Pennsylvania to offer tax credit for restoring historic buildings

Philadelphia's Divine Lorraine Hotel could benefit from the historic-preservation tax credit.
Philadelphia's Divine Lorraine Hotel could benefit from the historic-preservation tax credit. (MICHAEL S. WIRTZ / Staff Photographer)
Posted: July 12, 2012

HARRISBURG - Pennsylvania will soon offer a new sweetener to attract developers to blighted communities: a tax credit for restoring historic buildings.

After 16 years of on-and-off debate, legislation establishing a 25 percent tax credit for historic-preservation projects rolled through the General Assembly straight to Gov. Corbett's desk in the final hours before lawmakers' summer recess.

With Corbett's signature last week, Pennsylvania - which boasts one of the largest numbers of designated historic structures in the nation - became the 30th state to provide such a tax credit.

New Jersey's Legislature approved a similar bill in 2011, but it was vetoed by Gov. Christie, along with a package of other tax breaks for businesses, in a fiscal belt-tightening move.

Supporters in Pennsylvania say that when paired with the existing federal tax credit, the state incentive will help spur large-scale redevelopment projects that may lead to preservation of dilapidated behemoths such as the 118-year-old Divine Lorraine Hotel in Philadelphia.

"This is a tremendous incentive," said State Rep. Robert Freeman (D., Northampton), who has introduced versions of the tax-credit bill in the House since 1998. "It will create jobs, improve property values, and turn around communities."

Freeman said there has always been widespread support for the concept of such a tax credit, but also lingering disagreements over whether the credit should apply to residential properties as well. When the residential component was dropped, he said, the bill gained momentum.

The tax credits are likely to have a significant effect on Philadelphia's landscape, given the city's longtime use of federal credits.

"The additional boost of the state credits makes more projects feasible," said John Andrew Gallery, executive director of the Preservation Alliance of Greater Philadelphia.

Gallery said the Divine Lorraine on North Broad Street, which has long been threatened with demolition, is a perfect candidate given its size, configuration, and location.

"It's a difficult building with its small hotel rooms and its middle-ground location - not close to Center City, not close to Temple," he said. "Federal tax credits alone may not make it work."

The law will limit to $3 million the total amount of tax relief available statewide for rehabilitation in the first year, starting in July 2013, and cap the per-project credit at no more than $500,000. That could mean only a relative handful of projects, but proponents say the number isn't important right now.

"I would like to see a higher amount," said Freeman. "But once it's in full swing and people see what a wonderful tool it is, that amount will go up."

Freeman predicted that the incentive, along with Main Street and Elm Street - state-funded programs that provide grants to communities for restoring buildings and improving streetscapes - will help revitalize older communities, such as Easton in his district.

In order to qualify, a structure must be listed on the National Register of Historic Places or be located within a National Register-recognized historic district.

"I tell people George Washington didn't have to sleep in the building in order to get tax credits," said State Sen. David Argall (R., Schuylkill); he was a member of the state House and his 23-year-old son was in elementary school when the tax credit was first proposed.

Argall said the federal tax credit was used in his hometown of Tamaqua, located in the depressed northeast coal region, to turn an old underwear factory that "hadn't seen a coat of paint in 30 years" into an apartment complex that is now the pride of the community.

Both Argall and Freeman are confident that the new tax credits will expand the number of redevelopment projects throughout the state.

"It's been a long haul," said Freeman. "I am glad to see it get across the finish line."


Contact Amy Worden at 717-783-3584 or aworden@phillynews.com, or follow on Twitter @inkyamy.

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