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Efforts underway to renew expired historic tax credit

Efforts underway to renew expired historic tax credit
February 26
00:00 2015
(Above: Gallery Lofts is one of the many downtown projects that used the Historic Preservation Tax Credit)

As of this year, North Carolina no longer has its long-standing Historic Preservation Tax Credit, which was credited by many for spurring growth in downtown Winston-Salem and beyond.

First enacted in 1998, the credit offers tax breaks for rehabilitating historic buildings. It expired at the end of 2014 as part of a tax reform bill passed with Republican support designed to eliminate tax breaks and lower the tax rate overall.

Republican Gov. Pat McCrory has proposed a new historic tax credit that would offer smaller incentives to bigger projects with an overall cap on the program, and restoring the also eliminated tax break for movies made in the state. House Rep. Ed Hanes of the 72nd District is among the Democrats sponsoring a omnibus economic development bill to bring back the full, unaltered historic tax credit, along with other measures like re-establishing the movie tax credit and earned income tax credit.

“Our job should be to help everyone and that’s what the Historic Preservation Tax Credit does,” said Hanes.

According to the N.C. State Historic Preservation office, nearly $300 million of rehabilitation work has been done in 39 completed commercial projects in Forsyth County since 1998. Nearly $16 million of rehabilitation work has been done on 124 non-income producing residential projects in Forsyth. Though expired, work done through the end of last year still counts for the credit. Construction or new projects this year do not.

City Council Member Jeff MacIntosh said Winston-Salem has a high number of historic districts and properties. He said the tax credit often makes restoring buildings financially feasible when it wouldn’t otherwise be. He said its been vital to projects that have helped revitalize downtown, like turning the Nissen Building into apartments in 2006 and transforming an empty tobacco plant into 525@Vine, a laboratory and office complex in the Innovation Quarter, which opened last year. He said without it,  many developers will look to other states that offer the credit.

“It’s been so beneficial to Winston-Salem,” he said. “The bottom line is that so much restoration work, all that money in the ground, wouldn’t have occurred at all without this credit.”

He’s personally used the tax credit several times on qualifying houses. He and his wife, Susan, specialize in buying old homes, restoring them, then reselling them. He said one house, which took about $65,000 worth of work to restore, gave him a $13,000 state income tax credit combined with an equal federal tax credit.  He said in his projects, keeping the historic character of the house generally doesn’t drive up his construction cost.

“It almost always made sense to use it,” MacIntosh said.

Many different projects have used the credit. It was used twice by Goler Community Development Corporation, which is devoted to revitalizing the historic Goler-Depot Street area that used to be the thriving economic center of the local black community.

It used the credit to transform an abandoned tobacco factory into Gallery Lofts, an 82-unit apartment complex that stays filled to capacity. The CDC also used it to restore Craver Apartment Building, which was built for black families just before World War II.  Goler CDC Chair Michael Suggs said the credit provided equity for the projects, which would’ve been unfeasible without it. He said he fully supports bringing the tax credit back.

“I think it’s a great idea,” he said. “It has the potential to restart development in Winston-Salem.”

Little

Walter Roy Little stands outside the historic Ella’s Lofts.

While it’s been used to convert other old factories into lofts, it’s also been used on smaller projects. When Walter Roy Little, a barber and owner of Purrfect-Cut Barber Shop, decided to finally convert the long abandoned top floor of his building into lofts, he found out it would qualify for the credit. Builders took special care to keep the 1923 architecture intact as they converted it into the four apartments that make up Ella’s Lofts. Construction was completed by last summer, and only a month after their dedication, all four units were filled. He said he hopes the credit will help with the expensive project.

Local church, Wholeman Ministries, was also planning to use the credit in its

$631,000  Homes 4 Our Heroes project to restore five houses on Cameron

 

Avenue for homeless veterans. Most of the work on the first house was done before this year, with the finishing touches being scheduled for this week. The others have yet to be completed. Wholeman Pastor Barry Washington said the houses were built between 1938 and 1940 using bricks by the historic local hand-made brick maker George Black. Washington checked with the city and state about using the credit, and preserved the front of the houses to meet its qualifications. He hasn’t applied for the credit yet and wasn’t aware it had expired, but hopes it is restored.

“That could help us significantly in financing the project,” he said.

 The historic homes being restored on Cameron Avenue.

The historic homes being restored on Cameron Avenue.

To have qualified for the historic tax credit, a building had to be listed in, or had the potential to be listed in, the National Register of Historic Deeds, or was located in a registered historic district. It had to be certified as a historic structure by the state, which required a payment of a $500 to $2,500 fee, depending on the cost of the project. The repairs had to be consistent with the historic nature of the building and, were applicable, its historic district. Only rehabilitation costs to the structure counted toward the credit. Other expenses involved in the project, such as landscaping, paving and acquisition costs, did not.

The tax credit provided 20 percent tax credit for rehabilitation costs for income-producing historic properties, which combined with a 20 percent federal historic tax credit. There was a 30 percent credit for non-income producing properties, which don’t qualify for a federal tax break. Those rehabbing a historic factory, such as a tobacco or textile plant, could’ve instead used the Mill Rehabilitation Tax Credit, which is part of the historic tax credit program. In Forsyth, a tier-three county (meaning its among the top 20 counties in the state economically), the mill credit would result in a 30-percent tax credit on rehabilitation costs on an income-producing   structure.

 

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Todd Luck

Todd Luck

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