Improvements to KY’s State Historic Preservation Tax Credit Make it More Accessible to More Communities!

Posted on February 5, 2020
in Events, Homepage, Uncategorized

Kentucky Legislators made significant improvements to make our state historic tax credit more functional and competitive with surrounding states, providing a much needed boost for Kentucky’s economy, local job market and state revenue.

 

THE NEW IMPROVEMENTS AND WHY THEY’RE IMPORTANT TO KENTUCKY

1. The maximum credit a taxpayer can claim for commercial, income-producing properties was increased from $400,000 to $10 Million

2. The maximum credit a taxpayer can claim for residential owner-occupied properties increased from $60,000 to $120,000
3. The transferability provision was reinstated to allow nonprofits to sell their credit to financial institutions taxed under the income tax statutes instead of the bank franchise tax, which expired in January 2020.

 

KEY POINTS OF KENTUCKY’S IMPROVED HISTORIC TAX CREDIT PROGRAM
Kentucky’s Historic Preservation Tax Credit Program was increased from $5Million to $100Million in 2020, but without changes to the project caps.  In 2021, legislators revised the statutes to align with the program, increased the project caps and reinstated a provision for nonprofits that expired with the Bank Franchise Tax in 2020.
These significant changes:
>Make Kentucky more competitive with bordering states, which until Kentucky’s was improved, had better state historic preservation tax credits programs attracting Kentucky developers away from our state and to theirs;
>Increase access to the credit so more people and communities can utilize and benefit from it;
>Reinstates the transferability provision so nonprofits can benefit from the credit, conserve funds and use donor dollars for other endeavors.

 

KENTUCKY’S HISTORIC PRESERVATION TAX CREDIT PROGRAM
Historic tax credits are financial incentives to encourage private investment in historic buildings by giving building owners tax incentives that result in benefits to the public at large and communities of all sizes.
Kentucky’s HTC program has successfully incentivized private investment for decades, but until recently, we were still at a competitive disadvantage with surrounding states due to our current program restrictions. Meanwhile, competing states were enjoying substantially higher investments and stronger tax bases while luring investors away from Kentucky.
The 2021 legislation resolved these issues and leveled the playing field with a more functional and competitive program to revitalize our historic assets!

 

PROVEN ECONOMIC DEVELOPMENT TOOL AND RETURN ON INVESTMENT
>In 2021, $136,633,219 in private investment was approved pending completion of 98 projects – impressive data even in non-covid years.
>From 2005-2021, our state historic tax credit resulted in 1,166 buildings rehabilitated across Kentucky and $709 million of private funds investedin historic buildings, leveraged through $51.5 million in credits – an impressive ROI–Return on Investment

 

HOW KENTUCKY’S HTC PROGRAM HELPS STATE, LOCAL ECONOMY
1. Boosts tax revenues with new property, sales and payroll taxes
2. Returns more revenue to our state treasury than it costs
3. Stimulates local and state economies with income for improvements
4. Provides a credit for owner-occupied buildings, unlike the Federal HTC
5. Benefits the state immediately with tax revenue during construction
6. Returns vacant, underutilized and endangered buildings to tax rolls
7. Creates new and permanent jobs, maintains a strong workforce
8. Provides much-needed revenue and incentives for rural communities
9. Revitalizes neighborhoods, downtowns and Main Street communities
10. Reverses economic decline in central business districts
11. Spurs development in surrounding areas
12. Increases appeal to out-of-state developers and businesses
13. Acts as a catalyst for additional local investment
14. Encourages revitalization in blighted areas
15. Encourages adaptive reuse of buildings that risk demolition
16. Conserves building materials and craftsmanship
17. Supports sustainable green construction
18. Restores civic pride to communities
19. Enhances our visual environment and aesthetics
20. Preserves historic architecture, connects us to our heritage and enriches our quality of life

 

OVERVIEW OF KENTUCKY’S HTC PROGRAM
1. Enacted into law in 2005, a low risk-high return program
2. Available to all 120 counties and communities of all sizes
3. With 3,200 historic districts, sites and structures listed in the National Register of Historic Places encompassing more than 42,000 historic properties in all 120 counties, our HTC Program is a smart way to capitalize on valuable assets
4. Since 2005, has created more than 17,500 jobs and leveraged more than $1Billion value of investments in projects reviewed annually by the Kentucky Heritage Council, which administers the program
5. Can be utilized in tandem with the Federal Historic Preservation Tax Credit – a key provision that strengthens use and effectiveness for both programs.

