Historic Preservation Tax Credits

HISTORIC PRESERVATION TAX CREDITS

Most historic buildings will require substantial maintenance, renovation, or rehabilitation at some point in their lifecycle. There are numerous pathways to maintain the historic integrity of a building while obtaining funding from various sources. The State of Ohio and the federal government both have historic preservation tax credit programs which can be used in tandem to complete a historic preservation development project. Historic preservation tax credit programs have been tremendously successful in enabling historicallyappropriate rehabilitations and is a popular funding program for these types of projects.

What are tax credits?

A tax credit generally is a deduction of total tax liability for the developer of the project. If a developer is required to pay $1,000,000 in taxes but receives a $500,000 tax credit, then the developer only owes $500,000. Some tax credit recipients do not have enough tax liability to receive the full amount of the tax credit reduction. In this instance, many developers find partners who do have tax liability to take advantage of the funding program.

The Federal Historic Tax Credit

The federal government provides a 20% tax credit for eligible projects. To be eligible for the federal historic rehabilitation tax credit, the building must be listed on the NRHP either individually or as part of a district. The tax credit is applied to the total Qualified Rehabilitation Expenses of the project, which are referred to as QRE’s. QRE’s generally include construction costs to fully renovate the building, but also include various soft costs such as architectural, engineering, and legal fees. As long as the project meets the requirements for the tax credit program, the 20% federal credit will be awarded and is non-competitive.

The Ohio Historic Preservation Tax Credit

Ohio has a tax credit program as well that is complementary to the federal program. The Ohio Historic Preservation Tax Credit (OHPTC) offers 25% tax credit or a 35% tax credit for eligible rural properties. Funding programs change frequently so a developer interested in using historic tax credits should check the most recent funding guidelines to determine potential tax credit availability. The OHPTC is a competitive program and only a certain number of projects are awarded in each funding cycle. There are generally two funding cycles each year; one in the spring and one in the fall.

The OHPTC program also includes different funding pools including the small pool which is up to $250,000, the intermediate pool which is up to $2 Million, and the catalytic project pool which is up to $25 Million. Although some projects may not be funded in their first round, projects often will eventually receive funding in subsequent funding rounds, so persistence is important.

The state historic tax credit can be attained without the site being listed on the NRHP. If a site is listed on a local register or is within a local historic district it is eligible for the state historic tax credit so long as the municipality is a Certified Local Government (CLG). The CLG program is administered by the State of Ohio and can be attained through a relatively straightforward process.

Combining Tax Credit and other Funding Programs If a project is eligible for both the federal and state historic tax credit programs, these resources can be combined on the same project. For example, a project in a qualifying area could receive the 20% federal tax credit and the 35% state tax credit, which will pay for up to 55% of QRE’s. This can make a project financially viable and achievable within a relatively short period of time.

These funding programs can also be combined with other tax credits, grants, and various funding programs. Developers commonly refer to this as a capital stack, which includes all of the sources of funding needed to achieve the total amount of funds required to do the project. The capital stack may include personal equity of the developer, various loans and private investments, grants and loans from the local municipality, and numerous other sources.

It is not uncommon for other types of tax credit funding to be involved in a historic tax credit project. For example, Low Income Housing Tax Credits (LIHTC) and New Markets Tax Credits (NMTC) could be a part of a project capital stack in addition to historic tax credits. While the financing of the project becomes complicated, there are numerous examples in Ohio that utilize numerous streams of funding to deliver high-quality projects.

Another funding resource that is commonly used in historic projects is environmental cleanup funds. Many historic buildings have issues such as asbestos, lead, and other toxic materials that are the result of the former use of the building. These environmental cleanup funds are often used as part of the capital stack for historic projects, or are used prior to determining the potential preservation development project to simply clean up the site and remove the environmental concerns.

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Key Elements of Successful Projects Historic preservation tax credit projects have stringent guidelines that must be met and are administered by the SHPO. It is important to have a design team and or a historic preservation consultant on the project to assist the developer with maneuvering through the design review and compliance processes.

WE ARE REVISITING HPTC'S SINCE THE DOWNTOWN REVITALIZATION WORKSHOP WITH DESIGNING LOCAL. THEY REALLY MADE IT SEEM LIKE A NO BRAINER FOR PROJECTS THAT HAVE PROPERTIES EITHER REGISTERED AS LOCAL OR NATIONAL HISTORICAL SITES.

Mollie Fitzgerald

Executive Director of Athens Economic Development Council

CASE STUDY: PEOPLES BANK THEATRE

With a seating capacity of 950 seats, the Peoples Bank Theatre in Marietta, Ohio was built as one of the largest performing arts theaters in the region. The theater required 15 years of fundraising, but eventually raised enough money for a complete renovation that was completed in 2016. The theater is a major destination in Downtown Marietta, hosting performing arts events and showing movies.

Image: www.peoplesbanktheatre.com