Historic fixer-uppers could again see state tax credit

It wasn’t a beautiful sunset. At least not for folks who were renovating old buildings and houses when the state’s historic structure rehabilitation tax credit reached its sunset in mid-2022 and became no more.

An extension of the credit was part of the tax bill agreed upon by a conference committee in 2022, but it never came to a final vote. So those working on projects that had been approved by the National Register of Historical Places and the State Historic Preservation Office were suddenly on the hook for 20% more of their project’s cost than expected.

But that tax credit could rise again.

Deputy State Historic Preservation Officer Amy Spong testifies before the House Taxes Committee Feb. 14 in favor of a bill to expand the historic structure rehabilitation credit. Rep. Cheryl Youakim, right, sponsors the bill. (Photo by Catherine Davis)

Sponsored by Rep. Cheryl Youakim (DFL-Hopkins), HF1488 would revive the refundable credit, which is equal to 20% of qualified historic rehabilitation expenditures. First signed into law in 2010, it was designed to parallel the existing federal rehabilitation tax credit, also offering project investors the option of a grant in lieu of a credit.

On Tuesday, the proposal, as amended, was laid over by the House Taxes Committee for possible omnibus bill inclusion.

“A University of Minnesota Extension report on the economic impact of projects leveraged by the Minnesota Historic Rehabilitation Tax Credit concluded that every dollar of the tax credit brings $9.90 back to the state,” Youakim said. “That’s in the form of expanded property tax and increased income taxes on the folks working the jobs.”

The chief change from the previous state credit would be that, instead of five annual installments, it would be received entirely in the year the rehabilitated structure is placed into service.

The Department of Revenue estimates reinstating the credit will cost the General Fund $31.5 million in fiscal year 2024, then $35 million each year through fiscal 2027.

“Over the 12 years that we’ve had a historic tax credit in Minnesota, we’ve approved 193 projects,” said Amy Spong, the Department of Administration’s deputy state historic preservation officer. “We’ve been averaging just over a dozen projects a year.”

The bill would reinstate the credit effective July 1, 2023, allowing the State Historic Preservation Office to allocate credits on or after that date. There is no sunset.

While all committee members who spoke said they support the bill, Rep. Kristin Robbins (R-Maple Grove) doesn’t like that it would repeal the sunset provision. Youakim replied that other parts of statute call for an eight-year sunset on all tax expenditures, so that aspect of the bill would have to be negotiated as the omnibus tax bill is assembled.