The Minnesota Historic Structure Rehabilitation State Tax Credit Is Set to Expire in June
The powerful development tool has yet to be renewed at the Minnesota Legislature despite having support on both sides of the aisle
By Chris Hudson and Sheri Hansen | March 11, 2021
NorShor Theatre in Duluth, renovation by Sherman Associates, TKDA, and DLR Group/Westlake Reed Leskosky. Photo by Peter J. Sieger.
SPOTLIGHT
It’s hard to think of a tax incentive that has enjoyed more economic success and wider political support than the Minnesota Historic Structure Rehabilitation State Tax Credit. Enacted by the Minnesota Legislature in 2010 to spur job growth in the wake of the Great Recession, the program mirrors a long-established federal tax incentive that encourages private developers to rehabilitate historic buildings by way of a 20-percent income tax credit for qualifying projects. The renovation and reuse of an historic structure is often a financially risky undertaking, so the program results in a number of job-producing community revitalization projects across the state that may not otherwise have been possible.
The Minnesota Legislature renewed the tax credit in 2015, with a sunset date of June 30, 2021.
How the Program Works
To qualify for the tax credit, a project must be income-producing and entail the substantial renovation of a property that is either on the National Register of Historic Places or certified as contributing to an historic district. The State Historic Preservation Office (SHPO) manages the application process, and plans for the project must be approved by the National Park Service (NPS) as adhering to the Secretary of the Interior’s Standards for Rehabilitation, a set of 10 criteria for ensuring that renovations are consistent with the historic character of the building. Completed Minnesota projects approved by the NPS receive a state and federal tax credit of 20 percent of the IRS-approved costs of the project.
For the fiscal year ending June 30, 2020, 11 approved projects were slated to fuel an estimated $176.5 million in economic activity (including $49.8 million in labor income) and $5.5 million in new state and local tax collections.
Minnesota Numbers
Minnesota SHPO, a division of the Department of Administration, offers detailed reports by the University of Minnesota Extension on the economic impact of the Minnesota Historic Structure Rehabilitation State Tax Credit for the years 2011 to 2020. The numbers are eye-opening. For the fiscal year ending June 30, 2020, for example, 11 approved projects—six in the Twin Cities and one each in Duluth, Fergus Falls, Mankato, Owatonna, and Winona—were slated to fuel an estimated $176.5 million in economic activity (including $49.8 million in labor income) and $5.5 million in new state and local tax collections. Notable rehabilitations among the more than 130 projects that received the state and federal credits over the past decade include the NorShor Theatre in Duluth, Ely’s Historic State Theater, and Schmidt Artist Lofts in St. Paul, highlighting the cultural vitality the program supports.
Schmidt Artist Lofts in St. Paul, adaptive reuse by Dominium Development and BKV Group. Photo by Troy Thies.
The Latest from the 2021 Legislative Session
The policy has support on both sides of the aisle, but its renewal this year isn’t certain, given the challenges created by the pandemic and the divided legislature. The bill extending the tax credit has advanced far enough through the process to continue consideration after the first committee deadline on March 12. Still, it has a long way to go before passage. Readers who value the program’s merging of job creation and historic preservation and its reach across the state are encouraged to voice their support to their legislators this spring.
For More Information
The State Historic Preservation Office’s program overview includes links to economic-impact analyses for the years 2011–2020.
Revitalize MN, a coalition of advocates and industry partners, offers information and other resources on the effort to renew the tax credit, including links to articles from around the state on the program and its approaching expiration.