Incentives Watch: State Tax Credits for Historic Rehabilitation Are History in the Making


In a recent musical retrospective piece, Drake exclaims "[w]e started from the bottom, now we're here!" He reminds us how important it is to stop and think about how far we have come. In a similar vein, the Alabama, Virginia and West Virginia state legislatures are reviewing their historic rehabilitation tax credits with an eye to the future. Like Drake looks over his life and accomplishments in his song, these states are reviewing the purposes, goals and results of these credit programs as a way to measure their effectiveness and how far they have come. 

Generally, historic rehabilitation tax credits provide taxpayers an incentive to purchase, restore and put historic properties to use. The goal of historic rehabilitation credits is often twofold: preserving history and creating jobs. Although the focus of these credits is usually on commercial property, historic rehabilitation credits are often times also available to individuals for personal residences. The federal government and about two-thirds of states offer a historic rehabilitation tax credit.

In Alabama, the credit may be in line for a resurrection this year, according to an article from AL.com. After May 15, 2016, applications for the state’s historic rehabilitation credit were no longer being accepted, signaling the end of the program. Although an extension of the credit was proposed in 2016, it did not pass the state’s legislature, according to the article.

However, a recent evaluation of the program conducted by the University of Tennessee has many expecting the credit to make a comeback, the article stated. The resulting report gave Alabama’s historic rehabilitation credit generally good reviews, but also highlighted areas were future iterations of the program can be improved. 

While the discussion of bringing back the credit is going on in Alabama, Virginia is instead focused on keeping its credit.

Recently, S.B. 1540 was unable to make it out of committee in the Virginia Senate. This bill would have placed several limitations and phase-out provisions on a handful of the state’s tax credits. Although the historic rehabilitation credit was one of multiple credits being effected by the proposed bill, it was the star of the show, according to the Richmond Times-Dispatch. More than a dozen different lobbyists came together to oppose the bill.

In West Virginia tax credits for historic rehabilitation are facing a different issue—their supporters want to raise the amounts available. Credit advocates recently hosted a forum to both promote the credit and urge the state’s lawmakers to increase it, according to The Fairmont News.

Currently the credit is equal to 10 percent of qualified rehabilitation expenditures. Proponents of raising the credit want to see that more than doubled, arguing that it will bring West Virginia more in line with surrounding states, according to the article.

Legislators in these states have a lot to consider when deciding on the future of their state’s respective historic rehabilitation tax credits. However, when looking to the future it is always helpful to know where you started.

*Continue the discussion on Bloomberg BNA's State Tax Group on LinkedIn: Should states continue to offer historic rehabilitation tax credits?

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