SB 708 SD1 / HB 1708

STATE TAX CREDIT FOR REHABILITATION OF HISTORIC PROPERTIES

Bill Summary:

·       Provides an economic incentive for appropriate rehabilitation of historic buildings, both commercial and residential, through credits against state taxes.

·       Qualifying buildings include individual structures or contributing buildings in a district designated on the Hawai‘i State or National Registers of Historic Places

·       Uses the Secretary of the Interior or State Historic Preservation Division Standards to determine qualifying costs

·       Provides a credit of up to 25% of qualifying costs that can be claimed over a five year period.  Qualifying costs include health and safety, code compliance, seismic retrofit, electrical, plumbing, handicapped-accessibility and stabilization.

·       Provides for recapture of tax credits in the event of failure to maintain the historic building.

Historic Hawai‘i Foundation SUPPORTS SB 708 SD1 / HB 1708

·       Preservation tax credit programs are proven mechanisms for incentives for rehabilitating older structures and returning them to useful life.  Preserving and using our historic buildings are ways to enhance community character, provide an alternative to sprawl, encourage heritage tourism and generally spur economic development in older neighborhoods and commercial districts.

·       Rehabilitation of older structures is among the greenest form of construction, requiring far less new material and disposal of old materials than a replacement structure.  This is of particular importance in Hawai‘i, which possesses a fragile environment, limited landfill space and high construction costs.

·       Redevelopment and rehabilitation of historic buildings and communities is key for healthy communities.  States on the forefront of this trend have established incentive programs to encourage this development. Tax credit programs have been used at the federal level and by over half of the states.  While the details of the programs vary state by state, they have been shown to be very effective, especially when coupled with the 20% federal historic tax credit.  Tax credit programs help to return historic properties to tax rolls and generate employment and housing where they are needed most.

·       State investments in tax credits can pay heavy dividends.  For example, the Rhode Island historic preservation tax credit, passed in 2002, generated a total of $795 million in economic activity from an investment by the state of $145 million (a 5:1 return on investment) in the first four years.  The study, which was commissioned by Grow Smart Rhode Island, estimates that the state rehabilitation tax credit will add $242 million to the tax base of local communities and to generate a present value basis of $179 million in additional property tax revenue and $42 million in sales and income tax revenue.  Missouri has seen over $1.8 billion invested since 1998 and the cost of the tax credit was recouped in additional payroll taxes alone.  Florida has seen a 2:1 return on investment and a 10:1 return for the Main Street program.

·       This proposed tax credit is a great incentive to the owners of historic homes, as there is no commensurate federal credit for owner-occupied residences.  This aspect of the bill may encourage more nominations of eligible properties, leading to a greater number of preserved historic residences, which are presently disappearing at an alarming rate.