 

>The Federal and State Historic Preservation Tax Credit Programs are administered by the Kentucky Heritage Council, an agency of the Tourism, Arts and Heritage Cabinet.
>Learn more about how tax credits help communities and how the application process works here.

The demand for Kentucky’s Historic Preservation Tax Credit has exceeded its resources since it was signed into law with the JOBS for KY Tax Modernization Bill in 2005.  Kentucky’s HTC leverages millions in private capital that likely would not otherwise come to invest in our state, increases the property tax base for local governments, creating new local and state revenues, and restores historic downtowns—a key tourism draw, driving hotel stays, bringing out of state spending to Kentucky, providing jobs and building local pride.

Kentucky’s HTC starts reinvesting in communities throughout the Commonwealth immediately, from Paducah to Pikeville, in both rural and urban areas, by employing skilled labor, purchasing local goods and often putting vacant buildings back into use and on the tax rolls.  It’s one of the best tools we have to protect our history while investing in it.
Kentucky’s Historic Preservation Tax Credit has been a vital economic development tool to revitalize neighborhoods, Main Streets and downtowns, put Kentuckians to work and keep them in the workforce, return once-vacant buildings to tax rolls, and generate income for community improvements.

When HB 659 passed, it:

  • Increased the maximum credit a taxpayer can claim for commercial, income-producing properties from $400,000 to $10 Million
  • Increased the maximum credit a taxpayer can claim for residential, owner-occupied properties from $60,000 to $120,000
  • Allowed the credit to be transferred to financial institutions that are now taxed under the income tax statutes instead of the bank franchise tax

Benefits to Kentucky:

  • Makes Kentucky more competitive with bordering states with better state historic preservation tax credit programs
  • Increases access to the credit so more people and communities can utilize and benefit from it
  • Reinstates the transferability provision so nonprofits can benefit from the credit
  • Allows more projects to benefit statewide
  • Helps more communities with revitalization incentives
  • Stimulates the economy with increased property, sales and payroll taxes
  • Increases appeal to out-of-state developers and businesses

The Staun Family used Kentucky’s state Historic Tax Credit for residential properties to renovate their home in Newport, Campbell Co., and received a Preservation Kentucky Excellence in Preservation Award in 2014.

Formerly Noonan’s Grocery in Frankfort, this mixed use building with first floor retail and second floor residential was saved from demolition by using Kentucky’s Historic Tax Credit.  The Franklin Co. owners received a Preservation Kentucky Excellence in Preservation Award in 2014.

Paducah’s City Hall, a Mid-Century Modern building designed by internationally acclaimed architect Edward Durrell Stone in 1963, was saved from demolition utilizing Kentucky’s Historic Tax Credit.  The City of Paducah, McCracken Co., received a Preservation Kentucky Excellence in Preservation Award in 2019 for preserving this important landmark.

Potter’s Castle in Bowling Green, Warren Co. utilized Kentucky’s state Historic Tax Credit for residential properties and received a Preservation Kentucky Excellence in Preservation Award in 2016.

Our state historic tax credit is important to Kentucky’s Main Street Program.  In Whitley County, the tax credit is revitalizing Williamsburg, population 5,245.

Once a home, this 1908 Queen Anne style cottage in Lexington, Fayette Co., was renovated into a doctors’ office using Kentucky’s state Historic Tax Credit and received Preservation Kentucky’s Excellence in Preservation Award in 2015.