The exterior of the Quackenbush Building at 30 Third St., in downtown Troy, home to the Tech Valley Center of Gravity. The building’s renovations were paid for in part through the Historic Tax Credit. Photo by Tom Tounge
NEW YORK — Since 1986, the federal government has leveraged more than $84 billion to preserve 42,293 historic properties nationwide, through a Federal Historic Preservation Tax Incentive program administered by the National Parks Service (NPS) in partnership with the Internal Revenue Service and State Historic Preservation Offices.
On Sunday, Nov. 19, U.S. Rep. Paul Tonko spoke in Troy — alongside state Assemblyman John McDonald (D-108), Troy Mayor Patrick Madden and Tech Valley Center of Gravity Executive Director Holly Cargill-Cramer — against a GOP-authored tax reform bill that passed the U.S. House of Representatives on Thursday, Nov. 16, which would eliminate the Federal Historic Tax Credit (HTC) program altogether.
The program gives a 20 percent tax credit for the rehabilitation of historic, income-producing buildings and a 10 percent credit for non-historic buildings built before 1936. According to data from NPS, the U.S. government invested almost $680 million to rehabilitate 491 properties in New York state between 2002 and 2016, generating more than $4 billion in new state taxes. During the same time, the HTC has created more than 52,000 jobs statewide, 28,671 of which are permanent positions.
Characterizing the credit as an urban recovery and tax base extension program that has incentivized tens of millions of dollars of investment in local property revitalization, Tonko said, “If we don’t do it, it means people will pay more in property taxes here at home.”
According to Tonko, the federal government has invested around $140 million in his district, which includes all of Albany and Schenectady counties, and portions of Montgomery, Rensselaer, and Saratoga counties, through the HTC since 2002. The total economic impact of those projects, he said, is $702,612,047 district-wide.
Since 2002, more than 150 properties have been rehabilitated around the Capital District. The Tech Valley Center of Gravity on Third Street in Troy, where the press conference was held, utilized nearly half a million dollars in federal tax credits for the $3 million rehabilitation of the boarded-up former Quackenbush building into a tech business incubator three years ago. The program helped to redevelop St. John’s Academy into the Albany Barn artist loft in Arbor Hill, as well as the Arcade Building downtown on Broadway, where Albany Center Gallery and Stacks Coffee Shop now reside.
McDonald mentioned Tilley Lofts in Watervliet and Harmony Mills in Cohoes, a 400-unit apartment development that he said generated more than $250,000 in tax revenues, among other projects that have used the HTC to spur redevelopment and create local tax revenue. Noting that $3 billion in investment has been made in commercial properties in New York since the state enhanced the credit in 2013, McDonald said he believes these activities are spurred by tools such as the federal credit.
According to the National Trust for Historic Preservation, the HTC is by far the federal government’s most significant financial investment in historic preservation, leveraging $131 billion in private investment and creating more than 2.4 million jobs since it was permanently written into the tax code.
According to a study commissioned by NPS, $25.2 billion in tax credits have generated more than $29.8 billion in federal tax revenue associated with historic rehabilitation projects over the life of the program — meaning the program earns the federal government more than it costs. Even so, approximately 75 percent of the economic benefits associated with HTC-supported projects tend to remain in state and local economies.
Currently, developers restoring buildings listed on the National Register of Historic Places or certified by NPS can apply for the 20 percent income tax credits to help pay for rehabilitation expenses. To ensure the program’s usefulness as an economic development tool, only “income-producing” projects are eligible, defined by NPS as spaces that serve “commercial, industrial, agricultural or rental residential purposes.” (A sister tax break exists for rehabilitating buildings without certification for 10 percent of the cost, as long as the structures were built before 1936.)
Noting that there more owner-occupied historical structures in Bethlehem than those that might be repurposed as income-producing properties, Bethlehem Supervisor John Clarkson suggested that the direct impact of eliminating the credit would be felt most in larger cities “as a practical matter.” But, he said, “I agree that the elimination of this credit is a horrible idea that would have a devastating impact on the region, which will ripple through the economy and ultimately affect Bethlehem.”
There is bipartisan support for several reforms included in a Historic Tax Credit Improvement Act that would direct more investment to older “Main Street” corridors in smaller rural and inner-city communities (H.R. 1158 and S. 425). The bill, sponsored by 39 Democrats and 42 Republicans in the House, creates a 30 percent credit, up to $750,000, for smaller projects to make sure rural and non-urban areas have the same ability to take advantage of the HTC. The bill also allows the credits in these small transactions to be transferred with lower transaction costs, as a tax certificate, making it easier for small project owners to bring outside investment into smaller transactions.
“Tax reform aimed at growing the economy should enhance, not diminish, the HTC,” stated the National Trust for Historic Preservation. “A tax reform package that focuses primarily on lowering income tax rates will be insufficient to encourage investment in historic buildings. Historic rehabilitation projects frequently have higher costs, greater design challenges, and weaker market locations — all of which results in lender and investor bias against investments in rehabilitation.”
In addition to opposing the elimination of the HTC, Tonko has taken issue with a number of provisions in the GOP tax reform bill that passed the House, including: the elimination of education deductions; the elimination of the state and local tax deduction (which will disproportionately affect high-tax states like New York); elimination of a deduction for preventative or chronic medical costs; and elimination of a Work Opportunity Tax Credit for U.S. veterans.
“The House and Senate bills take different approaches to cutting away middle class benefits,” noted Tonko’s Communications Director Matt Sonneborn, referencing a Nov. 26 report by the Congressional Budget Office. “The Senate bill includes a partial healthcare repeal — CBO estimates current Senate plan would drive healthcare premiums 10 percent higher “in most years” of the next decade and lead to 13 million fewer Americans with health insurance by 2027 — and sunsets nearly all middle class tax breaks after 5-10 years. The House bill eliminates nearly every middle class and business-friendly deduction.”
According to that report, he said, Americans earning less than $75,000 a year will be worse off by 2027 under the proposed Senate tax reform legislation.
GOP supporters of the legislation argue that reports by CBO and the Joint Committee on Taxation, another nonpartisan tax policy group, which show that the tax reform bills would ultimately hurt lower- and middle-income families, are misleading. They continue to maintain that the reforms are meant to benefit middle-class earners.