Decision Time: Historic Preservation Easements at the Crossroads

Written by guest blogger Angela Threadgill

Here in Atlanta, we’ve been serving up tax incentives through the use of historic preservation easements for 30 years.  Recognizing that a local preservation ordinance couldn’t cover all the bases, a successful alliance comprising of the city of Atlanta, Atlanta History Center and the Atlanta Preservation Center created Easements Atlanta, Inc., a non-profit organization whose mission is to accept donations of historic building façade easements.  Historic preservation easements are the most ironclad means of ensuring the protection of historic resources well into the future. Not even local historic preservation ordinances can match the level of protection afforded by preservation easements over the long term.

Realizing the strong potential for easements to help achieve the nation’s preservation goals and to help offset the significant costs related to maintaining the donation, the federal government has allowed tax incentives for qualified donations of historic preservation easements since 1976.  Without getting into the details of the tax code, the deduction allows for an owner to subtract from his or her income the amount of the value loss in the property along with some of the transaction costs associated with donating the easement. This decreases the owner’s income, and consequently the amount of tax paid, and may even place the owner in a lower tax bracket.  Thus far, owners of 40 Atlanta properties have benefited from the federal income tax deductions of their qualified donations to Easements Atlanta, Inc.

Another key aspect with preservation easements is their widespread applicability.  It’s been well documented that federal and state rehabilitation tax credits spur investments, generate jobs, increase household income, attract visitors and revitalize downtowns.  No knock on rehabilitation tax credits – they are lucrative tools – but what if a historic building doesn’t meet the substantial rehabilitation test?  What about owners who have maintained their historic properties through thick and thin?  These circumstances aren’t contenders for rehabilitation tax credits. Conversely, historic preservation easements are well suited to these situations, in addition to rehabilitation projects.  Despite their widespread applicability, historic preservation easements have been used to preserve relatively few properties compared to the total number that could be preserved using this tool.  For example, a cursory survey of the Buckhead area suggests there are over 1000 historic properties eligible for historic preservation easements, yet only three have participated in the program.

On a national level, the IRS began to scrutinize the easement donation program on valuations of donations, variety of appraisal content, and even whether a preservation easement tax deduction incentive was justified.  This sent a shockwave through the preservation community, but it acted to save the core purpose. A compromise with Congress was reached in 2006 that preserved the incentives but added reasonable reforms to the tax code to help prevent abuse.  Since then, recent Supreme Court and tax court cases have turned out favorable rulings in support of qualified donations of historic preservation easements.  The bottom line is if a property owner has the desire to preserve their historic property in perpetuity, has a qualified appraisal, and has a qualified donation to an organization with a commitment to uphold the preservation easement restrictions, donors should feel secure to participate in the preservation easement tax credit program without fear of intervention.  Unfortunately, the preservation community is still suffering shell shock after the trials and tribulations.

The preservation community now faces a decision: will they choose to return to the pre-reform days and tone down their advocacy for preservation easement tax incentives or will they bond together to be proactive in their advocacy for this tool in an effort to expand its use and strengthen it?

• Angela Threadgill serves as the Executive Director for Easements Atlanta, Inc., a non-profit organization that accepts historic preservation easements in the metro-Atlanta area.  Previously, she served as staff to the Asheville-Buncombe County Historic Resources Commission, Atlanta Urban Design Commission, and San Francisco Historic Preservation Commission.  Angela never thought her adventure would begin from a simple historic preservation poster in her tenth grade drafting class.

To learn more about Easements Atlanta please visit http://easementsatlanta.org/