyndon B. Johnson. Under this act, the National Historic Preservation Act (NHPA) was established, which resulted in the creation of the National Register of Historic Places (NRHP) in 1966. The NRHP is the official list of buildings, structures, districts, sites, and objects that are significant in terms of American history, architecture, and culture.
Then, in 1976, the Tax Reform Act was enacted, which included a provision for a federal tax credit for historic preservation. This was the beginning of the Historic Preservation Tax Credit (HPTC) program. The HPTC program went through several amendments and extensions over the years and was eventually made a permanent part of the federal tax code in 1986.
Eligibility for Historic Preservation Tax Credit Program
To be eligible for the HPTC program, a building must be listed on the National Register of Historic Places or be located within a historic district that has been designated by the state or the federal government as having historic significance. Buildings that are not formally listed on the National Register can still be eligible for the HPTC program if they meet certain criteria and are deemed eligible by the State Historic Preservation Office (SHPO).
To qualify for the credit, the rehabilitation work must be substantial and must meet certain requirements. The rehabilitation work must preserve the historic character of the building, and the project must be certified by the Secretary of the Interior. The amount of the credit depends on the type of building, the level of preservation required, and the amount invested in the rehabilitation.
Benefits of Historic Preservation Tax Credit Program
The Historic Preservation Tax Credit has numerous benefits, including economic, cultural, and environmental. The program has enabled the rehabilitation of millions of square feet of endangered buildings across the country and has resulted in more than $120 billion of private investment in historic preservation projects since 1976.
Economic Benefits:
The HPTC program encourages investment in historic properties, which in turn generates economic activity and creates jobs. The HPTC program also provides a tax credit to the owners of historic properties, which can offset the cost of rehabilitation. The reduced tax burden encourages private investment in historic properties, which spurs job creation, and creates economic activity.
Research from the National Trust for Historic Preservation has shown that the HPTC program creates nearly 100,000 jobs annually, generates more than $5 billion in income, and contributes over $12 billion in economic output. According to the National Park Service, projects that utilize the HPTC create an average of 18 jobs per $1 million of investment.
Cultural Benefits:
The HPTC program plays a crucial role in preserving the cultural heritage embodied in historic buildings. By rehabilitating historic buildings, the HPTC program ensures that the country’s heritage buildings are preserved for future generations to appreciate and enjoy. A building tells a story of the past, and when it’s preserved, it can continue to share that story with future generations.
The National Register of Historic Places allows buildings to be recognized for their significance to America’s history and culture. By giving buildings a platform to be recognized for their historical value, the National Register of Historic Places furthers preservation efforts, and in doing so, supports the HPTC program.
Environmental Benefits:
The HPTC program promotes sustainability and environmental stewardship by encouraging the reuse and rehabilitation of existing buildings. Instead of demolishing historic buildings, the HPTC program encourages rehabilitating them, which preserves embodied energy and reduces waste.
According to the National Trust for Historic Preservation, it takes 10 to 80 years for a new, energy-efficient building to overcome the energy consumed during construction. By rehabilitating existing buildings, the HPTC program encourages the reduction in embodied energy consumption, which is beneficial to the environment.
Impact of the Historic Preservation Tax Credit Program on Historic Buildings
HPTC has had a significant impact on historic buildings across America. The program has facilitated the preservation and reuse of numerous historic buildings that would otherwise have been demolished. Many historic buildings that were once endangered have now been saved, and are being used for commercial, residential, or public purposes.
For instance, the Empire State Building, an iconic New York City landmark, was rehabilitated in 2009 by using the HPTC program. The program helped fund the replacement of all the windows of the building’s tower, which reduced energy consumption and improved the overall environmental performance of the building.
Many other iconic buildings across America have also been rehabilitated under the HPTC program, including the Chicago Bertrand Goldberg’s Aqua building, the Rookery building in Chicago, and the Lake Shore and Michigan Southern Railways Depot in Cleveland.
The Takeaway
In conclusion, the Historic Preservation Tax Credit (HPTC) program is an essential tool for preserving America’s architectural and cultural heritage. The program’s aim is to encourage private investment in historic buildings to preserve the historic character of the building, create jobs, generate economic activity, and promote environmental stewardship.
By rehabilitating historic buildings, the HPTC program ensures that these buildings can continue to tell their unique stories, and their cultural significance can be preserved for future generations. It is crucial that we not only value but also support preservation efforts to ensure that we continue to appreciate and respect significant buildings across America.
The provision of state tax credits for the encouragement of historic preservation activities was first established as a practice in 1986 by the passage of the Tax Reform Act of 1986.
A substantial state tax credit can therefore be applied for by an individual who owns a building determined to be of substantial historical significance and is putting it to commercial use while improving its integrity in regards to the appreciation of said significance. If the applicable agency determines that a provision is being permissibly applied for, it will grant a state tax credit at a rate of 20%.
As with other aspects of the state tax credit programs administered under the United States, the Federal Historic Preservation Tax Credit Program is administered at a state level, usually by the Preservation Department of the state in question. Building owners who feel that their property entitles them to this kind of state tax credit can make an application to such an agency for consideration.
The preservation office specifically tasked with giving out state tax credits will not have the ability to recognize the building as historic based upon their own findings or evidence presented by the owner, to which end applicants must make sure that the historic significance of their property has already been established. For the purposes of state tax credit policy, several different sources exist for affirming the historic significance of a building.
The main guide available in the United States for this purpose is provided through the National Register of Historic Places, through which every historical building in the country can be found. Such a building may either be found in the text of the National Register, or it may be administered under a specific historical district listed as a whole in the Register.
Further considerations to be made for providing state tax credits through a finding of historical significance consist of the way in which the owner is treating the building. Agencies making this judgment will refer to the Department of the Interior, which provides oversight in the form of the Standards for Rehabilitation and the Guidelines for Restoring Historic Buildings. As an agency of that department, the National Park Service will examine the building in line for a state tax credit.
The need for the building owner to receive state tax credits will be established dependent on the budget for the project being greater than the value which the building can be shown to have for commercial purposes. As to the last point, a historic building eligible for state tax credits must also be in use for a profit-oriented activity.
The restoration of commercially-used buildings in the United States is often made financially feasible through the securing of state tax credits in this way, and building owners can include the costs to be offset as a result of such a provision in their overall budget. The government recommends, however, that owners secure state tax credit approval before beginning the restoration if it is a vital part of their strategy.
