Virginia Historic Rehabilitation Tax Credits – Legislative Update

The Virginia Historic Rehabilitation Tax Credit (HRTC) program (see Virginia Code § 58.1-339.2) has played a significant role in stimulating Virginia’s economy and preserving thousands of historic properties throughout the Commonwealth. Developers may use this credit to reimburse up to 25% of their eligible rehabilitation expenses against income taxes, insurance premium taxes, or bank franchise taxes. When combined with the federal historic rehabilitation tax credit of 20%, developers can claim a total tax credit of 45% of eligible rehabilitation expenses. These tax credits have provided developers with the ability to reinvigorate urban centers, schools, and nonprofit property throughout the state which in turn has yielded tremendous benefits for the state’s economy.

A 2023 study by the Virginia Commonwealth University Center for Public Policy found that the HRTC program has had long-term positive effects on the Commonwealth’s economy, generating over $6.8 billion in private investment since its inception in 1997. The same study found that from 2015 to 2020 the HRTC program has: (1) enabled the completion of over 100 historic rehabilitation projects each year, (2) incentivized $2.2 billion in private spending, (3) boosted the total value added from all industries in the state (Gross State Product) by $2 billion, (4) provided approximately $1.16 billion in salaries, wages and benefits to workers, and (5) generated an estimated $55.9 million in estimated state tax revenue.

Notably, the properties rehabilitated by the HRTC program are also yielding long-term economic benefits for the Commonwealth. Between 2015 and 2020, properties rehabilitated through the HRTC program have: (1) contributed more than $1.8 billion each year to Virginia’s economic activity, (2) created over 10,000 jobs, and (3) generated state tax revenue approaching $42.7 million.

A key feature of the HRTC program is that the credit may be carried over by the taxpayer for up to ten years, or until the full credit is used. Since 2017, the total amount of the credit that could be claimed by each taxpayer, including carryover, was not to exceed $5 million in any taxable year. The Virginia legislature through House Bill No. 960 has sought to amend and reenact the Virginia HRTC program, increasing the amount of credit available for taxpayers to $7.5 million for taxable years beginning on and after January 1, 2025. The additional $2.5 million is a significant increase in the annual limitation and should result in greater HRTC projects being developed in the Commonwealth.

House Bill 960 and Senate Bill 556 were signed into law on April 4, 2024 and will become effective on July 1, 2024.