Supporters of U.S. tax credits for historic preservation work are fighting to keep the program as Congress looks for cuts in a rewrite of the IRS code.
The Historic Tax Credit is used to rehabilitate historic buildings and promote economic revitalization in rural and urban areas. Investors are eligible for a 20 percent tax credit for their expenses used in preserving historic properties or 10 percent for non-historic buildings built before 1936.
With tax writers saying they may throw out all the current breaks and craft a new code from scratch, long-standing programs may be in jeopardy. Preservation advocates are promoting economic development initiatives as a boon to jobs, Bloomberg BNA reported. The credit probably affects the financing structure of historic preservation projects as taxpayers tailor their plans to fit its requirements, said Clint Stretch, senior tax policy counsel at Tax Analysts.
“All of the special tax credits have to be at risk if and when Congress addresses a fundamental tax reform plan,” Stretch, a former legislative counsel to the congressional Joint Committee on Taxation, said in an e-mail. “If the point of tax reform is to get government out of economic decision-making and to broaden the base as much as possible so that rates can be as low as possible, then any tax credit that continues in existence would be inherently at odds with the entire effort.”
According to the Joint Committee on Taxation, the credit for rehabilitating historic structures will cost the government $3.2 billion over five years.
Members of the National Trust for Historic Preservation are seeking to use a recent report on the costs and benefits of the federal historic tax credit as a defense against congressional efforts to eliminate the tax credit as part of a tax rewrite.
The program has been a net benefit to federal funds, bringing in $25.9 billion in tax receipts versus $20.5 billion in allocated tax credits since 1978, according to a July 31 study by the National Park Service and Rutgers University’s Edward J. Bloustein School of Planning and Public Policy.
More recently, the program has also served as a bulwark against further economic decline for the construction and manufacturing industries coming out of the housing crisis and economic recession, the study said. In fiscal year 2012, investments tied to these credits generated 58,000 jobs and were responsible for creating $3.4 billion in GDP, the report said.
“Targeted to income-producing buildings, the HTC program is the largest and most effective Federal program specifically supporting historic preservation,” the report said.
The credit program also helps raise private investment, often in conjunction with the low income housing tax credit. The study’s authors found that the $20.5 billion cost of the credit to federal coffers, in inflation-adjusted 2012 dollars, encouraged more than five times that amount of private investment, or $106.1 billion, for historic rehabilitation.
“Historic tax credit projects protect the places that make a community special, while fueling the economy and creating good jobs,” Tom Cassidy, vice president of government relations and policy at the National Trust for Historic Preservation, said in a statement. “For lawmakers taking up tax reform, you simply cannot find fault with the federal historic tax credit.”
Congress is working on the biggest overhaul of the tax code since 1986, trying to get a draft together this year. Companies and advocates are lobbying ahead of the draft to keep their preferred breaks in for everything from research tax credits to pieces of the code that affect the steel industry.
Representative Dave Camp of Michigan, chairman of the House Ways and Means Committee, wants to reduce the top corporate tax rate to 25 percent from 35 percent and set the top individual rate, now 39.6 percent, as close to 25 percent as possible.
He would do that while raising the same amount of money for the government.
Starting from zero makes the tradeoffs inherent in a tax rewrite more explicit, because every break that’s added would mean higher tax rates. Every $2 trillion over 10 years in individual tax breaks would cause rates to rise between 1.3 and 2.2 percentage points and every $200 billion in corporate tax breaks means a 1.5 percentage-point increase.