By Frank Perdue, Audit Manager, Sherbert CPA, PC
The proposed Historic Tax Credit Growth and Opportunity Act of 2025 (the Act), a bipartisan bill, enhances tax incentives for building rehabilitation and historic building preservation by amending the Internal Revenue Code of 1986 (IRC). The Act was introduced in the Senate on April 10, 2025 as S. 1459 and was introduced in the House of Representatives on April 17, 2025 as H.R. 2941, collectively, the HTC-GO Bill. Although the HTC-GO Bill is not likely to pass on its own, it could potentially be considered as part of a broader tax legislation in 2025.
Key provisions of the HTC-GO Bill are as follows:
- Full Credit is Allowed in the Year Building Placed in Service
- Increases the Credit for Certain Small Projects
- Allows Transferable Credits for Certain Small Projects
- Lowers Rehabilitation Threshold
- Eliminates Basis Adjustment
Full Credit is Allowed in the Year Building Placed in Service
The HTC-GO Bill allows a rehabilitation credit equal to 20 percent of a building’s qualified rehabilitation expenditures (QREs) to be claimed in the year the building is placed in service. This is effective for property placed in service after December 31, 2023.
Increases the Credit for Certain Small Projects
The HTC-GO Bill increases the HTC from 20 percent to 30 percent for qualifying small projects, as defined in the HTC-GO Bill.
The QREs with respect to the rehabilitation shall not exceed $3,750,000 ($5,000,000 for projects in rural areas, as defined in the HTC GO Bill).
This makes it easier for smaller and rural communities to fund historic building preservation projects. This is effective for property placed in service after the date of enactment of the Act.
Allows Transferable Credits for Certain Small Projects
The HTC-GO Bill allows taxpayers to transfer the HTCs for certain small projects, making tax credit incentives more flexible and attractive for investors. No credit is allowed for the transferor for any taxable year. A credit is allowed for the transferee for the taxable year of the transferee in which such credit is transferred. Transferable credits make the HTCs more appealing to investors. This is effective for property placed in service after the date of enactment of the Act.
Lowers Rehabilitation Threshold
The HTC-GO Bill decreases the “substantially rehabilitated” requirement for HTC eligibility from 100 percent to 50 percent of a building’s adjusted basis. QREs are critical for determining HTC eligibility. The current IRC defines “substantially rehabilitated” as a building’s QREs exceeding the greater of the adjusted basis of such building (and its structural components) or $5,000. The HTC-GO Bill changes that definition to be the greater of 50 percent of the adjusted basis of such building (and its structural components) or $5,000. As a result, eligibility is expanded, allowing more buildings to qualify for the HTC. This is effective for property placed in service after the date of enactment of the Act.
Eliminates Basis Adjustment
The HTC-GO Bill removes the requirement to reduce a building’s tax basis by the credit amount, increasing the HTC’s value. This change enhances synergy with the Low-Income Housing Tax Credit for affordable housing projects in that it makes it easier to combine the HTC with this credit. This is effective for property placed in service after the date of enactment of the Act.
Broader Impact
The HTC-GO Bill fosters community development and rural development by incentivizing historic preservation and economic development, driving community revitalization through restored historic buildings.
Status
The Historic Tax Credit Growth and Opportunity Act of 2025 would support historic building rehabilitation nationwide and could be a game changer for historic building preservation projects, if passed into law. The Sherbert Group will continue to monitor the status of the HTC-GO Bill and will share updates as they become available.
To contact the reporter on this story: Frank Perdue at fperdue@sherbertcpa.com.
To discuss this or any other upcoming tax changes with the Sherbert Group, Contact: Bill Sherbert at bsherbert@sherbertgroup.com.