Historic tax credit in danger
MINNESOTA — For 11 years, the Minnesota Historic Tax Credit has created economic benefit across the state, but this credit is in danger of disappearing this year.
The Minnesota Historic Tax Credit provides 20% reimbursement of qualified cost to redevelop properties listed on the National Register of Historic Places.
To qualify for the tax credit, a project must be on the National Historic Register, it must be income-producing, and it must be a substantial rehabilitation project.
The tax credit was created in 2010 during the height of the economic recession. The tax credit was one method to stimulate building projects. The non-profit Rethos works nationwide to repurpose old buildings and sites.
Rethos Policy Director Aaron Hanafin Berg said other states had historic tax credits and there were efforts to create one in Minnesota for over a decade, but the Legislature was resistant as the credit was an added expense to the state.
The recession was the perfect environment to get the tax credit passed. It initially had a sunset date of 2015, but legislators bumped the expiration date on the tax credit to June 2021.
Every year, the University of Minnesota Extension report provides an update on the historic tax credit’s impact on the economy. The most recent report was released on Feb. 9 and shows that in 2020, the historic tax credit generated $176.5 million in economic activity, including $49.8 million in labor income.
Over 700 jobs were created in 2020, including 330 construction jobs. An average of $9.52 of economic activity was generated for every $1 spent. Projects completed in 2020 will generate an estimated $5.5 million in state and local tax receipts.
Berg said a federal historic tax credit exists, but before Minnesota approved a state-level credit, the federal credit was underused.
“When paired with the state credit, use goes up,” Berg said.
New Ulm has benefited from the tax credit. The Emerson Union Apartment project used the historic tax credit to remodel the building from a school to an apartment complex.
Heidi Rathmann, formerly a member of Community Housing Development, assisted with the Emmerson Union project. She said the tax credit was instrumental in getting the project finished and likely would not have happened without the credit.
Rathmann said the Emerson Union project was a win-win for the community. It allowed New Ulm to fix up an old building and provide community housing. The project also created several construction jobs and put the building on the tax rolls.
Emerson Union is a recent example of the tax credit at work. The Grand Center of Arts and Culture also used the historic tax credit in 2013. Rethos figures estimate that for every $1 in credits spent on the project, The Grand generated $16.
Minnesota’s Historic Tax Credit is popular and has bipartisan support in the Legislature. Bills in the state Senate and state House have been introduced to extend the sunset on the tax credit beyond 2021, but there is concern these bills will fall through the cracks with the Legislature focused on pandemic legislation.
Berg and other supporters of the tax credit are reaching out to the public to explain the importance of the credit. The hope is legislators will hear in support of the tax credit from constituents.