Advocates of historic buildings cheered the recent passing of SB 451, familiarly known as the California State Historic Tax Credit, as an important and effective incentive for the rehabilitation of certified historic structures in the state. Real cause for celebration arrived this summer, as Governor Newsom signed the 2021-2022 state budget, essentially financing the credit and ensuring that it will be available for use on qualifying projects in 2022 will be available for use on qualifying projects in 2022.
Proven beneficial nationwide, the incentive will help spur new investment and reuse of hundreds if not thousands of buildings in California. One national leader in historic preservation and architecture, Page & Turnbull, has applauded the new legislation and the recent allocation of $50 million in funding that will become available in early 2022.
“We’re proud of the state legislature for approving California’s historic tax credit and of Governor Newsom for signing the current budget, effectively funding this credit starting in 2022,” says architect Carolyn Kiernat, AIA, principal of Page & Turnbull. “We’ve seen how tax credits provide tremendous benefits, like creating more jobs, stimulating business, advancing housing, strengthening communities, and bolstering economies.”
“Allocating money for this historic tax credit will provide building owners and preservation-oriented developers with the essential support that is needed to make these projects feasible. These credits have proven to be an economic stimulus in states that have enabled them,” adds Kiernat, an expert in historic preservation.
About the New Law
The bill, which was unanimously passed almost two years ago and went into effect in January 2021, supports the rehabilitation of certified historic properties through the availability of historic tax credits related to qualifying construction costs. The California bill was written by Senate President pro Tempore Toni Atkins and sponsored by the California Preservation Foundation and the American Institute of Architects (AIA) California Council, who worked hard to advocate for its funding.
According to a released statement from Senator Atkins, “Studies show that a third of the initial cost of a historic preservation credit is paid back during the construction phase of the project, prior to the issuance of any credit.”
Added Atkins, “Tax credits for the preservation and rehabilitation of historic buildings will increase construction and building industry job creation, increase property tax revenues through higher property values, and lead to higher local tax revenues through sales tax and heritage tourism.” Atkins called the tax credit SB 451, “a much-needed spark to reinvigorate investment in our communities.”
Page & Turnbull can attest to the power of development incentives in their expansive work for residential, commercial, and institutional clients. Examples include notable buildings listed in the National Register of Historic Places. The architects led the preservation and federal tax credit scope at the Ferry Building and the Exploratorium in San Francisco, among many others.
Other projects have created much needed housing, cultural facilities, and office space. Examples include the St. Joseph’s Art Society In a former cathedral, The Tioga apartments in downtown Merced, and Sacramento’s Capital Park Hotel, which is being adapted for affordable and low-Income housing and will be completed in 2022.
The mechanics of historic tax incentives are straightforward, adds the firm: The new California State Historic Tax Credit will allow for a 20% or 25% tax credit of qualified rehabilitation expenses for approved certified historic structures or eligible residences. The program’s annual aggregate cap is set at $50 million per year, and “would be effective immediately upon enactment and specifically operative for taxable years beginning on or after January 1, 2021, and before January 1, 2026, when the credit is included as an appropriation in the budget,” according to the State of California Franchise Tax Board.
With the stroke of a pen, California joined 37 other states that have similar and successful programs. “California’s historic tax credit marked an important step in encouraging investments in historic preservation,” says Kiernat “Allocating funding to this approved legislation is key to saving our cultural resources and historic fabric as it helps to ensure the continued use of historic structures throughout the state. Historic tax credits provide powerful ways to bolster the local and regional economy. They open the way for beneficial development and collaboration that strengthens communities’ opportunities for financial wellbeing and the longevity of their cultural heritage.”