Federal tax credits for historic buildings could be axed

The same might be said for more than 160 buildings throughout Indiana that have been restored through the federal Historic Tax Credit program since 2002.

The credits have ranged from 20 percent of the $120.4 million remodeling of the Gibson Company Building on Capitol Avenue in Indianapolis to 20 percent of the $15,300 Wertz-Bestle Farm project in South Bend. In Anderson, they include $2.27 million for work to turn Central Avenue School into housing in 2008 and $4.6 million for the downtown YMCA in 2015.

Now, the executive director of the Indiana Landmarks preservation group is worried that the tax credit could be eliminated if Congress begins a sweeping tax reform.

“What it will clearly do is take historic preservation out of the game of being a major force for economic revitalization,” said Marsh Davis, president of Indiana Landmarks, the statewide preservation group.

He fears that some folks in Congress believe that eliminating HTC would lead to lower taxes.

“Without the HTC, so many of the rehabilitation projects that have transformed cities and towns across America would not have been possible,” Davis said.

There has been no official word about a possible funding cut as the House Ways and Means committee begins to meets in May.

In Indiana, the Historic Tax Credit program has brought back to life such structures as the West Baden Springs Hotel, the Kokomo YMCA and the Charley Creek Inn in Wabash. Perhaps best known on the list is the remodeling of Hinkle Fieldhouse at Butler University, which cost $42.2 million and received qualified tax credits of a little more than $8 million.

Although among a myriad grants and funding programs available to redevelopers, the HTC has since 1976 led to the rehab of more than 41,000 historic places across America. In turn, that has created 2.3 million jobs and leveraged more than $78 billion in private investments, according to the National Park Service, which administers the program along with the Internal Revenue Service.

The main element of the program provides the 20 percent credit for the rehabilitation of income-producing projects such as converting into loft apartments or improving Hinkle for revenue-producing activities.

The credit can be applied to the individual’s or the corporation’s federal tax liability, essentially for rehab work of a permanent nature such as replacing windows, installing a mechanical system or other labor and materials.

Past analyses found that about two-thirds of all projects nationally were in neighborhoods at or below 80 percent of area median family income.

In Wabash, a former apartment building was renovated into the boutique-style Charley Creek Inn by philanthropist Richard E. Ford. In Indianapolis, the charter Herron High School is converting a former Naval academy on the city’s west side into a campus. The downtown Indianapolis eight-story Harrison Hotel is being renovated by the Indiana Association of Realtors for office space.

All three projects were restored through RATIO Architects in Indianapolis; all used the historic tax credit.

“If the credit were eliminated all together, I think it would have a very negative impact on the rehabilitation of historic buildings,” said David Kroll, principal and director of preservation at RATIO Architects.

“The credit was originally created to level the playing field as far as expenditures since sometimes it could be more expensive to rehabilitate a current building than construct a new one and the credit was created to help offset that. So if you no longer have any credits available for some of these projects, these buildings may just continue to sit or maybe demolished,” he said.

Near the Indianapolis Zoo, the Harding Street Lofts are a complex of four buildings constructed in the late 1800s. German furniture maker Henry Lauter opened his shop there and it operated until the Great Depression. In 1937, the site was sold to a grocery warehouse operator and a paper recycling firm. Both had left by 2010.

In 2011, Core Redevelopment — whose website motto advertises “We transform history into your next home” — purchased the U-shaped complex and converted it into 124 units. The size of the project required historic tax credits, said Eric Seal of Core Redevelopment.

“At 125 units it was a fairly large project so the historic tax credit provided a gap where, if we didn’t have it, the building would have been done differently and not by us,” Seal said.

Seal also works in other states where HTC and other rehab-related credits are offered.

“If Congress takes the historic tax credit, those state credits would probably lapse, too,” Seal said.