From The Herald-Dispatch of Huntington:
Over the past couple of years, various city officials, economic developers and preservation advocates pushed West Virginia lawmakers to enhance a tool that could bring new investment to historic buildings in communities across the state.
The tool they sought to sharpen was the tax credit for rehabilitation of historic buildings for commercial use. The hope was that lawmakers would increase the state tax credit from 10 percent to 25 percent of eligible expenses on those projects as a way to spark more projects and more economic development.
After the measure failed to gain approval during last winter’s legislative session, it won passage in a special legislative session in October. The change was hailed as a smart move. The higher state credit combined with an already existing 20 percent federal tax credit on such buildings would mean a developer could gain tax credits totaling 45 percent – enough to push many projects into reality.
But that progress could be negated by legislation being considered in Congress.
The tax overhaul legislation championed by Republicans and making its way quickly through the U.S. House would end the federal historic tax credit. If that happens, the result would be the tax credit landscape for rehabilitating historic buildings would be worse than if the state’s legislature had never acted. Even with the state’s increase, tax credits would be capped at 25 percent rather than the 30 percent previously or the 45 percent that would go into effect Jan. 1 if the federal tax credit was preserved.
The motivation in Congress for ending the tax credit presumably is to help pay for a variety of tax cuts that Republicans want to enact to live up to campaign promises. But doing so makes no sense, if that’s the goal.
Since the federal historic tax credit was created in 1978, it has generated $29.8 billion in federal tax revenue for a return of $1.18 for every $1 in federal tax expenditures, according to Rutgers Center for Urban Policy Research. Simply put, more investment sparked by the tax credit means more tax collections in the long run. That same argument also applied to increasing the state tax credit, and state lawmakers eventually saw the wisdom in that.
If the federal tax credit is eliminated, the lost opportunity likely will be felt in Huntington, as well as cities across the state. In Huntington, a group of investors had high hopes for renovating several historic buildings for new purposes, and envisioned that up to $50 million could be invested if the state tax credit was increased. But ending the federal tax credit would dim those hopes because, as one of the investors told The Herald-Dispatch, those projects would no longer make economic sense.
There are plenty of questions surrounding the tax-reform legislation being developed by House Republicans, particularly whether the bill would benefit lower and middle class people as much as the bill’s backers claim.
But there really should be no question about keeping the federal tax credit intact. It is an important economic development tool that makes sense not only for developers hoping to revive historic structures, but also for the government, too.