Community
Restoration and Revitalization Act
Community Resoration and Revitalization
Act (H.R.1054/S. 584)
For Preservation
Action's "Grass Roots Guide" to this bill,
click here
Background
On November 17, 2004, at the end of the
108th Congress, Representatives Rob Portman (R-OH) and William
Jefferson (D-LA) introduced the Community Restoration and Revitalization
Act (H.R.5378).
The Community Restoration and Revitalization
Act is a package of amendments that would further the mission
of the federal
historic preservation tax credit by spurring greater investments
in smaller commercial projects and "main street" commercial
properties in older neighborhoods – particularly where there
is a critical need for affordable housing and community revitalization.
Since it was enacted in 1976, the federal
historic preservation tax credit has generated over $33 billion
in rehabilitation and revitalization dollars. To discourage demolition,
the tax credit allows the owner of a historic building to receive
an income tax credit of 20% of the amount spent to rehabilitate
a certified historic structure. There is also a 10% tax credit
for older, non-historic buildings. In 2003, the federal historic
preservation tax credit produced $2.7 billion in private investment
and created over 62,230 new jobs – 49 new jobs per project.
A primary aspect of the Community Restoration
and Revitalization Act is its usefulness in creating affordable
rental housing in historic buildings. The federal historic preservation
tax credit can be combined with the Low-Income Housing Tax Credit
(LIHTC) in certain projects. In 2003 the historic preservation
rehabilitation tax credit produced a total of over 15,300 housing
units in the United States and, in conjunction with the affordable
housing tax credit, about 40% of those units were classified as
affordable housing units.
The bill was reintroduced as H.R.659 on
February 8, 2005 with seven original co-sponsors. H.R.659 was
a bipartisan bill to improve the existing historic preservation
tax credit for the restoration and rehabilitation of the nation’s
vacant and underutilized historic buildings, by amending language
restricting the age of buildings elligible for the credit from
those built before 1936 to those 50 years of age or older. The
bill was intended to expand the application of the tax credit
to smaller "main street"-type projects and lead to the
development of more housing – particulary affordable housing
– in historic buildings.
In May of 2005, Representative Portman was
appointed a U.S. Trade Representative. His departure meant that
the bill would have to be re-introduced by a new sponsor. On June
30, 2005, Representatives Phil English (R-PA) and William Jefferson
(D-LA) re-introduced the Community Restoration and Revitalization
Act as H.R.3159. The bill also includes new language that removes
a provision calling for the recapture of the tax credit for condominium
development. The legislation can be viewed at: thomas.loc.gov
and entering "H.R.3159" as the bill number. The bill
was referred to the House Ways and Means Committee that day and
there it remained.
Almost one year later, on May 18, 2006,
Representative Russ Carnahan (D-MO) introduced the Preserve Historic
America Act of 2006 (H.R.5420), a bill that includes several amendments
to the federal historic preservation tax incentives program. The
legislation can be viewed at: thomas.loc.gov
and entering "H.R.5420" as the bill number.
H.R.5420 is modeled on the Missouri state
historic tax credit. According to Representative Carnahan’s
staff, he views his bill as the ideal federal tax program, based
on the success of the Missouri state credit.
H.R.5420 includes many of the improvements
proposed in H.R.3159. (The similarities include: changing the
current definition of a qualified rehabilitated building to buildings
50 years of age or older; improving the credit for smaller projects
with expenditures under $2 million; and improving the credit for
buildings in designated low-income areas.). There are several
differences, though. H.R.3159 proposes removing the “recapture”
provision precluding the current credit’s use in condominium
developments; H.R. 5420 amends the current law to allow the credits
to be transferred or assigned. H.R.5420 also includes an amendment
providing a credit to residential housing – something preservationists
have been advocating for for quite some time. The proposed legislation
would create a 20% tax credit for qualified rehabilitation expenditures
made by the taxpayer to a qualified historic home.
