Republicans look to ax tax credit that Reagan embraced and Trump sought

Rep. Tom Reed, R-N.Y., listens as he sits next to a stack of IRS Code volumes as the House Ways and Means Committee begins writing the GOP's far-reaching tax overhaul.
Rep. Tom Reed, R-N.Y., listens as he sits next to a stack of IRS Code volumes as the House Ways and Means Committee begins writing the GOP's far-reaching tax overhaul. AP

Ronald Reagan put the historic tax credit into the U.S. tax code. Donald Trump’s company tried to use it.

Now Republicans are fighting to get rid of it.

Once crumbling reminders of the past, nearly a dozen glitzy Art Deco hotels along Miami Beach have benefited from the credit, which could be wiped out in the Republican tax bill. Well-known landmarks throughout America have also taken advantage of the break, from San Francisco’s famed Ferry Building to Asheville, North Carolina’s Grove Arcade and a horse barn at the Biltmore Estate.

It’s a tax credit that’s been used for 40 years to help spark the rebirth of old, historically significant buildings as well as often neglected communities. At one point The Trump Organization applied for the federal historic preservation tax credit for its Washington hotel.

Now, history buffs, developers and preservationists nationwide are banding together in hopes of fending off the push to end the tax credit.

And they’re invoking the Republicans’ most enduring modern historic figure, Reagan, who signed legislation making the provision a permanent part of the tax code in 1986.

“We have a limited supply of historic buildings and we want to make it viable economically to preserve them,” said Melissa Wyllie, executive director of the non-profit Florida Trust for Historic Preservation. “From a development standpoint this tax credit can make the difference between preserving a building or starting from scratch, and potentially demolishing one.”

Republicans say they are trying to trim such tax breaks as part of their effort to deliver across the board tax relief.

“With the lowest tax rates in modern history for American businesses of all sizes, this legislation will allow our local job creators to keep more of their earnings to invest as they see fit — including in local revitalization projects,” said Shane McDonald, House Ways and Means Committee spokesman.

Rep. Tom Rice, R-S.C. a member of the committee, said that in his 25-year career as a tax attorney he took advantage of the historic preservation tax credit, and knew others in South Carolina who did as well.

He cautioned, however, that sacrifices would have to be made in crafting a final product, and not every credit can be spared. The committee spent a second day Tuesday writing the tax legislation. It’s expected to approve the bill later in the week, with a House floor vote likely next week.

Repeal of the historic tax credit is likely to make it into the Senate version of the tax bill, which could be released this week.

"It's a billion dollars, so I think we're looking at it right now, and I would imagine it makes it through the cut," said Sen. Tim Scott, R-S.C., who is playing a leading role in negotiating the Senate GOP tax bill. “We're going to try to be ... strategic, in a broad brush, on the largest expenditures that provide the most revenue so as not to have the simple fight over little things."

Since it began, the program has preserved more than 42,000 historic properties across the country, with the owners earning a 20 percent income tax credit after all the work is completed, according to the National Park Service, which runs the program.

The tax credits are only available for properties used for businesses or income-producing means and the National Park Service must certify the building as a historic structure.

This isn’t the first time Congress has targeted the tax break.

Sen. James Lankford, R-Okla., highlighted it in a 2015 report, Federal Fumbles, which documented what he termed examples of wasteful federal spending. At the time, the Trump Organization was seeking a $40 million tax credit for its work in renovating a historic post office in Washington, D.C., now home to the Trump International Hotel. The company has not completed the final application to receive the tax credit, according to federal records.

Lankford cited the use of the credit for what was said to be “the most sought-after hotel redevelopment opportunity in the country” and charged that the break has “repeatedly been used to offset the massive price tags for megaprojects,” including Boston’s Fenway Park, home of baseball’s Red Sox.

He argued that eliminating the credit would not prevent states and localities from starting or expanding their own historic preservation efforts.

Preservation advocates, however, point to far smaller projects in towns and cities across the U.S. that have benefited and note that lenders are often not interested in sinking money into blighted areas.

“If not for this credit, I could not have done any of what I did without going broke,” said Bill Hart, who developed historic properties in his St. Louis neighborhood and now serves as executive director of Missouri Preservation. “Sometimes it was the only thing that kept me from losing money.”

Preservationists argue that the program pays for itself with construction jobs and by sparking renewal in neglected neighborhoods. A report by the National Park Service and Rutgers University, found that the benefits were “extensive, increasing payrolls and production in nearly all sectors of the nation’s economy.”

Though Charleston, S.C. has become a model of historic preservation, Michael Bedenbaugh, executive director of Preservation South Carolina, said the federal tax credit program benefits smaller towns with once-bustling Main Streets that were emptied out by businesses moving closer to highways. Charleston has no problems attracting capital, he said, but smaller and rural towns do.

“The majority of banking and financial institutions tend to aim at the new and mistrust the old,” Bedenbaugh said. He found the tax credit has created a class of developers who are “bringing money back to places that were empty, abandoned and rotting. Now they are filled, alive and and contributing.”

He pointed to the renovation of the mammoth Palmetto Compress Warehouse in Columbia, S.C. as an example.

Emma Dumain contributed to this report.

Lesley Clark: 202-383-6054, @lesleyclark