Growing interest by developers in remodeling some of West Virginia’s vintage skyscrapers appears linked to the Legislature’s 2017 decision to increase the state’s historic rehabilitation tax credit.
House Bill 203, which took effect Jan. 1, 2018, increased the historic rehab tax credit for commercial income-producing properties from 10 percent to 25 percent.
The former 10 percent rate “just wasn’t worth the brain damage,” quips Alex Vence, who’s transforming Huntington’s historic West Virginia Building into a luxury apartment complex. The 15-story building — West Virginia’s tallest when it was built in 1924 and still Huntington’s tallest — once was filled with busy offices. But in recent years it stood mostly empty until Vence began transforming it.
To qualify for the credit, a property must be listed on the National Register of Historic Places, either individually or as part of a district. Huntington’s West Virginia Building is included in the city’s downtown historic district.
Developers must also follow the federal Secretary of the Interior standards for rehabilitation, which includes maintaining the historic character of the structure. Generally that means preserving the exterior appearance of a building but allowing a developer to make whatever interior changes are necessary to repurposing it.
The 25 percent credit brought West Virginia to parity with neighboring states. Ohio, Pennsylvania and Virginia have a 25 percent state historic tax credit; Maryland and Kentucky each have a 20 percent tax credit.
In convincing their fellow lawmakers to approve the increase, its supporters argued it would encourage the rehabilitation of historic buildings and spur private investment, create jobs, and help rid the state of vacant and underutilized buildings. They pointed to studies showing the estimated return on historic rehab tax credits is approximately 2 to 1. This means for every dollar of tax credit provided by the state, $2 of additional state taxes and revenue are created through investments in the property.
State Sen. Bob Plymale, D-Wayne, was a key supporter of increasing the credit.
“To be honest, I’m not necessarily in favor of many tax credits,” Plymale said. “But studies show this tax credit, with such a quick return, is good. This is a revitalization of buildings that have been empty for a number of years and gives them new life.”
Applying for the tax credit starts with developers submitting their plan to the West Virginia Division of Culture and History for an initial evaluation. Then, once the work is finished, developers send pictures of the completed project to show they followed through with the original plan and maintained the historic character of the structure.
The office then recommends projects to be approved by the National Park Service. The state office has no control over what does or does not get approved at the federal level.
Approved projects receive the tax credit on a first-come, first-served basis. That’s made necessary because the new legislation caps the amount of money the State Historic Preservation Office can give back. The cap is set at $30 million annually.
Plymale said he doesn’t understand why there is a cap at all. Huntington Mayor Steve Williams says he also is puzzled by the cap. “We could eat up that $30 million just in Huntington,” he said