On Thursday, January 19, as part of Preservation Leadership Forum’s webinar series, the National Trust’s president and CEO, Stephanie K. Meeks, and policy staff hosted a webinar addressing the threat to the federal historic tax credit (HTC).
Background and Action Items
Among the many changes expected to take place under the Trump administration and the new Congress, tax reform is uniformly identified as a top legislative priority. It was last reported in mid-December 2016 that Chairman of the House Ways and Means Committee Kevin Brady, R-Texas, was calling Republican committee members together to initiate the drafting process for comprehensive tax reform legislation.
The December meeting represented the first step in what will become a lengthy process of advancing a challenging policy objective. While many expenditures in the tax code—including HTC—were specifically identified as topics for discussion, conversations among committee members focused primarily on reaching consensus regarding broader provisions of the tax code, including the creation of a border adjustment tax and the tax implications of repealing the Affordable Care Act.
Lawmakers confirmed that the HTC was not discussed at this meeting but noted the significant constituent input they had received in their districts—outreach by the preservation and business communities took the form of hundreds of personalized emails and phone calls in support of the HTC. This strong outpouring of support was acknowledged by members and their staffs and demonstrated that vocal and engaged constituencies across the nation stand behind the HTC.
No assurances were given, however, that the HTC would be retained in the tax reform legislation. In fact, feedback suggests that the House bill will closely adhere to Speaker Paul Ryan’s “A Better Way” tax reform blueprint, which asserts that credit programs should generally be eliminated in order to lower rates and simplify the tax code.
House leadership aims to pass a bill before the August recess, though the Senate is likely to take longer. Throughout the process, advocates will need to both engage in methodical, long-term advocacy to educate members of Congress on the value of the HTC and respond to urgent “calls to action” when HTC advocates learn of critical points in the lawmaking process.
To immediately assist efforts to protect the HTC, please consider:
- Advocacy Relationship Survey. We are conducting a survey of our advocates to determine who has connections to federal and state policymakers in order to plan targeted outreach and assess gaps that need to be filled.
- In-district meetings during congressional recesses, February 20–24 and April 10–21. Advocates are encouraged to host in-district/in-state meetings with both House and Senate members during these recesses. To ask about scheduling a local visit with House and Senate members, contact their offices during office hours. If you have the opportunity, combine your meeting with a tour of a completed or potential HTC project. If the members of Congress are unavailable, meeting with their staff members is still valuable. These meetings should be coordinated among local preservationists, developers, architects, mayors, Main Street organizations, and others in order to convey that the HTC program impacts many constituent groups.
- Lobby in Washington, D.C., in 2017. Come to D.C. during Preservation Advocacy Week, March 14–16, or at any time in 2017 that fits your schedule. Campaign staff are ready to help plan your visit and connect you with others from your state. For assistance please contact Mike Phillips (firstname.lastname@example.org), Shaw Sprague (email@example.com), or Renee Kuhlman (rkuhlman@savingplaces).
During the webinar we ran out of time before all attendee questions could be addressed. Here is a selection of the remaining questions, edited for clarity.
Has the National Trust mapped the location of HTC projects in order to illustrate near- and long-term impacts of the credit broken down by voting district?
The National Trust has regularly mapped the location of HTC projects at both the state and local levels, as well as by key congressional districts. The most recent maps are available on our website. If you do not see a map for your congressional district, you can create one using this interactive mapping tool designed by Novogradac & Company. Use the navigation tools to zoom in on your state or district, then click on “Download Map Image” to save a graphic file and on “Download to CSV” to print out the list of the projects that are captured in your screen shot.
Where can we find evidence that the federal HTC earns more than it costs?
The National Park Service’s (NPS) Annual Report on the Economic Impact of the Federal Historic Tax Credit for FY 2015, produced in coordination with the Rutgers University Center for Urban Policy Research, answers this and many other questions about the positive economic benefits that flow from the use of the HTC.
Has there been a calculation of how many jobs would be lost if the HTC were eliminated?
We know from the NPS and Rutgers research and annual reports that the HTC creates 65–85,000 jobs each year.
How does the HTC preserve the fabric and enhance the vitality of our inner cities—one of the stated goals of the new president?
Preservationists have a compelling argument that the federal HTC is a proven economic development tool for the very places that need reinvestment the most. You can build on that story by reviewing Place Economics study: "Catalyst for Change, The Federal Historic Tax Credit: Transforming Communities."
