Historic Tax Credits, Broken Down

The collective benefit of the Louisiana Rehabilitation of Historic Structures tax credit extends far beyond a single project.

St. Francisville is justifiably famous for the warmth of its hospitality, its stately architecture, and closely-held history. Tourists from near and far flock to West Feliciana parish to enjoy the tranquil beauty of the landscape, and the friendly, small town spirit that prevails even as the community continues to evolve and grow. Hardly surprising, then, that St. Francisville has experienced a wave of small businesses openings in recent years. Along Ferdinand Street, local storefronts like Away Down South and District Mercantile are flourishing within transformed historic properties. Efforts are ongoing to save the Old Benevolent Society building on Ferdinand Street, which housed the area's oldest Black burial insurance lodge. Standing at the corner of Ferdinand and Commerce streets, up-and-coming craft brewery Bayou Sara Brewing Co. aims to be pouring pints from the old Bennett Ford dealership by late 2022. It will be shoulder-to-shoulder with North Commerce, a multi-use development in the works from Don and Susan Charlet, the St. Francisville family who run The Corbel, a custom furniture and architectural salvage retailer. Across the street from the St. Francisville Inn at the old Rinaudo’s Hardware site, the diverse space will include the microbrewery, a wood-fired pizza restaurant, an event space, 10 boutique hotel rooms, and retail offerings including: a mens clothing shop, an outdoor furnishings storefront, The Corbel, Barlow Fashion, Charlet Brothers Custom Furniture, and even more surprises. One factor contributing to this exciting new wave of growth? Louisiana's Rehabilitation of Historic Structures Tax Credit.

Tax subsidies might seem an intimidating subject for the small business owner to tackle. But don’t worry: you don’t need to be a tax attorney, accountant, or banker to benefit from tax credit programs. Dare Powers, Director of Tax Incentives for Didier Consultants, Inc. and a longtime St. Francisville resident, breaks this complicated-sounding topic down into easy-to-understand terms. Founded by Powers and Belton Didier in Zachary, Didier Consultants runs the largest Louisiana tax incentive practice in the state.

“Tax incentives are a critical tool for bolstering economic and community development,” Powers says. Created in 2002 by the Louisiana Legislature, Louisiana’s Rehabilitation of Historic Structures Tax Credit has helped to revitalize neighborhoods and communities across the state by encouraging private sector investment in local economies, leveraging more than $350 million in private reinvestment in Louisiana’s downtown development districts and cultural districts.

Restored historic buildings are being rehabilitated to house many kinds of businesses, and encouraging entrepreneurs of all ages to actively invest in their communities’ futures. St. Francisville couple Danny and Skye Willis utilized the historic tax credit in 2019, when they rehabilitated a historic Victorian home located in the heart of Zachary to create Magnolia Fields, a contemporary wedding and event venue. 

The economic impact extends beyond the renovation process, too. In addition to creating jobs, generating tax revenues, and putting long-vacant buildings back into commerce, the rehabilitation of historic structures beautifies communities for residents and encourages tourism, too.

By encouraging the restoration of historic buildings, tax credits help communities preserve their architectural landmarks while also growing the local economy.

How does it work?

First, in order to be eligible for the tax credit, the property must: 

  • Be at least 50 years old
  • Produce income 
  • Be located within a state-designated cultural district or downtown development district
  • Be undergoing rehabilitation with qualified renovation expenses exceeding $10,000

Powers explains that, to be eligible, a rehabilitation project must preserve the building’s original form as much as possible. The timeline for the application process with the State Historic Preservation Office (SHPO) depends on how far along the project is, but usually the process takes about two to three months from start to finish. 

Once the SHPO signs off on the renovation plans, construction can begin. After project completion, the SHPO will perform an inspection and certify the rehabilitation, at which time the application is approved by the Louisiana Department of Revenue.

What is the value of the tax credit you receive?

Once a project has qualified for the Louisiana Rehabilitation of Historic Structures Tax Credit program, 20% of the total value of eligible costs and expenses associated with the building’s rehabilitation will be returned to the owner in the form of a dollar-for-dollar credit on state income taxes. What’s more, Powers explains, the credits are transferable, which means you don’t have to use them on your tax return. If the value of a company's credits is higher than its tax liability, the company can sell or broker the excess credits at a rate of 80 cents on the dollar. 

Is the application process worth the work?

Though the application process is labor intensive due to all of the documentation required, Powers says, the end result is undoubtedly worth the time and effort. “The benefit of receiving the credits far exceeds the work that goes into it,” Powers says. “You end up recouping 20% of your initial investment, and the program has no clawback provision, which means the state cannot take the credits back once they are issued,” Didier explains. So, if you end up adding to the property or changing it later down the line, there is no penalty.

By the Numbers

In 2017, the Louisiana Office of Cultural Development (LOCD) commissioned a study to measure the catalytic role of historic preservation projects in Louisiana during the decade between 2007—2016. Included in the analysis were rehabilitation projects that utilized the State Commercial Historic Tax Credit, the Federal Rehabilitation Tax Credit, or both. Key findings included that:

  • Close to $2.7 billion dollars have been invested in Louisiana’s historic buildings as a result of these tax credit programs. 
  • Every $1 that Louisiana provides in commercial historic tax credits spurs $8.76 in additional economic activity. 
  • Fully half of all projects receiving the credit incurred rehabilitation costs of less than $500,000, demonstrating that the historic tax credit is fundamentally a small business incentive. 

The Catalytic Impact

In town after town, the LOCD study revealed that a historic rehabilitation project tended to serve as a driver of additional investment and increased property values in the surrounding neighborhood. In addition, the study found that utilization of the state tax credit tends to go hand-in-hand with use of the Federal Historic Tax Credit—a process known as stacking credits. Add the tax advantages together with the incentive provided to revitalize historic districts while encouraging businesses back to the heart of communities—and the Louisiana Rehabilitation of Historic Structures Tax Credit turns into a tool that adds a whole lot of growth: growth that preserves our shared community heritage while also unleashing new economic opportunities in the present, and the future, too.

To learn more about how Bank of St. Francisville can help your business benefit from tourism to West Feliciana, call 225-635-6397 or click here to schedule an appointment. 

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