Historic Tax Credit Program in jeopardy

RICHMOND, VA (WWBT) – It's the program that re-built modern Richmond, and tonight supporters say it's under siege by the IRS.

The historic tax credit program gives developers a break for rehabilitating older buildings. The ruling could curb construction on old buildings, not just in Richmond but around the state.

The tax credit program is credited with bring more than 2,000 Virginia landmarks back to life. The National, which sat empty for more than a dozen years used them, so did the Hat Factory, and Miller and Rhoads.

"Tax credits mean business. They mean jobs in the construction industry they mean, more taxes to local governments," said Kathleen Kilpatrick.

Kathleen Kilpatrick runs the Historic Tax Credit Program for the state. A federal court recently ruled that the credits amount to a sale and therefore should be taxed as income.

"We feel very strongly that the IRS just plain got it wrong," said Kilpatrick.

The John Marshall Hotel is being brought back to life now because of the tax credits. Kilpatrick says work on older buildings is extremely costly because the rules to restoration are strict.

"You can end up at the end of the day with a project that costs more than the value of the building that's why we have state and federal tax credits in order to make up for that gap," she said.

Preservationists fear fewer buildings will be saved, and that a slowdown in the program will lead to job losses and lost taxes for cities like Richmond.

Mary Jane Hogue is the executive director of the Historic Richmond Foundation, an organization that works to save historic structures.

"It just doesn't make sense that the IRS has done this not looking at the big picture of how damaging this is going to be older cities," Hogue said.

An IRS spokesperson will not comment on pending  litigation. Preservationists expect to take their fight to Congress hoping lawmakers will help them come up with a solution.

According to a 2009 VCU study the tax credit program has created 5800 jobs and has had a total economic impact of nearly $2-billion.

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