Tax Credits for State Institutions of Higher Education

House Bill 1003, passed during the 85th Texas Legislative Session in 2017, eliminates the depreciation and non-tax-exempt use provisions in the Texas Historic Preservation Tax Credit (THPTC) program for state university systems and other state institutions of higher education. This will allow these entities to take advantage of the tax credit to assist in financing capital projects or maintenance work on their historic buildings.

The program provides for a tax credit against Texas franchise or insurance premium taxes equal to 25% of qualified costs expended on the rehabilitation of a historic building. Like non-profits, which are also eligible to participate in the THPTC program, state colleges and universities can sell the credits they earn to private companies that owe franchise taxes or insurance premium taxes to the Texas Comptroller of Public Accounts.

Eligible schools or institutions are those that meet the definition of an institution of higher education or university system as defined by Section 61.003 of the Texas Education Code. This generally includes public junior colleges, public technical institutes, public senior colleges or universities, medical and dental schools, and other facilities within the public university systems described in the Education Code. The new law applies only to state-owned universities and institutions of higher learning. Private non-profit and for-profit schools are eligible to participate in the tax credit program under the pre-existing rules.

Higher Education projects must follow the same rules and meet the same requirements as all other projects participating in the THPTC program.

Basic program requirements are as follows:

  • Buildings must be designated as historic or determined eligible for historic designation. This includes listing in the National Register of Historic Places, or designation as a Recorded Texas Historic Landmark or State Antiquities Landmark
  • Buildings that are not already designated must be determined eligible for designation as the first part of the application process, and then must pursue and receive historic designation. The designation process must be completed before the THC can certify a completed rehabilitation project. THC typically recommends that undesignated properties pursue listing in the National Register of Historic Places, which can take up to a year to complete.
  • Architectural work must meet the Secretary of the Interior’s Standard for Rehabilitation and be reviewed by the tax credit staff within the THC’s Division of Architecture. Work that does not meet the Standards for Rehabilitation may require revision in order for the project to be certified. 
  • Ideally, all proposed work will be submitted for review and approval before construction begins, although that is not a requirement of the program. However, any completed work that is considered inappropriate could lead to a denial of tax credits. We encourage potential applicants with in-progress projects to contact our office as soon as possible.
  • There is a three-step application process. Part A establishes that your building is historic. Part B details your proposed plans. Part C documents the completed project. Applications are available to download from our main THPTC page
  • Part A must be submitted to the THC before the project is completed, otherwise the project is ineligible to receive tax credits. Tax credits can be claimed through the Comptroller’s office only once Part C has been certified by the THC.

The law was signed into effect on June 14th, 2017, with an expiration date of January 1, 2022. Only qualified expenses incurred by the property owner or long-term lessee within this time period count towards the credit. Projects that are already in-progress may apply, but any expenses incurred prior to June 14, 2017 do not count towards the credit. Projects that were completed before this date do not qualify to participate in the program.

Projects must have a documented placed in service date prior to January 1, 2022. Projects that will not be completed by that time may be phased so that completed work items are still eligible for tax credits. The THC retains review authority over the entire project, to ensure that all work meets the Standards for Rehabilitation. Applicants that wish to pursue phased projects should contact the THC before submitting their Part B application to ensure that the project and its phasing are adequately described.

 

For additional information, or if you have questions about the Texas Historic Preservation Tax Credit program, please contact Christine Huber by email or at 512-475-0129.

For information about the National Register of Historic Places, please contact Greg Smith by email or at 512-463-6013.