The Minnesota Historic Tax Credit: What is it, who’s eligible

An infograph showing the economic impact generated by the Minnesota Historic Rehabilitation Tax credit. The information highlights the impact over fiscal year 2021, and overall since the passing of the tax credit in 2010. Source: SHPO website 2021 economic impact report

For those involved in the historic structure rehabilitation scene, a potentially significant change may be on the horizon. The extension of the Minnesota State Historic Structure Rehabilitation Tax Credit, failed to pass before the state legislature adjourned on May 23, and is set to sunset after June 30 if a special session does not take place. The tax credit is a part of the Omnibus Tax Bill.

According to the Minnesota Department of Administration State Historic Preservation Office’s website, the tax credit, which mirrors the federal version which passed in 1966, offers a 20% state tax credit for qualified historic rehabilitations. Additionally, it offers project investors the option of a grant in lieu of a credit loan, whichever option is best suited to a developer’s tax situation, in order to maximize the efficiency of the public dollars assisting the project.

The program, which requires an application with the State Historic Preservation Office (SHPO) before work begins, has multiple requirements including: the property must be a certified historic structure by either being a building listed on the National Register of Historic Places or certified as contributing to a Registered Historic District; the owner must submit an application to the SHPO before any construction begins; the project must meet the substantial rehabilitation test; the project plans must be approved by the National Park Service (NPS) and certified as meeting the Secretary of the Interior’s Standards for Rehabilitation; the completed work must be approved by NPS and allowed the federal tax credit; and the completed project must be income-producing.

The credits, according to the website, must be claimed over a five year period rather than as a single pay-out, and it is recommended that those looking to use the tax credit should consult their tax professional first.

Statewide in 2021, 34 developers submitted applications, a record high for the program according to an economic impact report featured on the SHPO website. Project developers last year spent $890 million to complete their projects, and the projects will generate an estimated $1.4 billion of economic activity in the state and $693.4 million in labor income. The credit, the report says, will support 9,660 jobs and every dollar of tax credit created $11.30 of economic activity in the state of Minnesota. Additionally, construction of the projects is expected to repay 50 percent of the credit cost immediately upon completion through increased state and local tax collections. 

Projects that have been in progress from fiscal year 2011 (after the passing of the tax credit in 2010) to fiscal year 2021, have generated an estimated $5 billion in economic activity in the state, and has supported 28,480 jobs and $1.9 billion in labor income.

According to Amy Spong, the Director and Deputy of the State Historic Preservation Office, the state tax credit was applied for and used only once in Pipestone, by the Calumet Hotel, in 1983. Since then, no other developers or other entities have applied. Still, local organizations like Reclaim Community of Jasper, are urging for those who may be eligible for the tax credit to contact their local representatives, and encourage them to come back for a special session to pass the Omnibus Tax Bill, and in turn, the historic tax credit.

Elicia Madetzke Kortus, the founder and president of Reclaim Community, said that despite the significant impact that the tax credit has had on the state’s economy, not enough community members have contacted their legislators to express the importance of credit.

“Not enough community members have contacted their legislators to tell them how important it is, because they left a session without passing any bill,” she said. “The only hope is that they go into a special session.”

Kortus said from what she has researched and seen, the tax credit is one of the best job creators for Minnesota and the fact that it didn’t pass was senseless.

“It is so ridiculous that it hasn’t been passed, because it has strong bipartisan support,” she said.

At a larger level, organizations like Revitalize Minnesota, a nonprofit organization that is working to create jobs and rebuild communities through preserving the state’s tax credit, have been urging supporters to contact their legislators about a special session, and rallied on the steps of the state capitol on Friday, calling for state legislators to do the same, according to their social media.

According to Senator Bill Weber, the Historic Tax Credit has been used in this senate district by a number of communities and it is used in conjunction with the federal credit to help make historic renovations and usage more affordable.

“Such restorations are some of the more expensive projects that occur,” Weber said. “Thus, this program has had strong support from the historical community as well as the construction trades who employ people to do this work.”

Weber said that it is doubtful that the governor will call a special session only for the historic tax credit.

“The credit extension was part of a larger tax bill,” he said. “There were a total of eight articles which had been individually approved. These articles included not only this credit but eliminations of state SS benefits, a rate reduction, property tax reforms, local sales tax options and many other items.”

The only thing left to do, Weber said, was to have the committee meet to pass the conference report with those items and forward it to the House, which must act on a final tax bill first. House conferees, Weber said, were not allowed to attend the ‘final meeting.’

“The governor and speaker refused to allow the house conferees to attend the final meeting at which we would have passed the conference report,” he said. “They did not allow this because an agreement wasn’t reached on spending bills and as they really didn’t want the amount of money to go back to taxpayers as was included in the tax bill, they will not allow it to go forward without all of their other spending. I do doubt however that they were truly serious. The House HHS conferees never made a proposal within the spending limits agreed to by leadership until the afternoon of the final day. They seemed to have a problem figuring out that a billion dollars is not $1.6 billion or $1.3 billion or some other larger number.”

As to whether or not the tax credit could be extended or a special session will be called, Weber said he’s not holding his breath.

“Should I be surprised, and a special session be agreed to, I believe that those elements included in the original tax bill will come back,” he said. “However, I am not holding my breath.”