Advocating for Historic Tax Credits

7 min read

Coalition remains vigilant

The Historic Tax Credit industry has never been better organized than it is today—and that’s a good thing since there has never been a greater need for that organization than over the past few years.  Even with the threat of comprehensive tax reform in the U.S. Congress and the disruptive results of the Historic Boardwalk case, the industry is making strides in protecting the program as well as enhancing its efficiency and encouraging wider use.

Historic Tax Credit Coalition and Tax Reform
In 2009, following the first significant amendments to the historic tax credit since 1986, John Leith-Tetrault, President of the National Trust Community Investment Corporation, founded the Historic Tax Credit Coalition (HTCC). Made up of the most experienced companies and best minds in the industry, the Coalition boasts more than 60 companies including developers, investors, syndicators, attorneys, accountants and historic consultants.

Given that so few current members of Congress were in office in 1986 when the historic credit was made permanent in the tax code, it should come as no surprise that the major challenge facing the Coalition is simply education. Most members either don’t know the program exists or have no sense of the role it has played in the revitalization and stabilization of their communities. In meeting after meeting on Capitol Hill, some version of the refrain “Yeah, I know that building. I had no idea their project used historic credits” has been heard repeatedly.

In addition to Coalition’s activities, the National Trust for Historic Preservation has made protecting the historic tax credit its number one legislative priority over the past few years.  HTCC is working with the Trust’s legislative campaign to assemble sophisticated, state-of-the-art advocacy efforts on Capitol Hill and in state legislatures to educate lawmakers about the value of the historic credit in their states and communities, and to advocate for protecting and strengthening the program. Together, they have created tools, targeted at key members of Congress, that include:

  • Advocacy pieces, like Catalyst for Change—The Federal Historic Tax Credit: Transforming Communities as well as maps of states and Congressional Districts showing all historic tax credit projects for the last ten years for use in visits to Congress members on tax-writing committees.
  • Coordination of Washington, DC fly-ins, lobby days, and project visits to educate members of Congress and their staffs about projects in their states and districts, as well as the catalytic effect of those projects on surrounding communities. Over the past three years, more than 1,000 Capitol Hill visits and 50 in-district/state site visits have occurred.
  • Targeted messaging to key members of Congress, including local newspaper editorials and letters to the editor in key Congressional districts and states.
  • Presentation of the annual “Preservation’s Best” awards presented on Capitol Hill to highlight historic credit projects in key states and Congressional districts In coordination with NH&RA’s J. Timothy Anderson Awards for Excellence in Historic Rehabilitation (“The Timmys”).

This campaign has clearly borne fruit in terms of educating members of Congress and their staffs about the economic revitalization and job-creating value of the credit and there is a greater sense today than at the time the Coalition was founded that Congress will not intentionally target the HTC.

The danger is that under certain tax reform scenarios this program will be swept out of the code with all the “carve-outs and loopholes” that many politicians are calling to eliminate. “I don’t believe that as a matter of public policy the historic credit is at risk,” says Patrick Robertson of FTI Consulting, the advocacy firm engaged by the Coalition to work on Capitol Hill. “The real danger is that to reach the lower corporate tax rates some in Congress are targeting, the historic credit would need to be eliminated along with a lot of other credits and deductions.” John Leith-Tetrault adds, “There are a lot of arguments about the likelihood of tax reform ever actually happening, but I believe even the possibility of reform requires vigilance on the part of the industry.”

Historic Boardwalk Case
While protecting the historic credit from tax reform efforts remains the primary proactive focus of the Coalition, it has also played a leadership role in reacting to events that have unexpectedly hit the industry, including a critical event that rocked the historic rehabilitation world a few years ago.

In the widely-reported 2012 decision of the Third U.S. Circuit Court of Appeals, Historic Boardwalk Hall LLC v. Commissioner of Internal Revenue, the court disallowed historic tax credit allocation to a project’s institutional investor. The Coalition coordinated the industry’s best legal experts in providing input to the IRS in what eventually resulted in Revenue Procedure 2014-12. While project investments in the industry were essentially frozen after the court’s decision, the “safe harbor” features of the revenue procedure allowed the investment community to go forward, confident that new deals structured within the rules of the revenue procedure would not be challenged by the IRS.

