Owners of historic properties throughout Maryland could receive a tax break for investing money in improvements, under legislation before the General Assembly.
The House Ways and Means Committee gave a favorable report last week to the measure, HB 1452, which would authorize political subdivisions to defer increases in the tax assessments that would have resulted from improvements made to historic properties.
A Senate version must be considered. If the full General Assembly approves the legislation, exact terms of the tax credit would be set by individual jurisdictions.
The legislation was drafted to give local government a new tool to encourage property owners to invest in historic buildings and districts. It also was intended as an incentive for owners to agree to let eligible buildings be added to local or national landmark lists.
It has strong support from the Maryland Historical Trust, the Maryland Association of Historic District Commissions, the Maryland Heritage Alliance, Baltimore Heritage and other preservation groups and organizations around the state.
"House Bill 1452 is an important statewide measure to allow local jurisdictions to design appropriate tax incentives to encourage preservation and economic development efforts," said Al Barry, assistant director of Baltimore's planning department.
"Already, 37 states have authorized enabling legislation for preservation incentives. . . . Unlike some states, which grant tax relief automatically to historic properties, House Bill 1452 is development-driven and requires reinvestment before a property becomes eligible."
The House bill involves locally or nationally designated landmarks or historic districts. It would give local jurisdictions authority to permit owners to avoid paying taxes for up to 10 years on investments that significantly alter the assessed value of historic properties, provided the improvements are approved by a local historic district commission.
For example, if an eligible building is assessed at $100,000 and the owner invests $1 million to make it more suitable for office use, the owner would receive a tax credit that would offset any increase in taxes on the property as a result of the improvements.
In effect, officials say, the owners would be required to pay taxes on the building as if it were still in its unimproved state, even though they would be profiting from the improvements. Owners would receive a similar tax break for construction in historic districts that is compatible with the district.
The measure would only authorize subdivisions to offer the tax breaks. Before it could take effect, the local governments would have to enact rules spelling out the specific terms of the tax break and the properties that would be eligible.
Kathleen Kotarba, executive director of Baltimore's Commission for Historical and Architectural Preservation, said the legislation is consistent with the Schmoke administration's 20-year strategy for downtown development.
In the past, she noted, building owners have sometimes balked when the preservation commission has wanted to add their buildings to the city's landmark list, claiming they receive no compensation from the city. The tax credit would be the "carrot" that governments could offer to owners of property they would like to designate as landmarks, she explained.
Preservationists say the legislation could help stimulate redevelopment in any part of the state with a large supply of historic buildings, such as Frederick, Havre de Grace, Annapolis, Frostburg and Cumberland.
"The beauty of the bill is flexibility, in that the local jurisdictions can write their own controls," said Gail Rothrock, chairwoman of the Prince George's County Historic District Commission. "It would be a very useful incentive."