State historic preservation tax credit already dead for 2020 legislative session

photo of owyhee hotel
Renovation of the 1910 Owyhee Hotel generated $2.2 million in federal historic tax credits. Photo by Teya Vitu.

Before the legislative session has even started, hopes for a state historic preservation tax credit have been dashed for another year.

That’s because the Idaho State Historical Society, which would lead the effort, is a state agency under the executive office of the governor and requires the approval of Gov. Brad Little.

“As a state agency, the way we have to bring legislation forward is through the governor’s office,” said Tricia Canaday, administrator for the State Historic Preservation Office, part of the State Historical Society. “It’s a very prescribed process. We can’t just initiate our own legislation. The governor has priorities for this year, and that’s what he wants to focus on.”

If this sounds familiar, it’s also what happened last year. While supporters hoped to bring the legislation during the 2019 legislative session, it was held off early due to concern about a new governor, many new legislators, tax reform and Medicaid expansion also taking place during that session.

What is a state historic preservation tax credit?

The bill would give developers of historic buildings up to a 20% state tax credit on money spent to rehabilitate them. There is already such a tax credit on the federal level, and 37 other states also offer a state tax credit, according to the National Trust for Historic Preservation, spearheading the effort.

“Well-crafted state historic tax credits, such as those in Minnesota and Virginia, encourage private investment in the reuse of historic buildings and promote investment in local economies,” noted the organization on its website. “Also, the presence of a state historic tax credit increases the amount of federal investment in rehabilitation, according to research from the Washington Office of Planning.

While such a tax credit would cost Idaho money, statistics from other states, as well as experience with the existing similar federal program, indicate such credits more than pay for themselves considering the money spent on renovation, as well as taxes buildings produce once rehabilitated.

Historic preservationists are anxious to implement the tax credit, because of the Opportunity Zones development program. While Opportunity Zones could provide synergy to help rehabilitate old buildings, especially in rural areas, they don’t include protections or incentives to help preserve them. Without such incentives, Opportunity Zones — like urban renewal in the 1960s — could actually hasten the demolition of those buildings, preservationists argue.

That’s because developers are required to spend an amount equal to the assessed property value at the time of acquisition, said Jerry Miller, economic development specialist with the Idaho Department of Commerce, during an Opportunity Zone Experts Forum organized by the Idaho Business Review earlier this year.

“Let’s say I purchase a property for $1.5 million, the land appraises out at $500,000, the building appraises out at $1 million,” Miller explained. “To make it eligible for the Opportunity Zone incentive, what I have to do as a developer now is invest another $1 million into the building, whether the building needs $1 million worth of rehab or not. That can make it kind of tricky when it comes to preserving the building. In some cases, it might make sense, under this incentive, to knock it down and start brand new.”

Next steps

Instead, the State Historical Society, as well as partners such as the nonprofit Preservation Idaho, will spend the session laying the groundwork for a 2021 bill.

“They gave us generally positive input regarding the idea of a state historic tax credit, so we will continue to work on it at the local, county and state level educating and garnering broad support,” said Paula Benson, president of Preservation Idaho, in an email message.

“There’s a lot of education that has to be done,” Canaday said. “The elements are not always things that are widely viewed as beneficial by some legislators.”

Of course, waiting until 2021 also means facing a new crop of legislators – part of the justification for postponing the legislation in 2019.

“Potentially, that’s true,” Canaday said.