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CA Tax Credit Boosts Historic Preservation

Friday, October 15, 2021

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Recently, the state of California became one of the latest states to offer tax credits for the rehabilitation of historic buildings. Like federal tax credits for rehabilitation of historic structures, the funds are used to help revitalize communities, create jobs and preserve historic resources.

Passed over the summer, the new funds also aim to encourage the development of more affordable housing and improve the resilience of historic structures.

NPS Historic Preservation

Commonly referred to as the federal historic tax credit, the Federal Historic Preservation Tax Incentive program—administered by the National Park Service and the IRS—provides a 20% income tax credit for the rehabilitation of historic income-producing buildings.

The credit is based on qualified rehabilitation expenses, which includes construction costs as well as architectural and engineering service fees.

“There are currently 39 states that have a state historic tax credit that works in tandem with the federal historic tax credit,” reports Shaw Sprague, Vice President for Government Relations at the National Trust for Historic Preservation. “States have increasingly looked to model after the federal historic tax credit as a way to drive investment into communities that might not otherwise see this type of investment.

“Some states have incentives that are more robust than the federal credit, while other states place caps on how much credit will be issued for any given year,” Sprague added.

The federal tax credit, however, places no cap on the amount of historic tax credits that can be claimed.

Sanfranman59, CC-BY-SA-3.0, 2.5, 2.0, 1.0, via Wikimedia Commons

Recently, the state of California became one of the latest states to offer tax credits for the rehabilitation of historic buildings.

In addition to these incentives, last month, the NPS announced that it would be awarding $7.27 million in Paul Bruhn Historic Revitalization Grants to support the preservation of historic buildings in rural communities across the country.

A relatively new Historic Preservation Fund grant program, the Paul Bruhn Historic Revitalization Grants were created in 2018 to support subgrant programs that enable the rehabilitation of historic properties and rehabilitate, protect and foster economic development of rural communities.

The following year, the program was renamed to honor the legacy of longtime Vermont preservationist Paul Bruhn. The program was formerly named the Historic Revitalization Subgrant Program.

The NPS reports that the preservation projects for historic sites include architectural and engineering services and physical building preservation through subgrants to communities determined rural by the U.S. Bureau of the Census.

The awarded projects are slated to support the rehabilitation of historic properties in rural areas, including programs in local communities led by the Wheeling National Heritage Area Corporation in West Virginia; The City of Jefferson, Missouri; and DeFuniak Springs Landmarks Inc., in Florida.

Historic Preservation in California

Although California Governor Gavin Newsom signed legislation in 2019 creating the state’s historic credit with plans to go into effect in January 2021, it wouldn’t be until July of this year that the program was officially initiated.

According to reports, this was because the 2021-22 state budget that Newsom proposed at the time didn’t include funding for the program. To mitigate the issue, a new budget signed over the summer allocated $50 million for the first year of the five-year program.

The money is administered by the Office of Historic Preservation (OHP) and the California Tax Credit Allocation Committee (CTCAC). 

Cindy Heitzman, Executive Director of the California Preservation Foundation, reports that of the $50 million made available, $8 million is reserved for qualified rehabilitation projects that are expected to cost less than $1 million. An additional $2 million is also set aside for projects involving the rehabilitation of historic structures that are residences.

Like the federal program, California’s version also provides a 20% tax credit for qualified rehabilitation expenditures of certified historic structures. The state also offers an additional 5% bonus for the following five types of projects:

  • Structures located on local, state or federal surplus property or land;
  • Structures that include affordable housing for lower-income households;
  • Structures located in a designated census tract in which the rates of unemployment and poverty are within the top 25% statewide;
  • Structures that are part of a military base reuse authority; and
  • Structures that are part of certain transit-oriented developments.

To receive the 25% tax credit, projects must meet one of the above conditions.

“It’s a really big deal,” said Carolyn Kiernat, AIA, a principal for Page & Turnbull Inc., a California-based architecture firm. “It’s a huge incentive for a lot of affordable housing developers.” Kiernat continued, “If they pair that with a low-income housing credit, it’s really exciting to think where this could go (in terms of promoting affordable housing).”

According to the California OHP, over $2 billion have been spent over the past 11 years on historic tax projects across the state. The Certified Expenses from the 2009 Federal Fiscal Year through the 2020 Federal Fiscal Year have added up to $2,055,629,991 (total project expenditures are even higher when all other non-eligible costs are added).

The top five California projects over $40,000,000 during the past 11 years are:

  1. Pier 15, San Francisco, 2013 ($180,170,000);
  2. Lincoln Place, Venice, 2015 ($128,200,000);
  3. Fox Oakland Theatre, Oakland, 2010 ($79,500,000);
  4. The Forum, Inglewood, 2014 ($78,723,091); and
  5. Proper Hotel/Renoir Hotel, San Francisco, 2018 ($75,871,136).

Details of the state’s new historic tax credit program are expected to be completed either by year’s end or in early January, and applicants should be able to begin filing for the tax credits in March 2022.


Tagged categories: Architectural history; Commercial / Architectural; Commerial/Architectural; Good Technical Practice; Government; Historic Preservation; Maintenance + Renovation; NA; North America; Projects - Commercial; Renovation; Restoration; Restoration; Taxes

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