State Historic Preservation Office
Historic Preservation Tax Credits:
Making a Difference in North Carolina

In North Carolina, historic preservation rehabilitation activity provides jobs, bolsters the tax base, and utilizes existing infrastructure therefore mitigating "sprawl" and saving taxpayers' dollars while preserving the state's unique historic character. An essential component of these preservation efforts are the tax credits for the rehabilitation of designated historic structures. Entire neighborhoods, towns and cities across the state benefit from these incentives. Like the federal commercial rehabilitation tax credit which has been in place since 1976, the North Carolina historic preservation rehabilitation tax credit serves to return a sense of pride and optimism to communities large and small, rural and urban across North Carolina.

The positive impact which historic preservation has on the state was recognized and supported when the 1997 North Carolina General Assembly voted to provide new state tax credits to taxpayers rehabilitating historic buildings for their own homes and to increase the incentive to rehabilitate commercial historic structures. Those state tax credits were promoted in a 1996 legistlative study commission report on downtown revitilization. The legistlation establishing the historic preservation tax credits passed the Senate on a unanimous vote and passed the House by a vote of 107-2, demonstrating the broad base of support across the state for historic preservation. Senator Hamilton Horton of Winston-Salem, a principle advocate of the 1997 legistlation, recently reiterated his support for the historic preservation tax credits saying, "It's been an explosion of interest that we didn't anticipate and are delighted at. It keeps us from destroying things that are part of the historical fabric that makes North Carolina what it is." Charlotte Observer, March 18, 2001.

Almost as many projects, with more private investment, were undertaken in North Carolina the first three years of the expanded state credits than occurred in the first twenty years of the federal tax credit. Almost 675 income-producing tax credit projects, with a construction cost of approximately $280 million, were completed in North Carolina between 1976 and 1997 using federal tax credits and a smaller state tax credit instituted in 1994. Following the introduction of the 1998 expanded tax credit program, the State Historic Preservation Office has reviewed 586 proposed historic preservation rehabilitation projects with an estimated total cost of $305.6 million.

An econometric model developed by The Bureau of Economic Analysis of the U.S. Department of Commerce measures the impact of an economic activity with respect to number of jobs created, impact on household income, and total impact on the economy. According to the input-output multipliers for North Carolina, historic preservation projects supported by state tax credits from 1998 through 2000 will generate approximately 12,650 new full-time jobs, add $672.4 million to the state's economy, and add $244.8 million to the household incomes of North Carolinians.

Profiting from the Past: The Impact of Historic Preservation on the North Carolina Economy, the 1997 study funded by Carolina Power and Light and published by Preservation North Carolina, documents the dynamic role that preservation plays in the North Carolina economy. Preservation is a powerful tool creating jobs, generating income, stimulating tax revenue, nurturing tourism, and enhancing older cities. The study measured the tax impact of the federal historic rehabilitation tax credit program and illustrated the economic benefits outweighed program costs when income taxes paid by construction and other workers, business income taxes, and other taxes were taken into consideration. The $93.4 million cost to the federal treasury in 1995 was more than offset by $125.24 million in federal tax revenue. Thus, it may well be "penny wise and pound foolish" to repeal the North Carolina rehabilitation tax credit program that spurs needed and beneficial economic activity. In addition, increase property values of rehabilitated buildings clearly results in greater local property tax revenue for local government.

In addition to the positive economic benefits of historic preservation, the historic preservation rehabilitation tax credits encourages the reuse of the existing buildings, reducing the need to expand public services and infrastructure. Preservation and reuse of existing resources, including historic structures, is a strong component of state initiatives such as Smart Growth that promote the reduction of urban sprawl and Project Green that encourage environmental sustainability. Reusing, rather than replacing existing structures, supports both historic preservation and sustainable conservation principles. The continued or adaptive use of hundreds of historic buildings and houses avoids overburdening landfills, avoids extracting natural resources for new construction and building materials, reduces the need for new infrastructure, and preserves open space.

As important as all the economic and environmental benefits, the North Carolina historic preservation rehabilitation tax credits help the citizens preserve and care for the state's communities and the neighborhoods they love. In annual surveys conducted by the National Park Service on the income-producing tax credit programs, property owners have indicated that the majority of projects completed under this program would not have been done otherwise. There is nothing to suggest that the North Carolina experience with the use of historic preservation rehabilitation tax credits would be different. Citizens have used the historic preservation tax credits to rehabilitate historic buildings in 70 of the 100 counties. These tax incentives are important tools for the preservation and conservation of North Carolina historical resources in communities large and small, rural and urban, across the state.

* Reproduced from the April, 2001 revision of this document.
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