Federal tax credits for historic building renovations face uncertain future

980 Views
A federal historic tax credit that made the renovation of the Brandon Mill in Greenville possible faces an uncertain future under a sweeping national tax reform bill. Photo by Will Crooks.

A Republican-led effort to overhaul the nation’s tax code has created uncertainty about the future of a federal incentive that has stimulated redevelopment of historic buildings in the Upstate and South Carolina.

But developers and other advocates of the Historic Tax Credit (HTC) said they hope Congress will keep the program alive in a bill GOP leaders promised to deliver to President Donald J. Trump by Christmas.

“Federal Historic Tax Credits are a valuable development tool that promotes economic development, job creation, and revitalization of cities,” said James Bakker, co-principal of Greenville-based BF Spartanburg, which has undertaken a $29 million renovation of downtown Spartanburg’s 93-year-old Montgomery Building. “The renovation of the Montgomery Building would not be possible without [HTC].”

The U.S. House of Representatives passed its version of the Tax Cuts and Jobs Act on Thursday, Nov. 16.

The bill eliminated the HTC, which was enacted in 1978 and made permanent under the Tax Reform Act of 1986.

Administered by the National Park Service and the Internal Revenue Service in conjunction with state historic preservation offices, HTC provides a 20 percent credit that can be claimed in one year by developers of certified buildings.

The Senate is currently working on its version of the bill. GOP leaders plan to hold a floor vote after members return from Thanksgiving break.

An amendment supported by South Carolina Republican Sens. Tim Scott and Lindsey Graham was added to the bill to keep the 20 percent incentive in place, but requires it to be claimed over a five-year period.

An earlier version of the Senate bill reduced the credit from 20 percent to 10 percent.

“As a South Carolinian, Sen. Scott understands the importance of the Historic Preservation Tax Credit and how it allows the state to preserve landmarks and sites unique to South Carolina,” said Michele Perez Exner, a spokeswoman for Scott. “He sees it as an effective way to display and reuse our state’s history.”

“Sen. Graham is very supportive of the Historic Preservation Tax Credit,” said Kevin Bishop, spokesman for Graham. “There have been numerous projects in Spartanburg and throughout South Carolina that would not have been possible without the credit.”

“Sen. Graham supports retaining the credit at 20 percent and will work with colleagues to restore the credit to benefit historic preservation in South Carolina,” Bishop added.

U.S Rep. Trey Gowdy, R-S.C., declined to comment on the matter.

According to the Historic Tax Credit Coalition and National Trust for Historic Preservation, HTC has attracted more than $131 billion in private investment since its inception.

As of the end of 2016, the program had been used to rehabilitate 42,293 historic buildings across the country and created more than 2.4 million jobs, the advocacy groups said.

A study by Rutgers University’s Edward J. Bloustein School of Planning and Public Policy commissioned by the National Park Service found that the program has a net benefit to the U.S. Treasury.

For the $25.2 billion in credits allocated during the lifespan of the program, it has produced $29.8 billion in federal tax revenue, according to study.

That means every $1 invested in the program has yielded a return of more than $1.18.

The tax credit is generating redevelopment of historic buildings in the Palmetto State.

According to the state’s Historic Preservation Office (SPHO), which is responsible for reviewing applications for income-producing projects seeking the 20 percent federal HTC and the 10 percent, or optional 25 percent state historic tax credit, applications boomed during the past year.

SPHO said in its 2016-2017 fiscal year report, tax credit applications for income-producing projects increased 36 percent, while applications for residential tax credits increased 7 percent.

The agency said it received 54 new tax credit project applications from 12 counties covering all seven congressional districts during the year.

Projects completed during the fiscal year amounted to $180 million in total costs and earned a combined $48.4 million in federal and state HTCs, SPHO said. About two-thirds of the credits earned came from federal HTCs.

Since the federal HTC was first introduced 41 years ago, SPHO estimates projects in South Carolina have earned $148 million.

Under the state HTC, SPHO estimates projects in South Carolina have earned about $24.2 million.

A few notable projects completed during the past fiscal year include the $28 million Palmetto Compress project in Columbia, the $15 million Gibbes Museum of Art in Charleston, and the $20.9 million Brandon Mill renovation in Greenville.

On Nov. 6, Scott and Dr. Ben Carson, secretary of Housing and Urban Development, visited Drayton Mills Lofts and Marketplace in Spartanburg.

To date, project officials said Drayton is the largest historic renovation in the state’s history. And it wouldn’t have happened without the federal HTC.

“When Sen. Scott and Secretary Carson came to Drayton, the intent was to talk to them about the historic tax credit,” said Tara Sherbert, managing principal of The Sherbert Group, owner of Drayton Mills Lofts and co-owner of Drayton Mills Marketplace.

“This is an extremely successful private-public partnership that is working nationwide… It has helped breathe new life into blighted buildings that no one would even touch. There are mill communities across South Carolina that could benefit from this.”

Sherbert and her team are leading the redevelopment effort of University Center at Knowledge Park in Rock Hill.

Pace Burt, a developer from Georgia who has successfully revamped a variety of buildings in the Upstate, including the West Village Lofts at Brandon Mill in Greenville, and Church Street Lofts and Mayfair Mills in Spartanburg, said HTCs are critical for the revitalization of downtowns.

The West Village Lofts as Brandon Mill and other renovations of historic buildings have brought economic growth to communities across South Carolina. Photo by Will Crooks.

“If we didn’t have tax credits, downtowns would just implode,” Burt said. “In large markets, it would painful, but in smaller communities, it would be devastating. It’s a game-changer.”

“Church Street Lofts never would’ve happened without it,” Burt added. “That was a really good indicator because it showed that downtown Spartanburg could handle more residential development. Since we completed it, more than 1,000 units have been proposed, planned, or developed during the past two years. Success breeds success.”

Bakker applauded Scott and Graham for supporting efforts to keep the program alive. He said the federal HTC is one of the few government programs that “is doing what it is supposed to do.” Without it, the character and authenticity of communities across the state will be damaged.

“The bottom line is this tax credit is very important for developers to justify the added cost of redeveloping historic buildings,” said John Montgomery, principal of Spartanburg-based Montgomery Development Group and co-owner of the Drayton Mills Marketplace in Spartanburg. “Without it, we would not have been able to make Drayton a reality. If it goes away, I’m not sure what the future will be for many of the state’s historic buildings.”

SHARE

Comments

Related Articles

Related Posts