- Associated Press - Saturday, August 16, 2014

RALEIGH, N.C. (AP) - The tax credit that helped people rescue historic businesses and homes in 90 of North Carolina’s 100 counties, including plantations, neighborhoods and cotton mills, faces likely extinction as legislators have refused to renew the benefit.

The credits likely will end Jan. 1 despite the support of Gov. Pat McCrory, as legislators haven’t renewed them, and they’re not on a to-do list for lawmakers to complete before they adjourn. While House members supported a pared-down version of the program, senators refused to keep it going. Senate Republicans are generally more opposed to similar targeted credits.

“I think they have made a tremendous difference in who we are as a state,” said Cultural Resources Secretary Susan Kluttz. “We’ll be the only state in the southeast except for Tennessee without a tax credit for historic buildings, and Tennessee is working on it. And we’ve been a leader in the nation.”

More than 2,300 projects have used the credit since North Carolina expanded it in 1998, and it’s fostered nearly $1.5 billion in investment. They’re estimated to have contributed more than $124 million annually to the state gross domestic product and to create almost 2,200 jobs a year.

Successes include the Oakwood neighborhood in Raleigh, where Victorian homes sit near shotgun houses, and, more recently, the Loray Cotton Mill in Gastonia, which will open in October as commercial and residential space. In Durham, the American Tobacco Campus, a mix of offices, retail, restaurants and residences, has thrived for 10 years in a building where cigarettes were manufactured for more than 110 years.

The campus “has changed Durham’s self-image,” said J. Myrick Howard, president of Preservation North Carolina and a Durham native. “I don’t think it’s hyperbole to say that.”

Sen. Bob Rucho, R-Mecklenburg and co-chairman of the Senate Finance Committee, said his chamber declined to restore the historic building tax credit in part because it doesn’t fit with the legislature’s shift in tax policy away from benefiting certain groups. The legislature last year reduced overall income tax rates for individuals and businesses while eliminating many exemptions and credits. No one verifies whether the state credits achieve the desired results, he said.

“It shouldn’t be that the state should be involved in that kind of distribution of picking winners and losers,” Rucho said Friday. If local governments want to keep helping fix up historic properties, “they are welcome to give grants and other programs that they feel would benefit their community.”

Rucho suggested, however, the legislature could consider at a later date whether the state should appropriate funds to help improve aging buildings, rather than to extend the credit.

Qualifying structures that don’t produce income, such as homes, are eligible for a 30 percent state tax credit. Income-producing historic properties - a hotel, for example - that qualify for a 20 percent federal investment tax credit are eligible for a 20 percent state tax credit.

“A lot of these buildings would either have been destroyed or they would have been in pretty sad condition,” Howard said. “This has helped the quality of life in so many cities and towns across North Carolina.”

Kluttz and Howard say they’ll work to renew the tax credits in the 2015 session, either as tax credits - which seems unlikely with the Senate’s philosophical opposition - or in a different form, such as the Historic Rehabilitation Investment Program that the House supported.

“If someone is committed to tax reform, then I understand why they would feel this way,” Howard said. “I think we will figure this out. I hate it that there’s going to be a gap in here. But we should be able to do it in a way that has some retroactivity so people don’t get stuck in the middle.”

Still, he worries about some properties that might have been on the cusp of purchase and now could sit empty - or worse - between now and when the Legislature might approve a new financing method.

That list includes the 88-year-old Hotel Prince Charles in Fayetteville, which scheduled for auction for May 30. The auction was then postponed for the hotel, which the city declared unsafe in 2010. And there’s the Crabtree Jones House, built around 1800, and which might be the oldest house still standing in Raleigh as use as a residence. The Jones family sold the house to developers in the 1970s, and Preservation North Carolina moved it earlier this year to a new location.

The sale price is $350,000 for the Federal-style house, and Howard estimates the house needs $400,000 to $500,000 in renovations. If someone bought it soon, the buyer could still get tax credits for some of the expensive work, such as the purchase of air-conditioning and heating units.

If not, they’ll have to wait and see what the Legislature does next year or buy and renovate the home without help.

“It’s going to make our job a whole lot more difficult,” Howard said.


Associated Press writer Gary D. Robertson contributed to this story.





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