A bill under consideration during this year’s Legislative session would take a meaningful step in spurring millions of dollars in private investment among West Virginia’s towns, proponents say.
The one-page bill makes a small, but meaningful change to the state’s Historic Tax Rehabilitation Credit by raising it from 10 percent to 25 percent.
The result? A greater incentive for developers to acquire and redevelop historic buildings in towns and cities statewide.
The increase would make West Virginia’s tax credit consistent with Ohio and Virginia’s. Combined with the 20-percent federal historic tax credit, investors could see a 45 percent credit against their corporate or personal income taxes owed once a rehabilitation project is completed.
In the Mountain State, where finding flat land is often the first of many hurdles for prospective developers, the bill’s proponents say the historic rehabilitation market has the potential to breathe new life into West Virginia’s downtown areas.
Despite West Virginia having more than 90 historic districts around the state listed on the National Register of Historic Places, as is required to receive the tax credit, developers often overlook the state for such projects because the current 10 percent credit isn’t enough of a draw.
SB 238 was discussed during the Senate’s Committee on Economic Development meeting last week. After hearing from supporters of the bill, representatives from the state Historic Preservation Office and private developers, the committee voted to table the bill until this week.
Greg Dobur is a developer based in Charlotte, North Carolina, who primarily does student housing projects. He’s benefited from historic tax credits in North Carolina and New York.
While Dobur had been eying a building in Huntington for redevelopment into housing for Marshall University students, he said he ultimately passed on the project because of West Virginia’s lower tax credit.
“The historic tax credit increase was critical to this project if we’d moved forward on it. On a large-scale project, the investment would [have been] close to $10 million on rehabilitation,” he said.
Dobur has been in the construction business for more than 20 years, but he only began using tax credits for rehabbing historic buildings in the last year or so. The credits are the only way to make such projects work financially, he said.
“I think a lot of developers in West Virginia think this doesn’t make sense at 10 percent, but at 20 or 25 percent, then it’s probably worth doing,” Dobur added.
Historic tax credits aren’t a new phenomenon — they’ve been used for years across the state, mostly for the 20 percent federal tax credit.
Projects in downtown Charleston that have used the credits include the Lowenstein & Sons Building on Capitol Street, the Quarrier Diner building and the Hoyer building at 901 Quarrier St.
In the downtown Charleston Historic District alone, nearly 130 contributing structures are potentially eligible for historic tax credits, according to information from the State Historic Preservation Office.
There are some requirements in place that must be met for a structure to be eligible. First, it must be listed on the National Register of Historic Places or within a historic district on the national register.
A building also must be an income-producing property, whether for commercial use or residential use that generates rent payments.
The State Historic Preservation Office helps facilitate the application process for the credits, said Mike Gioulis, a local historic preservation consultant who’s a vocal proponent of the tax credit increase.
At the current rate, a developer who completes a $100,000 rehabilitation project could potentially save $30,000 in income taxes if he or she used the state and federal tax credits, Gioulis said.
Anything considered a capital expense on a building’s interior is eligible for the credit.
Developers also have the option of selling the state and federal tax credits to institutional investors.
A bank can purchase those credits from a developer to apply to its own corporate income taxes, said Marlo Long, vice president of community development at BB&T Bank in Charleston.
“In West Virginia, every community has a dilapidated Main Street somewhere. The first person on the block will never get the appraised value [they] need to renovate the building, keep it in a historic context and then get cash flow,” Long said. “The 10 percent state tax credit really isn’t enough to buffer that loss.”
The National Trust for Historic Preservation and the Historic Tax Credit Coalition track the impact of historic tax credits in each state.
From 2002 to 2015, historic rehabilitation projects produced $3.7 million in local taxes and $5 million in state taxes in West Virginia, compared with nearly $80 million in local taxes and $72.8 million in state taxes in Ohio, respectively, during the same period.
It’s difficult to measure what affect, if any, an increased historic tax credit would have on the state budget because the credits aren’t awarded until a project is complete, which generally takes at least 18 to 24 months.
Reach Elaina Sauber at
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