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Historic tax credit program lives on

SoVaNow.com / December 20, 2017


Federal historic tax credits — a financing tool used by developers to restore buildings such as The Colonial Center in South Hill and the Southern Virginia Higher Education Center in South Boston — avoided demise in the tax overhaul bill that was poised to pass Congress on Tuesday.

Tax bills in the House and Senate originally did away with or sharply curtailed the historic tax credit program, which first went into effect during the Carter administration. Expanded under President Ronald Reagan, the program has been essential to restoring dilapidated structures in rural communities. Developers are looking to tap the program to attract investment in the Planters Warehouse in Clarksville, the John Groom School in South Hill and The Randolph Hotel in South Boston, each of which is slated for major renovation.

On Tuesday, the House of Representatives passed the Republican-drafted tax bill along partisan lines, and the Senate was expected to follow suit either later in the day or sometime this week. The reconciled bill that emerged from joint House-Senate conference committee retained the FHTC program — which was slated for full elimination under the original House bill.

While historic tax credits would appear to live another day, the final bill does require investors to space out the tax benefits over five years, instead of being able to claim the full value of the credits in the first year. Developers specializing in historic preservation have argued that the provision will make the program much less attractive to investors, especially to corporations that have large tax liabilities to write off in quick fashion.

Elizabeth Tune, who oversees preservation tax incentives with the Virginia Department of Historic Resources, said more than 3,200 historic sites and buildings have been preserved in Virginia because of the federal tax credits, for a 10-year economic impact of $4 billion.

Tapping the program to restore abandoned but historically significant buildings, often located in downtown areas, has positive spinoff effects for local economies: “Anecdotally, we suddenly see a lot of projects with similar addresses” cropping up around completed projects, she explained.

Developers such as Dave McCormack of Waukeshaw Development, which is spearheading the Planters Warehouse restoration in Clarksville, and Hal Craddock, a Lynchburg architect who is working with the Town of South Boston to restore the Randolph Hotel, have argued that changing the program to stretch it over five years is likely to discourage potential investors in historic buidings. Smaller or more marginal projects may get sidelined with Congressional tax reform, they say.

The federal credits are being counted upon to generate roughly $2 million towards the renovation and expansion the John Randolph in South Boston into a modern, boutique downtown hotel, and a similar amount towards the cost of renovating and expanding the Planters Warehouse in Clarksville into 27 market rate apartments and a first floor commercial center.

The Historic Tax Credit (HTC) program provides a 20 percent tax credit for the revitalization of historical buildings that have fallen into disrepair. Paying out only after the project has finished, the program generates approximately $1.20 in tax revenue for every dollar spent, according to the National Trust for Historic Preservation.

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