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• Preservation Tools: Questions about Virginia's Historic Rehabilitation Tax Credit Program

Legislative News

Preservation Virginia is monitoring the recent ruling by the United States Court of Appeals for the Fourth Circuit Court>

Dear Friend:

As a supporter of historic preservation, I want to share with you important information regarding the Commonwealth of Virginia’s historic rehabilitation tax credit program. Preservation Virginia is joining with colleagues at the National Trust for Historic Preservation, the National Conference of State Historic Preservation Officers and others to express concern about a March 29, 2011, decision by the United States Court of Appeals for the Fourth Circuit.

The Fourth Circuit’s ruling is of great concern to the business and preservation communities in Virginia and elsewhere around the country and could potentially have devastating impacts for historic places and communities. The appeal arises from a favorable Tax Court decision that upheld the ability of partnerships formed for the purpose of rehabilitating historic properties to leverage historic rehabilitation tax credits as an investment tool. The IRS appealed this decision to the Fourth Circuit Court, which reversed. Notwithstanding the Commonwealth of Virginia’s Historic Rehabilitation Credit Program, which allows investment partners to allocate credits amongst themselves as they “mutually agree,” the Fourth Circuit re-characterized the allocations as taxable income. The decision could have the consequence of IRS review of partnership projects going back six years and possibly assessing additional taxes related to those projects.

You are well aware of the multiple benefits of the historic rehabilitation tax credit program. In 2009, we celebrated the tenth anniversary of Virginia’s program with the release of a report commissioned by the Virginia Department of Historic Resources and conducted by Virginia Commonwealth University. The report showed that $952 million had been leveraged by the tax credit program and that investment created:

• an estimated $1,595 billion in total impact to Virginia

• 10,769 full and part-time jobs in other sectors

• $444 million in labor income and

• $46 million in state tax revenue

The unintended harm by this ruling is having a chilling effect because of the questions it raises about the use of historic rehabilitation tax credits in partnerships. Some future projects already are on hold.

With our colleagues, Preservation Virginia is requesting reconsideration of the Fourth Circuit’s decision. We will share with you developing news of this subject and its impact on historic places across the Commonwealth.

For more information , please see the following links

National Trust for Historic Preservation

Virginia Department of Historic Resources

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