HTC-GO Reintroduced in the Senate, Advocacy Efforts Stress Importance of Historic Preservation

Published by Peter Lawrence on Wednesday, March 8, 2023 - 12:00am

Historic preservation has been a topic of discussion in recent weeks on Capitol Hill and among preservation advocates.

Sens. Ben Cardin, D-Maryland; Bill Cassidy, R-Louisiana; Maria Cantwell, D-Washington; and Susan Collins, R-Maine, reintroduced March 2 the Historic Tax Credit and Growth Opportunity Act (HTC-GO) of 2023 in the Senate. Rep. Darin LaHood, R-Illinois, and Rep. Earl Blumenauer, D-Oregon, are expected to reintroduce the HTC-GO Act in the House. HTC-GO was previously introduced in 2021, when the bill had 154 House cosponsors (62 Democrats and 43 Republicans, including 25 cosponsors on the Ways and Means Committee) and 16 in the Senate (11 Democrats and 5 Republicans, including five cosponsors on the Finance Committee).

This week (March 6-8) marks Preservation Lobby Week, which is hosted by Preservation Action along with the National Conference of State Historic Preservation Officers and brings historic preservation advocates from across the country to lobby for preservation funding and the HTC. Furthermore, the National Historic Trust for Preservation (National Trust) held a webinar Feb. 23 focused on historic preservation advocacy in the 118th Congress. Finally, several states have introduced legislation to enhance and/or expand their state HTC initiatives. These states include New York, Minnesota, Utah and Arizona. Given the HTC’s impact on communities and historic preservation, advocates want to ensure HTC legislation on the state and federal levels continue to receive support.

An Overview of the HTC-GO Act

HTC-GO has been introduced in the 116th, 117th and now the 118th Congress. In the 117th Congress, the bill included temporary and permanent enhancements to the HTC with the goal of assisting with pandemic-related economic losses in the 117th Congress, the House Ways and Means Committee passed a version of the Build Back Better Act, which included several HTC proposals. These provisions included a temporary increase in the HTC percentage. These provisions were not included in the final bill. In the 116th Congress, the Moving Forward Act, an historic infrastructure bill, was introduced and passed by the House in July of 2020. Provisions of the HTC-GO Act of 2019 were included in this legislation, specifically temporary and permanent enhancements to the HTC.

The 2023 bill would create a 30% HTC for projects that cost less than $3.75 million, while retaining the 20% credit for other projects. The bill eliminates the basis-adjustment requirement, which would increase investor interest in the HTC, likely leading to higher equity pricing, and brings parity with the low-income housing tax credit. Further, the bill decreases the substantial rehabilitation test threshold to 50% from 100% of qualified rehabilitation expenses, increasing eligibility of historic properties. Aside from updating the dates, the bill is identical to the bill introduced in the last Congress.

Background on the HTC

The historic tax credit (HTC) is a key incentive for both economic and community development, while simultaneously preserving the nation’s historic structures. Since the incentive’s inception in 1978, 40,000 buildings have been rehabilitated and the credit has leveraged $200 billion in investment. Furthermore, 192,314 low- and moderate-income housing units have been created or rehabilitated because of the HTC. Between fiscal year (FY) 1977 and FY 2022, 308,039 homes have been rehabilitated and 343,403 new homes have been created. In FY 2021 alone, historic rehabilitation expenditures resulted in 135,000 jobs and $5.6 billion in income.

Data from the National Park Service’s Annual Report on the Economic Impact of the Federal Historic Tax Credits for Fiscal Year 2021 supports the reintroduction of HTC-GO.  In FY 2021, the HTC generated 135,000 jobs and $8 billion in total rehabilitation investment, the largest investment in the history of the HTC. Additionally, 1,063 certified HTC projects were completed, and additional 1,098 were approved. Data is available for the impact of historic rehabilitation expenditures, which resulted in $15 billion in output, $7.7 billion in gross domestic product, $2.1 billion in total taxes, $1.3 billion in federal taxes, $300 million in state taxes and $400 million in local taxes. This data shows that the HTC is an important tool providing not only funds for development and rehabilitation, but also economic benefits in the form of jobs and tax revenue.

Webinar Assesses Climate for Historic Preservation in the 118th Congress

The National Trust held a webinar Feb. 23 to discuss historic preservation advocacy in the 118th Congress. Speakers included Shaw Sprague, vice president of government relations at the National Trust for Historic Preservation; Michael Phillips, policy director at the National Trust Community Investment Corp; Pat Bowman, senior director of public lands policy at the National Trust; Laura Cohen, associate director of government relations at the National Trust; Christopher Cody, associate general counsel at the National Trust, and Sara Bronin, chair of the Advisory Council on Historic Preservation (ACHP).

