NPS Report: HTC Contributed $8 Billion in Investments in 2021, the Most in Any Given Year in the History of the Incentive
In fiscal year (FY) 2021, the historic tax credit (HTC) generated 135,000 jobs and $8 billion in total rehabilitation investment, according to the National Parks Service (NPS) and Rutgers’ annual report, titled “Annual Report on the Economic Impact of the Federal Historic Tax Credits for Fiscal Year 2021.” The report details the impacts of the HTC in FY 2021 and since the tax incentive’s enactment in 1979.
The $8 billion in total rehabilitation investments is the most in a single year in the history of the incentive. The year with the next highest total rehabilitation investment was 2018 with $7.7 billion, then 2020 with $7.3 billion in total rehabilitation investment.
About the Historic Tax Credit
The HTC provides a 20% federal tax credit for the substantial rehabilitation of certified historical buildings if the structure is used for business or income-producing purposes while maintaining the original character of the building. Administered by the NPS with the help of the state historic preservation offices, the HTC helps to revitalize historic communities across the country and has done so while providing many positive economic impacts.
While the historic tax incentive was first adopted in 1976, it did not become a tax credit until 1979, as it functioned as an accelerated depreciation from 1976 to 1978. The 20% tax credit can be claimed ratably over five years as long as the certified historic building undergoes a substantial rehabilitation that keeps elements of its original character as defined by the Secretary’s standards and the building generates income.
Furthermore, in addition to the federal HTC many states also have state HTC programs that are tracked by Novogradac. As under the federal HTC incentive, owners of historic buildings must complete a certified or qualified rehabilitation of the building to receive the state credits.
FY 2021 Highlights
In FY 2021, 1,063 certified HTC projects were completed and the NPS approved another 1,098 during that timeframe.
The HTC has had numerous positive economic benefits both in 2021 and throughout the incentive’s history, as seen in the chart below.
Based on data provided by the NPS, HTC-assisted projects varied by location in FY 2021:
- 44% of the certified rehabilitation projects were located in low- and moderate- income census tracts,
- 78% of projects were located in economically distressed areas, and
- 30% of projects were located in communities of less than 50,000 people.
These findings are important considerations for Community Reinvestment Act (CRA) purposes. The federal banking regulators are currently considering CRA regulatory reform, aiming to release final regulations by the end of the year. However, final regulations are more likely to be published in the first quarter of 2023.
A common misconception about the federal HTC is that it only supports large projects and projects in large cities. In fact, almost half (47%) of all projects in FY 2021 were under $1 million and 18% were under $250,000.
HTC-Related Activity by Sector
In FY 2021, the HTC had the largest positive impact on the construction sector, as the incentive helped to create 47,687 jobs, generated about $2.08 billion in income and contributed about $2.5 billion to the GDP. Manufacturing and services were the next two most impacted sectors while agriculture was the least impacted sector.
FY 1978-2021 Total Figures
The HTC has had significant economic impacts since its inception. The NPS has certified more than 47,000 HTC projects, while the HTC has leveraged $199.1 billion in total rehabilitation investment and generated more than 3 million jobs. Its total positive economic impacts for 1978-2021 are highlighted below.
Federal HTC Impacts by State in FY 2021
The impacts of the HTC in FY 2021 varied by state, as some states saw high levels of HTC-assisted investment while others did not see any. The report provided HTC investment data for the 50 states and Washington, D.C.
Next Steps for Legislation
Though the version of the Build Back Better Act (BBBA) approved by the Ways and Means Committee in September 2021 included all of the Historic Tax Credit Growth and Opportunity (HTC-GO, H.R. 2294, S. 2266) Act proposals and the Rehabilitation of Historic Schools Act (H.R. 4086), the version of the reconciliation bill eventually enacted by Congress in August 2022, the Inflation Reduction Act, did not include HTC-GO provisions. More details about the provisions from the Ways and Means Committee-approved version of BBBA can be found in this Notes from Novogradac post.
Before adjourning for the midterm election last week, Congress passed a temporary stop gap funding bill, a continuing resolution (CR) to fund the federal government until Dec. 16. When Congress returns after the election in a “lame duck” session to continue to negotiate FY 2023 spending after the CR expires Dec. 16, Congress will likely consider a FY 2023 omnibus spending bill including all 12 annual spending bills funding the federal government. Such a bill could serve as a legislative vehicle for a tax bill, as both Republicans and Democrats have priorities among the expiring tax provisions. Such a tax extenders bill could serve as a vehicle for HTC-GO provisions. We encourage HTC stakeholders to reach out to Congress during October to invite them to their HTC properties and advocate for HTC-GO provisions.
To stay up to date on the latest HTC industry trends, there’s still time to register for the Novogradac 2022 Historic Tax Credit Conference on Oct. 6-7. You can attend live in St. Louis or online. If you’re looking for insights into specific project-related inquiries, contact a Novogradac professional for help.