WASHINGTON D.C., DC — Sen. Angus King, I-Maine, is throwing his support on a piece of legislation he believes could help encourage developers to build more affordable housing by enhancing the federal Historic Tax Credit.
U.S. Senators Susan Collins (R-ME), Ben Cardin (D-MD), Bill Cassidy, M.D. (R-LA), and Maria Cantwell (D-WA) introduced legislation in March 2023 that would expand the Historic Tax Credit to foster economic growth and urban renewal.
It's called the Historic Tax Credit Growth & Opportunity (HTC-GO) Act and is designed to create a new 30 percent tax credit for qualified rehabilitation projects that cost less than $3.75 million, while maintaining the existing 20 percent credit. The 20 percent federal HTC is a financial incentive that supports investment in historic buildings.
"There is no silver bullet," King said. "We're using silver buckshot."
According to the U.S. Department of Housing and Urban Development, it encourages private property owners to rehabilitate historic properties for an income-producing use, such as rental housing, office, retail, manufacturing, or entertainment space.
"It is an important tool for the redevelopment of historic Main Streets and can be a catalyst for neighborhood and downtown revitalization. It can also be an effective tool to create affordable housing, including mixed-use developments that have commercial space on the first floor and residences on the upper floors," HUD's website says.
King's office said the bill lowers the threshold cost a project must meet to be eligible, bringing the HTC in line with other credits, such as the Low-Income Housing Tax Credit.
The HTC-GO Act also expands the category of eligible renovation projects. It decreases the rehabilitation investment threshold from 100 percent to 50 percent of the project’s expenses. King's office said rehabilitation expenses would only have to exceed half of the project’s cost to qualify for the credit.
For example, a project could include building an addition to an historic building as well as renovating the original structure. It also amends rules for tax-exempt entities – such as health care centers, arts organizations, community services, and workforce training providers – to allow better access to the credit.
Tara Kelly, executive director of Maine Preservation, said in a prepared statement by King's office that agency's 2020 economic impact report studied the effects of the Historic Tax Credit. In the previous 10-year period, these projects generated $525 million of construction investment; rehabilitated 3.6 million square feet of commercial and residential space; created or preserved 1,911 housing units, of which nearly 1,300 were affordable; and generated between 200-700 full-time-equivalent jobs annually, Kelly said.
She added these projects also created nearly 700 new full-time, year-round jobs for people to maintain the buildings, resulting in $13 million of income per year for families living in the communities where the projects were built.
Under current tax law, a building owner must subtract the amount of credits received from a building’s basis (the amount a property is worth for tax purposes). King's office said eliminating this requirement will bring more value to all HTC projects by increasing the basis of rehabilitated historic buildings for building owners, providing additional depreciation and other tax benefits, and attracting more capital from tax credit investors.
Maine also has its own State Historic Rehabilitation Tax Credits:
- The Substantial Rehabilitation Credit: A 25% state credit for any rehabilitation that also qualifies for the 20% federal credit. The rehabilitation must meet all of the requirements of the Federal tax incentive program.
- The Small Project Rehabilitation Credit: A 25% state credit for the rehabilitation of certified historic structures with certified qualified rehabilitation expenditures of between $50,000 and $250,000. This credit is available to entities that do not claim the federal rehabilitation credit. Applicants must meet all federal tax code qualifications except the substantial investment requirement.
- The Affordable Housing Rehabilitation Credit Increase: The State Substantial Rehabilitation Credit and the Small Project Rehabilitation Credit may be increased an additional 10% if the rehabilitation project meets certain affordable housing requirements. Please contact the Maine State Housing Authority (MSHA) for additional eligibility requirements.