Since the initial release of the Tax Cuts and Jobs Act of 2017 and the introduction of the Opportunity Zone incentive, NTCIC has been working the Historic Tax Credit Coalition (HTCC) and other industry leaders in the historic preservation community to better understand how this new incentive can best function in conjunction with other community development financing tools.
The Federal Historic Tax Credit (HTC) program, enacted in 1981, and the New Markets Tax Credit (NMTC) program, introduced in 2001, have each individually contributed to the creation of highly impactful community facilities, small businesses, millions of jobs, and the revitalization of over 43,000 historic structures. However, their initial rules and regulations make it difficult to use these tools within the same project.
It wasn’t until 2003 when NTCIC pioneered the utilization of these financing tools within a single transaction—now referred to as “twinning.” Since then, “twinning” incentives has allowed for even greater levels of impact by providing additional capital to projects that otherwise wouldn’t have access.
While the proposed regulations released by the IRS for the Opportunity Zone incentive have provided some guidance necessary to facilitate its implementation, there remains a need for clarification or interpretation to enable it to pair effectively with the Historic Tax Credit and the New Markets Tax Credit.
To help achieve the goal of twinning the Opportunity Zone incentive with other financing tools, the HTCC, through its Chair Merrill Hoopengardner, President of NTCIC, and Vice Chair Forrest Milder, Partner at Nixon Peabody, submitted comments to the IRS and the Department of Treasury to address and clarify several provisions of the proposed regulations. These include requests and suggestions related to:
- the definition of active conduct
- the 31-month safe harbor
- the 70% test
- the six-month test for Opportunity Fund status
- basis computation
- the rules related to leased property
Shaping the future of Opportunity Zones
For many existing owners of historic properties located in low-income areas now designated as Opportunity Zones, lack of capital—not lack of vision—has stymied rehabilitation plans. While tax reform modified the HTC in the Tax Cuts and Jobs Act of 2017, the same legislation that created the Opportunity Zone incentive, Congress once again decided that the tax code should contain incentives for rehabilitating historic structures nationwide.
Financing through Opportunity Zones can open the door for an unprecedented level of community impact, especially if it can be twinned with products like HTCs and NMTCs. As a leading advocate for improving and expanding the use of federal and state HTCs, NTCIC will work to shape how Opportunity Zones can best be utilized to support historic preservation efforts.
To read the full letter submitted to the Department of the Treasury, click here.