Minnesota Historic Preservation Tax Credits

What are Historic Preservation Tax Credits?

Historic preservation tax credits provide tax relief to property owners of historic buildings who make significant investments in their properties. The federal historic preservation tax credit program is administered by the National Park Service in partnership with the Internal Revenue Service and State Historic Preservation Offices throughout the nation.

Visit the National Park Service’s Historic Preservation Tax Incentives web page for more information on the federal tax credit program.

The federal program has generated over $40 billion in historic preservation activity since its inception 30 years ago. Furthermore, the tax credit program has leveraged more than five times that amount in private investments in historic preservation. Over 34,000 properties have been rehabilitated through the program, with 1,253 occuring in 2006.1 According to the NPS, the program is “one of the federal government’s most successful and cost-effective community revitalization programs.”2

Why does Minnesota need a Historic Preservation Tax Credit Program?

The federal historic preservation tax credit program has been so effective in leveraging resources for historic preservation that it has been replicated by states throughout the nation. A Minnesota historic preservation tax credit program would leverage additional dollars for historic rehabilitations by providing property owners state income tax relief.

a Minnesota historic preservation tax credit would also:

  • Increase job creation
  • Leverage federal investments
  • Stimulate business development in disinvested areas
  • Create affordable housing
  • Encourage investment in derelict or vacant buildings
  • Increase tax revenue
  • Spur heritage tourism3

The Preservation Alliance of Minnesota has spearheaded the movement to enact a tax credit program. Along with a coalition of cities, developers and other historic preservation non-profits and organizations (including Historic Saint Paul), the Preservation Alliance has lobbied extensively for the creation of the tax credit program.

Are there examples of successful state historic tax credit programs?

The proposed tax credit legislation for Minnesota is modeled after the successful program in Missouri. Since Missouri began the program in 1997, rehabilitations using the federal tax credit program have doubled. For the past two years, Missouri has ranked first among all the states in the number of federal tax credit projects. The Missouri tax credits have been instrumental in revitalizing inner-city neighborhoods as well as preserving cultural resources in fast-growth suburban areas.

The Center for Urban Policy Research (CUPR) at Rutgers University conducted a study of the economic impact of the Missouri HPTC program in 2001. The CUPR study analyzed the direct and indirect effects of investments in historic preservation. Between 1999 and 2001, investments in historic rehabilitations in Missouri totaled approximately $295 million. Since the Missouri tax credit program provides a 25 percent tax credit, the cost to the taxpayers was approximately $74 million. Using a “preservation economic impact model,” CUPR demonstrated that the $295 million invested in historic restoration generated $249 million in additional economic activity, primarily in the form of increased employment. Additionally, the historic preservation projects generated more than $5 million annually in added heritage tourism.4

Why doesn’t Minnesota have a tax credit program?

Legislation to create a Minnesota historic preservation tax credit program has been introduced numerous times over the past decade. While there is no formalized opposition to the proposal, its failure thus far can be largely attributed to the potential loss of state tax revenue. Other states (most notable Maryland) have encountered tax revenue shortfalls as a result of similar tax credit programs.5

The challenge for advocates of the tax credit program is to educate policymakers and elected officials about the economic returns to the state that can offset tax revenue losses. A recent study of the economic benefits of historic preservation in Colorado concluded that:

…the economic impacts of preservation extend far beyond the initial dollars spent. Any economic activity generates both a direct and an indirect impact, which add up to an overall impact. For example, when rehabilitating a historic building, the direct impact consists of the actual purchases of labor and materials used in the project. Indirect impacts occur as the effects of the direct expenditures ripple throughout the local and state economies. The overall impact often is far greater than the initial dollars spent.6

How can I get involved in the effort to create a Minnesota historic preservation tax credit?

Join the Preservation Alliance of Minnesota’s Action Alert network to receive emails regarding future opportunities to get involved with the effort to create a Minnesota historic preservation tax credit.

Sources

1Federal Tax Incentives for Rehabilitating Historic Buildings: Annual Report for Fiscal Year 2006

2Incentives!: A Guide to the Federal Historic Preservation Tax Incentives Program for Income-Producing Properties

3Minnesota Historic Structure & Community Re-Investment Tax Credit

4Economic Impacts of Historic Preservation in Missouri

5Preservation Tax Credit Working Too Well?

6The Economic Benefits of Historic Preservation in Colorado