Sprague began the webinar with comments on the atmosphere in Congress but assured listeners that historic preservation enjoys bipartisan support. Phillips provided current challenges to the HTC, one of which is equity pricing. Equity price per tax credit dollar has dropped by 25% from 2010 to present day. According to Phillips, the 2014 and 2016 Internal Revenue Service guidance Internal Revenue Code section 50(d) income contributed to this loss of value. Other contributing factors included the spreading of the credit over five years due to changes implemented by the Tax Cuts and Jobs Act, the pandemic, increasing costs of materials and rising interest rates.

Bowman discussed the makeup of the House Natural Resource Committee, a key committee for historic preservation with oversight of the National Park Services and preservation funding. Two champions of the HTC–Rep. Grace Napolitano, D-California, and Rep. Teresa Leger Fernandez, D-New Mexico–will be members of the committee. Policy priorities include appropriations and reauthorization for the Historic Preservation Fund (HPF). The HPF distributes matching grants to state and tribal historic preservation offices, and these grants are used to support the preservation of state historic sites. Grants are typically used for surveys, training and grants to local jurisdictions. Cohen provided an overview of the HPF and reported that funding met or exceeded the $150 million minimum authorization amount in FY 2022 and FY 2023. FY 2023 saw funding at $204.5 million, and when compared with the FY 2020 amount of $118.6 million, there has been a substantial increase. Congressional champions of the HPF include Reps. Leger Fernandez, Blumenauer and Mike Turner, R-Ohio.

Cody mentioned the National Historic Preservation Act (NHPA), which could be implicated in an attempt to reform permitting regulations for the National Environmental Policy Act (NEPA). The NHPA was passed in 1966 and began efforts to preserve historic structures by creating the National Register of Historic Places. Bronin closed the webinar, mentioning AHCP’s policy priorities for the 118th Congress. The AHCP wishes for a reauthorization and permanence of the HPF, enhancements to tax incentives for preservation, and support for the preservation of historic properties, especially in the creation of affordable housing.

State HTC News

Recent legislation in several states is promoting expansion and enhancement of the state HTCs. In New York, introduced legislation would expand the state HTC by 10 years and include an exception to the maximum allocation amount for “white elephant” projects. A “white elephant” project refers to projects that have at least $50 million in qualified rehabilitation expenditures (QREs) and have been vacant for at least 10 of the 15 past years.

In Minnesota, recently introduced legislation would reestablish their state HTC program. The tax credit expired in June 2021, and the new legislation allows taxpayers to claim the entire amount in the year the project is placed in service.

In Utah, legislation would expand and enhance the current state HTC to include commercial properties. The credit is currently only available to residential properties. This legislation would allow the transfer of HTC payments between taxpayers.

In Arizona, legislation would create a credit worth 20% of the QREs for a historic structure. This bill includes affordable housing. The credit is worth 25% of the QREs if the property was an affordable housing structure. The bill also establishes an annual state cap of $30 million.

In Maryland, recent legislation would increase annual caps for the HTC set asides, as well as increase bonus credits for rehabilitations completed in opportunity zones (OZs). In Maryland, enhancements to the OZ credit are determined by levels, either Level 1 or Level 2. The credit for a Level 1 OZ project would increase from 5%-10% and properties in a Level 2 OZ would increase from 7.5% to 12.5%. Furthermore, the statewide annual cap would increase from $10.5 million annually for Level 1 OZ projects and to $11 million annually for Level 2 OZ projects.

What Comes Next

The continued reintroduction of HTC-GO shows support for historic preservation and the HTC.  The introduction of numerous state HTC bills is also a positive sign for the future of both state and federal HTCs. Potential legislative vehicles for HTC-GO proposals include a year-end tax bill or a tax extender bill.

The United States is fast approaching the debt limit and a decision on how to proceed is needed from Congress. The federal government is now funded through the end of the fiscal year, which is Sept. 30, 2023, so Congress may choose to temporarily suspend the debt limit to find a more permanent solution. Furthermore, President Biden is expected to release his FY 2024 budget request on March 9, which will detail the administration’s priorities. Due to the debt limit and the federal budget taking priority, Congress may not have the ability to address topics like historic preservation immediately. However, advocates can ensure that historic preservation remains in the forefront of the Congressional agenda by encouraging their member to cosponsor HTC-GO.