How to Bring Stunning Historic Buildings Back to Life with Tax Credits with Elizabeth Rosin – Ep. 35

About the Guest

I am beyond thrilled to share this next conversation with all of you! Elizabeth Rosin is the Principal and CEO of Rosin Preservation, located in Kansas City. Elizabeth came into the field of historic preservation through the study of archaeology, earning her undergraduate degree from Northwestern University in anthropology and geography. The buildings that emerged from the confluence of people and place intrigued her. This interest spurred her to pursue a Master of Science in Historic Preservation at the University of Vermont. Since graduating in 1990, Elizabeth has held positions in both the public and private sectors that have involved her in historic preservation projects throughout the United States. In addition to the survey and designation of numerous historic resources, she has consulted on over 100 historic tax credit projects representing over $1 billion of National Park Service-approved rehabilitation. National, state and local entities have conferred preservation awards to numerous of these projects. In 2014 Elizabeth was recognized as Preservationist of the Year by the American Institute of Architects – Kansas City Chapter.

On every job, Rosin Preservation contributes practical rehabilitation strategies and design direction appropriate to the nature and complexity of the project. They actively guide clients through regulatory processes triggered by local, state and/or national preservation law. By connecting clients to legal and accounting expertise and to tax credit investors, they help to ensure that each rehabilitation project has the most effective team to achieve a successful outcome. Rosin Preservations intimate understanding of the preservation process, the players and the rules and regulations enables their clients to accurately anticipate the time, costs and hurdles required to complete a successful project.

In this episode, we discussed the process of obtaining historic tax credits, the most challenging aspects of obtaining these credits, and the various benefits there are to obtaining these types of tax credits. There is tons of great information in this episode and I greatly appreciated Elisabeth for taking the time out of her busy schedule to discuss this topic of historic tax credits with me.

Main Take-Away’s From This Show

When someone is passionate about a subject, you can really tell. It was easy to hear in her voice, that Elizabeth is very passionate about what she does. There is no doubt about that. She definitely knows her stuff when it comes to historic preservation and historic tax credits. There were several great anecdotes that she shared throughout the discussion, so it is extremely hard to just pick three for my main take-away’s this week. The following main topics of the show come from a deep understanding in the process of obtaining historic tax credits and the inherent value there is in understanding their benefits in your future real estate development endeavors.

The Historic Tax Credit program has incentivized the rehabilitation of thousands of properties since it’s establishment in 1976.
When coupled with the state programs, the historic tax credits could provide a tax credit of 40% to 50% of the value of the approved qualified expenditures.
There is a certain hierarchy of improvements that are looked on more favorably then others when preparing the design for a HTC project.

As always, I will dig into each of these “take-away’s” every week on the blog. So, without further a due, here we go!

The Historic Tax Credit program has incentivized the rehabilitation of thousands of properties since it’s establishment in 1976.

The Historic Tax Credit program has been one of the most successful federal tax incentive programs of recent history. According to the National Conference of State Historic Preservation Officers, “since its inception, the tax credit has resulted in the preservation of more than 45,000 buildings and generated over $102 billion in estimated rehabilitation investment. In 2019 alone, 1,042 completed projects generated $5.7 billion in rehabilitation work and created 172,416 low and moderate income housing units.” This is incredible to say the least.

In order to obtain the tax credits, it’s extremely helpful to truly understand the history and intent of the federal historic tax credit. The current tax incentive for preservation was established by the Tax Reform Act of 1986. The National Park Service (NPS) administers the program with the Internal Revenue Service (IRS) in partnership with State Historic Preservation Offices

The intent of the historic tax credit program was to promote the rehabilitation of historic structures at its core, as these structures are the links to our past as a society. The tertiary benefits of rehabilitating these historic structures includes the following:

Increased private investment in the urban core.
Increased property values in these areas.
Maintains the individual characters of the various cities and towns.
Increasing jobs in the area.
Increased revenues in these areas for local governments due to increased property tax generation.
And much more.

When you understand the implications of the tax credit and the numerous benefits that come from the program, you begin to understand the importance of this program in preserving our historical structures.

When coupled with the state programs, the historic tax credits could provide a tax credit of 40% or more of the value of the approved qualified expenditures.

As you probably already know, there are many challenges that arise when repurposing or redeveloping existing historic structures. In order to do so, you must bring the existing structure up to current code which could involve updating the electrical, plumbing, fire suppression, etc… This can be a very expensive proposition to say the least.

The Federal government understood this. The government also understands that in order to obtain a certain outcome from the private sector, certain incentives need to be formulated. One way they do this is through tax credits. According to Investopedia.com a tax credit is “an amount of money that taxpayers can subtract from taxes owed to their government. Unlike deductions and exemptions, which reduce the amount of taxable income, tax credits reduce the actual amount of tax owed.”

This is huge when we’re discussing the financial feasibility of a redevelopment project. The government understood that there was a burden to investors and developers to redevelop historic buildings due to increased costs for doing so. Therefore they are providing the tax credit, which as mentioned above is a dollar-for-dollar reduction in taxes-owed, to help offset the increased expenses. If you are in a state that also provides historic tax credit incentives, you could potentially obtain tax credits of 40% or more of the total qualified expenses needed to redevelop the property when coupled with the federal historic tax credit.

There is a certain hierarchy of improvements that are looked on more favorably then others when preparing the design for a HTC project.

This last take-away is somewhat intuitive but most likely could reduce a lot of headaches. When you have a professional on-board that understands the hierarchy of elements to the structure you are improving, you can begin to prioritize expenses in order to obtain the credit. This allows you to focus on attributes that will most likely provide a return on your investment.

As Elizabeth mentioned on the show, the front of the structure is more important than the rear. The common areas and public spaces within a building are far more significant than the private areas when applying for the credit. As soon as you understand and recognize these hierarchies, you can begin to deploy capital to the areas that will generate the greatest returns.

As you can see from the take-aways above, this podcast episode was full of amazing information on the topic of historic tax credits and the opportunities they provide to create desirable spaces and absolutely provides actionable steps you can take on your next historic re-development project. As always, if you have enjoyed the content and the show, please subscribe to the show below and share with your friends! We’ll have many more great discussions on the shows to come.

To Learn More About Elizabeth Rosin and Rosin Preservation, Check out the Following Websites:

For more on Historic Tax Credits, check out Episode 24 with Dak Hatfield to give you a perspective on funding your deal utilizing the benefits of Historic Tax Credits.

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