Can you send action emails that we can reformat and send to members?
Yes, we can develop sample emails for you to edit and tailor to your congressional delegation. It is important that you customize any sample email to create your own local message because staffers tend to discount multiple “form” emails that fail to reflect a depth of concern from the sender. Please visit our website for advocacy updates and a sample email.
If the tax credit is repealed, what happens to projects that are in process of being approved?
We will fight for generous transition rules so that investment in projects in predevelopment will not be lost.
What are the implications of the uncertain future of the national HTC for state HTC programs?
The implications are not good. If the federal credit is eliminated, it would likely embolden opponents of HTCs at the state level. Those who understand the economics of rehabilitation projects realize that state credits alone cannot fill the financing gap. We suggest that you urge state HTC advocates to also advocate for the federal credit.
What are strategies for engaging nonpreservationists who use HTCs in their work as additional voices and advocates for the tax credits?
For nonprofit allies that have an interest in preserving the federal HTC, our website features many resources to assist with outreach to new partners, including talking points, NPS reports, economic and job creation data, a media toolkit, and information about state HTC programs.
One of the best ways to engage the business community in support of the HTC, is to refer stakeholders to the Historic Tax Credit Coalition, a national nonprofit organization that brings together a variety of stakeholders, including 75 member firms and companies made up of developers, lawyers, accountants, preservation consultants, investors, and tax credit syndicators. The information you have received has also been shared with the coalition and they are heavily engaged in grasstops advocacy.
How do we bring in new partners to advocate for the credit? Tens of thousands of historic buildings will need to be adapted for flood risk reduction.
An important starting point for engaging new partners in HTC advocacy is to forward the webinar link to your network and encourage stakeholders to fill out the Political Relationships Survey.
It was mentioned that some members of Congress think that the HTC is no longer necessary. How does the campaign responded to this assertion?
One of our central advocacy messages is that financing rehabilitation falls short without HTCs. Banks typically undervalue historic rehabilitation and loan roughly 65 percent of the cost—compared to loans of 85 percent for new construction. If developers put in 10 percent out of pocket, that still leaves a 25 percent financing gap that must be filled by federal and state HTC equity.
Did the Historic Tax Credit Improvement Act come up for a vote during the 114th Congress?
With tax policy discussions focusing almost exclusively on moving a large, comprehensive tax reform bill through Congress, many smaller individual tax bills, like the Historic Tax Credit Improvement Act, did not receive a hearing or advance through the legislative process. A key objective for the legislation was to demonstrate support for the HTC and to suggest positive reform options for the program that could be incorporated into a larger tax package.
What are the chances of past Republican support for the HTC being lost to members of Congress supporting Chairman Brady’s approach to tax reform?
The previous sponsors of the Historic Tax Credit Improvement Act are working to introduce similar legislation in the new Congress. In the last Congress, the bill had 52 cosponsors in the House and eight in the Senate. It is quite possible that some past supporters will choose not to cosponsor the bill in the 115th Congress in favor of addressing tax priorities through a comprehensive tax reform package. We will do our best to recoup past support and build on it.
My elected representatives already support the HTC. Is support for the HTC really a national issue or does advocacy need to focus on rural communities?
Our research shows that 25 percent of all HTC transactions take place in towns with populations of 25,000 people or fewer. We support legislation that would increase the 20 percent credit to 30 percent for smaller projects (under $2.5 million in qualified rehabilitation expenditures), which would increase the use of HTCs in small towns and rural communities. This same legislative approach would also permit owners of smaller historic properties to transfer federal credits through a tax certificate, which would encourage greater regionally sourced private investment for smaller projects.
While we can already show robust use of HTCs in rural towns, we support making the credit even more balanced between urban and rural communities. Pointing out examples of smaller deals in rural locations can be instructive for members of Congress who believe that the credit only helps big cities.
I live in a blue state, and my congressional delegation strongly supports the federal HTC. Is it important that I continue to reach out to them?
Major reform of the tax code is a complicated endeavor that is ideally accomplished with bipartisan support. Comprehensive tax reform legislation can be improved by retaining and improving the HTC, and that requires a demonstration that a majority in Congress values the program. Members on both sides of the aisle who support the HTC must make retention and enhancement of this credit a top tax reform priority and make their position known. Your ongoing engagement with your delegation will help ensure their commitment to this issue.
Shaw Sprague is the director for Government Relations and Policy at the National Trust for Historic Preservation.