Deals are continuing now, but without the Coalition’s active leadership and communication with the IRS, the realities of the post-Boardwalk era might have been very different. “I was enormously proud of the Coalition’s attorney members in dealing with Historic Boardwalk’s fallout,” recounts John Leith-Tetrault.  “This was highly technical tax law being discussed with IRS lawyers, and not only did our members provide sound and sophisticated legal advice, but we were also able to impress upon the IRS how critical it was to get this guidance right and to get it out quickly so these rehab projects could continue moving forward.”

CRA Credit in the Banking Industry
Under the Community Reinvestment Act (CRA), the federal government agencies that regulate the U.S. banking industry require that banks invest in low- and moderate-income communities where they do business in order to encourage community revitalization and job creation. Banks have always made up an important part of the historic credit investor community, and have received CRA “credit” for those investments. In response to recent outreach by the agencies relating to how CRA credit is allocated, the Coalition is encouraging them to place increased emphasis on use of the historic tax credit to meet CRA goals, and thus provide a greater incentive for the banks to invest in historic credit deals. “We hope that this new CRA guidance will clarify when the historic tax credit qualifies for CRA. If it does, we expect to see greater demand for the credit among banks,” said Leith-Tetrault.

Treatment of 50(d) Income in the Master Tenant Investment Structure
The Coalition’s attention has also been drawn to an impending regulatory change by the IRS on the treatment of 50(d) income in a master tenant transaction that may have an impact on the historic tax credit rivaling Historic Boardwalk Hall. In a master tenant structure, there are certain additional tax benefits that accrue to the investor that are not available through a direct investment in the real estate. From discussions with the IRS, the Coalition has learned that the IRS may want to even out the tax outcomes of both structures. The Coalition has submitted written comments and participated in face-to-face meetings with the IRS to defend the industry’s accounting practices on master tenant transactions and provided input to the expected new regulations.

On federal historic tax credit issues, the HTCC is remaining vigilant and proactive in its mission to improve and expand the use of this important economic tool. Thankfully, we have a good story to tell, but in the current political climate with the risk of sweeping “all-or-nothing” reforms, industry stakeholders must continue to promote the merits of historic tax credits to generate jobs, contribute to local economies, and revitalize urban and rural communities.

To join and support the activities of the Coalition, visit

Bill MacRostie is based in the MHA DC office where he advises clients on historic rehabilitation tax credit design and regulatory issues. From 2000 to 2003, Bill was the Washington, DC principal of a national historic consulting firm. From 1997 to 2000, he was National Director of Historic Property Services for Ernst & Young LLP where he advised developers, institutional investors, and equity syndicators on historic certification matters. While at E&Y, Bill originated historic credit investments for the firm’s corporate and institutional clients. Bill has also worked for Langelier Historic Properties, Inc., an equity syndication firm specializing in rehabilitation development, and served as an architectural historian on the staff of the Technical Preservation Services Division of the National Park Service in Washington, DC where he performed historic tax credit project review. In private practice for more than 30 years, Bill has advised clients nationwide on projects ranging in size and type from the multi-phased $175 million mixed-use Stroh’s Riverplace project in Detroit, Michigan to a $1.5 million hotel rehabilitation in Santa Rosa, California. He has represented clients in over two dozen tax certification administrative appeals in Washington, DC. For the 14 years that NPS certification project review was conducted in regional offices, Bill worked extensively in every regional office and most major states around the country. Bill has lectured widely on the subjects of historic rehabilitation and real estate development. His speaking credits include the nationwide, 21-city “Rehab for Profit” seminar series on historic rehabilitation development co-sponsored by the National Association of Realtors and the National Trust for Historic Preservation, as well as testimony before the Committee on Ways and Means of the US House of Representatives. Bill’s recent publications include articles in Urban Land Magazine, Multi-Housing News, Affordable Housing Finance Magazine, and the Section 42 Report. Bill serves on the board of directors of the National Housing & Rehabilitation Association and is a past treasurer of the board of directors of Preservation Action, the national lobby for preservation and rehabilitation. Bill holds a Bachelor’s degree in History from Lewis and Clark College in Portland, Oregon and a Master’s degree in Historic Preservation Studies from Boston University.