December Tax Incentives Figures Released by NPS

The National Park Service’s Historic Preservation Certification review of application figures were just released and although it may seem promising, facts are development and tax credit projects are down and not working properly.  The Federal Historic Preservation Tax Incentives Program has three parts: Part 1 determines the eligibility of a property for the tax incentives program; Part 2 determines whether a proposed project meets the Secretary of the Interior’s Standards for Rehabilitation; Part 3 determines whether the completed project conforms with the Secretary’s Standards. In December, National Park Service staff reviewed 92 Part 1 applications, 81 Part 2 applications representing nearly $464 million in estimated preservation investment, and 74 Part 3 applications that resulted in $450 million in preservation investment using the federal tax credit. The National Park Service administers this program in cooperation with State Historic Preservation Officers and the Internal Revenue Service.

The problem with these numbers is that although $464 and $450 million worth of projects may seem like a lot, in reality it isn't. This averages out to about a total investment of $2.6 million and $6 million for these projects. Actual money being contributed by the government is around $520,000 and $1.2 million per project respectively. This may seem like a lot of money, and don't get me wrong, its nothing to scoff about however the problem lies in how the building owners can actually gain use of the money. The money is distributed as a Tax Credit, meaning whoever the owner or company is that is restoring the building must pay annually at least $520,000 or $1.2 million in federal taxes. This cancels out most small businesses and private party's that want to use the credit because they simply don't make enough money to have to pay that kind of money in taxes so then what? Ah, yes Tax Credit Partners. Because of this, an owner of a historic property who gains the tax credits can sell them to a larger entity who pays a lot of money in taxes. Banks and other large corporations are always looking for tax credits so they will buy the credits for between 75 and 90 cents on the dollar thus saving themselves money in the long run.

The problem is to be worth a large corporation or banks time, these tax credits usually need to be worth many millions of dollars which as I have demonstrated, they are averaging between a half and $1.2 million. Most corporations won't even bother with a tax credit that is so "small". This creates a major problem, a company could do everything right in accordance with preservation standards, complete the project, and then have no way to cash in the tax credit money they were given by the government. With most of these projects being fairly small, a half to $1.2 million is often the difference between a project thriving and a project going bankrupt. Many states  have similar tax credit programs that can cover between 10 and 20 percent of project expenses, however due to budget problems many states have capped their programs and made them highly competitive. The government needs to put together a program or coalition of major corporations that buy these tax credits from smaller project investors, without it, the goals of the tax credit program will never be fully reached.