Buffalo’s revival could grind to a halt if President Trump’s vow to make the tax code simpler means eliminating federal tax credits.
Buffalo and other communities across New York State risk losing a vital tool for revitalizing underutilized historic buildings if the federal historic tax credit and New Markets incentives for reinvesting capital in creating jobs in distressed areas disappear.
This would not be a way forward. The rehabilitation of these historic structures would remain out of reach for developers who need these tax credits to close financial gaps.
As News Washington Bureau Chief Jerry Zremski recently wrote, federal historic tax credits have been used to help finance 65 major development projects in the Buffalo area: the Hotel @ the Lafayette, the Guaranty Building and the H.H. Richardson Complex, among others.
The office of Rep. Brian Higgins, D-Buffalo, “calculated that in total, the historic preservation credit has helped fund more than $406 million in development in the region over the past 15 years.”
Congress instituted in 2000 the New Markets Tax Credit in an effort to improve impoverished neighborhoods. It helped fund one of the buildings at Larkinville, the Scott Bieler Clinical Sciences Center at Roswell Park Cancer Institute and 11 other local projects. The value comes in at a total of more than $182 million.
The Historic Preservation Tax Credit gives developers a 20 percent federal tax break on projects of historic significance; the New Markets credit offers up to 39 percent.
Giving him the benefit of the doubt, the president is being misled about the dire consequences of ending the tax breaks. Instead of creating a cleaner tax code, it will grind to a near halt the redevelopment of high-need areas.
There is one sliver of hope. Although Trump has insisted that he wants to get rid of tax breaks to simplify the tax, he has made no mention of either the historic preservation tax credit or the New Markets tax credit in a one-page tax reform outline.
Conservative think tanks such as the Heritage Foundation insist that tax credits encourage government interference in economic decisions that are better left to the free market, thus giving certain companies or developers an advantage. Trump should tune them out and listen instead to opinions from a close ally, Rep. Chris Collins, R-Clarence, as well as Rep. Tom Reed, R-Corning.
Reed has witnessed the power of the New Markets credit in his own district. The $4.8 million in net funding for Jamestown’s new National Comedy Center is a boon to economic development there.
The congressman sits on the House Ways and Means Committee, which must approve any tax reform effort. Reed said he will fight to keep the program alive, while adding his strong belief on the return on investment brought by the low-income housing tax credit, along with the historic tax credit.
Collins feels the same. He pointed out the economic infeasibility of rehabilitating old buildings without the credit. As he said, these are incentives that work.
Senate Minority Leader Charles E. Schumer and Sen. Kirsten Gillibrand, both New York Democrats, have been strong in their support of New Markets and federal historic tax credits. In 2014, Schumer was sponsor of a bipartisan bill to extend the New Markets credit and make it permanent. Higgins also called for permanent extension of the credits.
Schumer, Higgins and Gillibrand are co-sponsors of the bipartisan Historic Tax Credit Improvement Act of 2017, enhancing the program and making it more effective in the rehabilitation of small and mid-sized buildings and increasing the credit to 30 percent for projects whose “qualified rehabilitation expenses” do not exceed $3.75 million.
The credits should be protected, not eliminated. Our developer-president should understand that better than anyone.