PORTLAND – preserving its past, Maine has the opportunity to invest in its future, through the successful application of tax credits for historic rehabilitation projects.

Like many other states, Maine provides an income tax credit to owners for the rehabilitation of historic buildings. The credit equals 25 percent of qualified rehabilitation expenditures, paid over four years in equal 6.25 percent parts. If the amount of the credit exceeds the building owner’s income tax liability for a given year, the owner receives a cash refund equal to the excess credit.

The 154-year-old Chestnut Street Church in Portland is a perfect example of the credit’s success.

Before its rehabilitation, the church, iconic of the Gothic Revival style and a rare survivor of Portland’s 1866 fire, was abandoned and crumbling. Now, the completely renovated building, home to the restaurant Grace, contributes to the local economy, employing about 50 people and numerous local vendors.

Enacted in 2008, the historic tax credit has benefited many similar projects in Maine.

Building owners may qualify for the Maine historic rehabilitation tax credit (the state HTC) either by claiming the federal historic tax credit (the federal HTC) or under the so-called small project program.

To qualify for the federal credit, the building owner must substantially rehabilitate a historic structure. A building is a historic structure if it is on the National Register of Historic Places or is located within a Registered Historic District and certified by the National Park Service as being of historic significance to the district.

A building owner qualifies for the small projects program if the owner incurs between $50,000 and $250,000 in rehabilitation expenditures on a historic structure. Importantly, one can qualify for the small project program even if the building is not “substantially rehabilitated” for federal HTC purposes.

The incentives created by the state HTC promote several important policy goals.

n First, historic structures help define the identity of a community and represent its unique history. Boston is distinguished from other cities in part due to historic structures like Faneuil Hall. Portland’s Old Port is a popular destination due to its charming aesthetic.

Sadly, Portland lost a piece of its history with the demolition of Union Station in 1961. If tax credits had been available at the time, a rehabilitated and fully functioning Union Station, complete with retail stores and restaurants, might be a reality.

n The credit also advances green construction.

Rehabilitating an existing structure reduces the need to create materials for the building, transport them and assemble them on site. Generally, historic structures are accessed by existing streets and serviced by existing utilities; there is no need to build new streets or install new utilities.

Old buildings are often energy inefficient and upgrading them with modern equipment and materials helps reduce consumption. Historic rehabilitation may be the best means of reducing the carbon footprint of real estate development.

n The credit also efficiently stimulates economic growth. According to a recent Rutgers University study, every dollar in federal HTC granted spawned economic activity generating $1.30 in federal income tax revenue.

In light of similar evidence, some states have expanded their historic tax credit programs, despite pressure to reduce budgets during the recession, because the credit has been proven to stimulate economic growth for little or no net cost.

Ideally, historic rehabilitation would happen without the credit. Realistically, it will not.

Properly rehabilitating historic structures is expensive. Building owners are wise to hire historic conservation experts and lawyers to make sure the rehabilitation will qualify for the credit. The construction itself requires special materials and preservation specialists, all of which cost more than materials and contractors for other real estate projects.

The credit helps the building owner absorb those additional costs, providing the incentive to rehabilitate the building.

The historic tax credit will “sunset” in 2013 if action is not taken in the Maine Legislature. As written, the existing state HTC will not apply to expenditures incurred after 2013.

Because projects are often planned years in advance, the Maine Legislature and governor will need to act soon to extend the credit’s term to influence preservation decision-making in 2011 and 2012.

The state historic tax credit has been a boon for historic preservation and economic growth in Maine. For the sake of our community, our environment and our economy, let’s hope it continues beyond 2013.

 

– Special to The Press Herald