Lear & Pannepacker, CPAs and Preservation Construction Finance Advisors, on NJ Historic Tax Credit Influence

Rikki Massand
March 22, 2021

Scot D.  Pannepacker, CPA, is the former president of PNJ’s Board of Directors, a former board treasurer and partner/accounting executive with Princeton-based firm Lear & Pannepacker LLP

The PNJ Building Industry Network-member firm looks forward to working with clients on applications of the New Jersey HTC, as Scot outlines potential benefits of the Historic Property Reinvestment Act. “One, it draws attention to historic properties. Whether large or small, New Jersey can always debate on spending more or less money on state tax incentives. At least the fact there is an incentive puts the idea forward for preservation.”

“The mere existence of the HTC emphasizes the opportunity to do something. With a parallel to solar energy installations, when people hear there’s a tax incentive to do it they will consider it as it hits their radar as a selling point – whether that’s for contractors, a homeowner, people they are consulting, etc.,” Pannepacker said. 

Another sign will be observing the dollars allocated through the HTC. The cost-sensitive nature of construction projects and especially with historically accurate repairs, are likely more expensive and often ‘eyebrow-raising’ is influential. 

“There may be a few who do preservation projects irrespective of cost, they then get a windfall with the state tax credit. But for a lot of people cost is a significant factor in decisions. Where people might get financial help, it will push them to do one of two things — either to do it sooner, because they know the availability, or it pushes them in a more historic-centric direction because funds make a difference in terms of affordability. It should be motivating particularly with construction costs as a whole so high right now,” Pannepacker explains.

He referenced a recent project in New York where the owner was motivated as they got “a state tax refund off the year they did this work.” In the Garden State he sees historic preservation architecture firms as both potential beneficiaries and drivers of the HTC impacts on rehabilitation projects. 

“Inherently, a number of developers have argued, within industry and in front of municipal planning boards, that it still is less expensive to tear down and restart rather than preserve historic pieces of structures. They unfortunately remain successful with that argument, ‘starting fresh over fixing things’…..And that’s aside from discussions with prescience on green infrastructure and energy efficiency, which builders should further examine on a macro level with the existing building’s footprint. A state HTC offers ways to counter those arguments by presenting added efficiency and the financial incentive; if more costs would be incurred, they can be offset using this (credit) mechanism,” he said.

A concern he shares with many preservationists is postponing building work due to less motivation/financial incentive, which is “certainly not good for any historic property.”  

“That’s another advantage of the state HTC – in some cases you can argue a project would be undertaken anyway, but the HTC helps by adding incentive to do rehabilitation or adaptive reuse sooner — therefore preventing more demolition by neglect. We have enough properties deteriorating that are a part of the architectural fabric of our communities,” Pannepacker said. 

New Jersey CPA’s won’t need to take additional trainings or spend hours researching the new Historic Tax Credit, but what can be cumbersome with most specialized or focused tax credits like the HTC, Pannepacker says, is sifting through filing info to unearth a single credit “that may not apply to a lot of people.” 

He advises that educating the public on the HTC’s existence can help with the cost-savings approach. In their meeting with a CPA, a client can note, “I have a historic property and I understand there are incentives that can help.” Pannepacker is interested to see HTC impacts for those investing in or considering New Jersey historic properties. 

“To know there is a credit out there and that the state supports it will help encourage the general preservation effort, hopefully both for existing homeowners and driving more people to take an interest in historic properties. It’s a nudge to ‘take the leap.’ Solar is again a good example. Instead of a CPA approaching each homeowner or business and saying ‘have you considered solar?’ — the solar companies and media coverage have put out enough critical mass and information that people became aware of it as a topic of conversation with your financial professional. Preservation architects and firms can also promote the incentives,” Pannepacker noted. 

Along the East Coast Lear & Pannepacker LLP has many clients in real estate development, particularly in rehabilitating properties for adaptive reuse projects. He discussed the federal-level historic tax credit as a commodity for some commercial building projects, though not feasible to translate for residential work. He explains the distinction with historic districts as a factor — influential for downtown commercial areas, ‘historic main streets’ and not as applicable to the residential areas.

 “A lot of clients will believe in doing rehab work and our firm can better inform them as we research the building’s age — in some cases clients aren’t aware of the project constituting historic restoration,” he explains. 

The firm’s clients approached the National Parks’ Service for certifications sparingly for years, and with the 2018 tax deduction laws changing and construction projects being cost-prohibitive, oftentimes the certification was not sought.

 “Our firm will review a client’s portfolio and then advise on any opportunities to claim an additional tax credit to help with the return on their investments. I’ve had clients who have known a federal HTC credit existed and it factored into their decisions and scope of expenses. Potential for deductions would increase the up-front time planning on each project, though at the federal level pursuing an HTC it is harder for the clients who are smaller and don’t have the resources. They could be more concerned about waiting and impacts from potential project delays. And unfortunately I just don’t believe smaller projects would look to apply through the National Parks’ Service,” Pannepacker said.

Author, content strategist and historic preservation activist Rikki N. Massand serves as Associate Editor of his hometown Montgomery News in Somerset County. He also covers Hunterdon County government, planning and economic development for Flemington’s TAPInto online news and freelances for multiple tristate area ‘newszines.’

Rikki is a regional historian and local advocate in his present municipal government-appointed roles on the Montgomery Township Landmarks Preservation Commission and as township liaison to the Delaware & Raritan Canal Commission. He is also experienced in not-for-profit administration and advocacy as office administrator, records manager and bookkeeper for a local United Church of Christ.

Rikki holds master’s degrees from Columbia University and Quinnipiac University. His work has appeared in print titles including China Daily, amNew York, Syosset Advance, AsianWeek and more.