While preservationists applaud the inclusion of the longstanding tax credit for restoring old buildings in the sweeping overhaul of the U.S. tax code Congress passed on Wednesday, worried owners of historic properties are running to their lawyers to see how changes in the law will affect them.
The tax bill leaves the 20 percent credit intact, but critics say a key change to the way the credit is applied will undermine the purpose of the tax break — to encourage the rehabilitation of historic buildings — and could render a restoration project unprofitable. Among the local projects for which the financing could be affected are the restoration of the Miami Marine Stadium and the Miami Woman’s Club.
The historic tax credit has been part of the tax code since the Reagan administration and is heralded by people who want to preserve historic buildings. Considered a key element to saving once-crumbling Art Deco buildings that have become synonymous with Miami Beach, the benefit is considered an effective incentive for developers to preserve and reuse historic structures.
The historic credit was put on the chopping block when the House of Representatives passed a tax plan that eliminated the credit. The Senate chose to keep it, and the Senate’s version won out in the final bill.
Stephanie K. Meeks, president and CEO of the National Trust for Historic Preservation, commended Congress for “retaining a common-sense tool that has done so much to draw public and private investment to the historic fabric of our nation and to create local jobs.
“The inclusion of the historic tax credit … is a reaffirmation that reviving older and historic buildings is sound federal policy and good for the nation,” Meeks said in a statement.
Developers have used the credit to shape South Beach’s look by refurbishing old Deco hotels that now serve as postcard-ready images of Miami Beach. Developers and preservationists say these restored architectural gems provide an attraction to tourists and residents alike, and the buildings provided the setting for South Beach’s economic resurgence over the past few decades.
But under the final plan, the credit would be applied in a way that could devalue the tax break itself, messing with what developers consider a proven financial formula. This could imperil future historic rehabilitation projects, advocates say.
Under current law, developers can take the 20 percent credit in one year. In many smaller projects, owners sell the credit as part of a financial maneuver to make the development economically viable.
The new tax bill changes this so that the credit has to be taken over five years, which will likely make the credit worth less and diminish the incentive for undertaking historic rehabilitation work.
“It’s going to make the economics in favor of new construction,” said Brian Wishneff, an attorney based in Roanoke, Virginia, who specializes in historic tax credit projects and does work in South Florida. His firm, Brian Wishneff & Associates, has worked on more than 100 projects that have made use of the credit.
Spreading the credit over a longer period is not the only change. Richard Heisenbottle, an architect who is known for the restoration of Miami City Hall and the Olympia Theater at the Gusman Center, lamented the elimination of the 10 percent credit on buildings that were built before 1936 but are not listed on the National Register of Historic Places, which is required for the more commonly used 20 percent credit.
Heisenbottle is on teams that are pursuing the restoration of two significant historic structures in Miami: the marine stadium on Virginia Key and the Miami Woman’s Club in Coconut Grove. While thankful the 20 percent credit will continue, he is curious how the transition will be implemented for preservation projects that are not far along in the planning process.
He also echoed Wishneff in saying changes to the credit law will damage the economic framework that makes historic preservation work, and he worried the changes could impact the financing for the marine stadium and woman’s club. The woman’s club is federally certified as historic, and the marine stadium is in the process of seeking the same designation.
“There exists the possibility of the marine stadium being done as a historic tax credit project,” Heisenbottle said. “This change could impact that project.”