Good and Bad News for Historic Preservation

Historic preservation advocates got both good and bad news Thursday. The bad was expected: the U.S. House of Representatives passed a tax reform bill that includes the elimination of the Historic Preservation Tax Credit program. The good news came as a surprise. The U.S. Senate’s Finance Committee passed an amendment that restores the credit to its full amount in their version of the bill.

Currently developers can receive federal income tax credits for 20 percent of any eligible project costs to redevelop any historically-designated properties. Since 2014, they have been able to pair the 20 percent federal credit with a matching 20 percent state credit. Developers then use the credits themselves or sell them for less than their stated value. The credits are a critical piece of financing projects that would otherwise be economically unfeasible compared to building new structures on empty sites.

While the House bill eliminates the credit, the Senate bill reduces the credit to 10 percent. The now-approved Senate amendment, introduced by Senator Bill Cassidy (R-Louisiana), restores the tax credit to a 20 percent threshold. The amendment does change the payment terms for the tax credits. They would now be paid out over a period of five years, instead of all at once. The amendment was approved on a party-line vote.

Even if the Senate approves a tax reform bill that includes the historic preservation tax credit, a conference committee between the House and Senate will need to keep the credit in any reconciled language.

But before it gets that far, the Senate would need to actually pass the entire bill. Following multiple failures to pass a health care reform bill earlier this summer, the Senate’s ability to pass a tax reform bill is also in question. Senator Ron Johnson (R-Wisconsin) has expressed opposition to the bill because of its treatment of small businesses. Assuming the reform bill is passed on a party line vote, Republicans can only afford two defections.

The Senate is expected to act on the bill after Thanksgiving.

For more on the issue, see my column from Wednesday, “Historic Preservation in Peril.” For more on the potential impacts of the tax reform bill to individuals, read the latest Data Wonk column.

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