Arizona State Representative Karen Fann of Prescott has introduced “HB2337: Historic Preservation Tax Credit.” HB2337 would create both an individual and corporate income tax credit for up to 25% of qualified rehabilitation expenses on a certified historic property. Thirty-five other states have enacted similar tax credits, most recently Texas and Wisconsin.
From Patagonia to Prescott, Arizona is rich in history and historic downtowns are the heart of that history. The goal of this credit is to encourage more communities to preserve and protect their historic structures and promote economic development in our state. The credit selection process is designed to favor small and rural Arizona towns and selection criteria are designed to ensure that projects have broad community support and will provide an economic benefit to the city/town and the state.
HB2337 would create both an individual and corporate income tax credit for up to 25% of qualified rehabilitation expenses on a certified historic property.
- The program would have an aggregate annual cap of $15 million that could increase to $30 million based on the performance of projects and return on investment to the state.
- Applications would be accepted two times a year and the minimum criteria for awarding tax credits would be the ability for the developer to show a positive impact on state and local revenues generated by the project.
- Other selection criteria would include projected job creation, economic impact, and community support for the project but a return on investment would be a baseline requirement.
- The distribution of the tax credit would favor rural towns in the first round of awards by reserving 60% of the total credit available annually for projects in towns with a population under 150,000 people.
- Lastly, the credit would be repealed and have to be renewed in 20 years based on proven performance.
HB2337 will be heard in the Arizona House of Representatives Ways & Means Committee on Monday, February 9, 2015, beginning at 2 p.m. in Room HHR3. Historic preservation advocates wishing to voice their opinion on this measure are welcome to weigh in, including attending Monday’s hearing or contacting committee members prior to the hearing by phone or email.
The Honorable Mark A. Cardenas
District 19 (Phoenix)
Phone Number: (602) 926-3014
Fax Number: (602) 417-3048
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The Honorable Anthony Kern
District 20 (El Mirage, Peoria area)
Phone Number: (602) 926-3102
Fax Number: (602) 417-3282
Email Address: firstname.lastname@example.org
The Honorable Javan D. Mesnard
District 17 (Chandler, Gilbert, Sun Lakes)
Phone Number: (602) 926-4481
Fax Number: (602) 417-3152
Email Address: email@example.com
The Honorable Darin Mitchell
District 13 (Wickenburg, south through the West Valley, and parts of Yuma)
Phone Number: (602) 926-5894
Fax Number: (602) 417-3012
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The Honorable Justin Olson
District 25 (Mesa)
Phone Number: (602) 926-5288
Fax Number: (602) 417-3161
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The Honorable Andrew C. Sherwood
District 26 (parts of Tempe, Mesa, Phoenix, and Pima Salt River Indian Reservation)
Phone Number: (602) 926-3028
Fax Number: (602) 417-3038
Email Address: firstname.lastname@example.org
The Honorable Michelle R. Ugenti
District 23 (parts of Scottsdale, Fountain Hills)
Phone Number: (602) 926-4480
Fax Number: (602) 417-3155
Email Address: email@example.com
The Honorable Jeff Weninger
District 17 (most of Chandler, Sun Lakes, and some of northwestern Gilbert)
Phone Number: (602) 926-3092
Fax Number: (602) 417-3279
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The Honorable Bruce Wheeler
District 10 (Tucson)
Phone Number: (602) 926-3300
Fax Number: (602) 417-3028
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Federal Tax Incentive Program
The Investment Tax Credit program permits owners and some lessees of historic buildings to take a 20% income tax credit on the cost of rehabilitating such buildings for industrial, commercial, or rental purposes. This program also permits depreciation of such improvements over 27.5 years for a rental residential property and 31.5 years for commercial property. The rehabilitated building must be a certified historic structure that is subject to depreciation, and the rehabilitation must be certified as meeting The Secretary of the Interior’s Standards for Rehabilitation, established by the National Park Service (NPS).
Only projects involving certified historic structures are eligible for tax credits. According to program rules, a certified historic structure is:
- a structure individually listed in the National Register of Historic Places, or;
- a structure certified by NPS as contributing to a registered district. A registered district is a designated area listed in the National Register, or listed under a state or local statute certified as substantially meeting the requirements for listing of districts in the National Register.
Research has found that an effective state program leverages the use of the federal historic tax credit. For example, Missouri’s state tax credit doubled the usage of the federal incentive when it was put into place. To further support the federal historic tax credit, it is essential to also advocate protecting, expanding, and gaining tax incentives at the state level.
35 states have adopted laws creating credits against state taxes to provide incentives for the appropriate rehabilitation of historic buildings. Well-crafted state historic tax credit programs, such as those in Minnesota, North Carolina, and Virginia, increase the number of federal rehabilitation projects.
The presence of an active state tax credit program boosts the use of the federal credit on average between $15 and $35 million in certified expenditures according to research from the Washington Office of Planning. That means the states with active tax credit programs are bringing in between $3 to $7 million federal dollars, which would not otherwise be available, to the state.
Ohio law requires the state to conduct a cost-benefit analysis for each historic building seeking a tax credit. The state must determine whether rehabilitation of the building and awarding of the credit will result in a net revenue gain in state and local taxes once the building is used. The Ohio model takes into account tax revenues generated after the building is placed in service. Click here to learn about Ohio’s program.