When asked whether or not Representative
Carnahan felt that H.R.5420 competed with H.R.3159, Carnahan’s
staff noted that the he believed his bill was comprehensive, and
that Representatives could sponsor both bills
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On January 22, 2007, Representative Russ
Carnahan (D-MO) introduced the Preserve Historic America Act of
2007 (H.R.610) that proposes to amend the Internal Revenue Code
of 1986 to expand the incentives for the rehabilitation of older
buildings, including owner-occupied residences. Representative
Carhanan introduced an identical bill – H.R.5420 –
in the 109th Congress. Provisions in the bill:
- Expand the credit to residential housing
- Create a credit to allow for moderately
rehabilitated buildings
- Permit credits to be transferred or assigned
- Raise the tax credit rate to 25 percent
for certified historic structures
- Change the definition of a qualified
rehabilitated building to buildings older than 50 years
- Exempt historic tax credits from the
effects of passive loss rules
- Reduces the basis adjustment requirements
for filers claiming both the Low Income Housing Tax Credit as
well as the historic preservation credit
- Raise the historic preservation rate
to 130% for structures located within geographic designations
considered low-income
A study of the Missouri Historic Preservation
Tax Credit Program showed that state assistance of $74 million
in tax credits contributed to $267 million in Missouri income,
$381 million in gross state product (GSP), and 10,278 Missouri
jobs.
In his media advisory, Representative Carnahan
stated: "The state of Missouri has led the way in creating
the most utilized historic preservation tax credit in the country
and I am proud to bring my home state's successes to the federal
level. H.R. 610 will provide the economic incentive necessary
to save our historic treasures while simultaneously creating far-reaching
monetary benefits."
The bill has been referred to the House
of Representatives Ways and Means Committee. The legislation can
be viewed at: thomas.loc.gov
and entering and entering “H.R.610” as the bill number.
On February 14, 2007, legislation was introduced
in both the House of Representatives and the Senate. Representatives
Stephanie Tubbs Jones (D-OH) and Phil English (R-PA) introduced
the House bill (H.R.1043). Senators Blanche Lincoln (D-AR) and
Gordon Smith (R-OR) introduced the Senate bill (S.584) and Mary
Landrieu (D-LA) was an original cosponsor.
The bills are a set of amendments based
on insights from those who have used the credit. Provisions within
the bills will:
- Improve the coupling of the Low Income
Housing Tax Credit (LIHTC) and the federal historic preservation
tax credit (tax credit).
- Reduce the basis reduction required for
a property using the tax credit.
- Increase the tax credit for smaller projects.
The tax credit would be increased from 20% to 40% on the first
$1 million of qualified expenditures for projects under $2 million.
This would be a huge gain for Main Street-type projects.
- Allow rental housing in "qualified
rehabilitated buildings." Currently, the 10% credit for
"non-historic" buildings cannot be used for dwellings
- the law would be amended to allow the credit's use for residential
rental property.
- Change the qualifying date for non-historic
rehabilitation projects (10% credit projects) from "placed
in service before 1936" to placed in service "no less
than 50 years prior to the year in which qualified rehabilitation
expenditures are taken into account."
- Fine-tune the leasing rules laid out
in the current tax credit to reduce the number of community-oriented
projects currently adversely impacted without weakening the
anti-abuse function in the current law. The types of leasing
arrangements allowed in the current tax credit program limit
community revitalization-oriented projects.
- Increase the tax credit in "high
cost areas" to 130% of qualified rehabilitation expenditures.
High cost areas are difficult to develop and officially recognized
by the Department of Housing and Urban Development (HUD). A
difficult to develop area (DDA) has high construction and land
costs relative to the average local income. Incomes and housing
costs are compared in HUD's formula. The 130% increase would
also apply to Qualified Census Tracts - any census tract in
which at least 50% of households have an income less than 60%
of the area median or where the poverty rate is at least 25%.
- Removes a provision within the current
law that prevents condominium developments in tax credit projects.
The current law requires a developer pay back their credit if
the property is sold within five years of a given project's
completion.
Upon introduction the House bill was referred
to the Ways and Means Committee and the Senatte bill to the Finance
Committee. The legislation can be viewed at: thomas.loc.gov
and entering "H.R.1043" or "S.584" as the
bill number.
The Community Restoration and Revitalization
Act was just one of the issues preservationists advocated for
during their 2007
Annual Meeting.
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For More
Information
For an overivew of the amendments to the
tax code, click here.
For current information regarding the Community
Restoration and Revitalization Act, please see the NCSHPO Weekly
Legislative Update (available to NCSHPO members only).
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