Historic Tax Credits

What are Historic Tax Credits?

The Historic Tax Credit (HTC) program originated with the evolving, nationwide realization that preservation of historic community assets is an important part of our shared history. It encourages the private sector to invest in the rehabilitation and re-use of certified historic buildings. The program’s intent is to attract new private capital to the historic cores of our nation’s cities and towns. Many of the buildings are located in low-income communities, designated disaster areas, or designated distressed or underserved areas. The funds help revitalize communities by enhancing property values, creating jobs, and generating tax revenues.

The federal program provides tax credits to property owners equal to 20 percent of the qualified renovation expenditures of historic, income-producing buildings. The Commonwealth of Virginia also allows a tax credit of 25 percent of the qualified rehabilitation expenditures. HTCs may be used in conjunction with LIHTCs, further increasing incentives to investors.

How do they work?

• The HTC program is jointly administered by the U.S. Department of the Treasury and the U.S. Department of the Interior, in partnership with the State Historic Preservation Officers in each state.

• If the developer’s rehabilitation of a certified historic building meets certain requirements that maintain the historic elements of the structure, then that project can be eligible to utilize Historic Tax Credits.

• Developers of HTC projects typically use the tax credits to raise equity from private investors to help offset the costs of developing the project.

• Investors provide equity in exchange for the tax credits and other benefits over the life of the investment. The tax credits flow the year the project is placed in service.

  • The combination of tax credits and passive losses reduces the investor’s tax liability, providing the investor a competitive market rate return.

  • In addition, some projects will allow bank investors to receive favorable consideration for complying with the Community Reinvestment Act Investment Test.

  • VCDC can help connect investors to HTC-eligible developments

  • HTCs can be combined with LIHTC, but often stand alone without LIHTCs

• The equity investment helps to finance the historic renovations, allowing the developer to afford the additional costs of meeting the historic renovation guidelines.

• The project must maintain the historic characteristics approved by the Department of the Interior for the full five-year compliance period.

To learn more about Historic Tax Credits and how VCDC can help you invest or develop in communities you serve, please contact us.