Historic tax credits are an important tool for the revitalization of downtowns and neighborhoods throughout Arkansas. Since 1976 the Federal Historic Tax Credit program provided a 20% federal tax credit to people who undertake the substantial rehabilitation of a certified historic building for income-producing use. The federal historic tax credit was nearly eliminated during tax reform in 2017. But thanks to coordinated advocacy efforts the tax credit is still in place, with a provision that the 20% credit be taken over a five-year period.
Arkansas is one of 39 states with a state historic tax credit program that can be used in conjunction with the Federal Historic Tax Credit. The Arkansas Historic Rehabilitation Tax Credit is a 25% credit on the costs of rehabilitating a certified historic building within designated per-project caps — a maximum of $400,000 in credits for an income-producing property and a maximum of $25,000 in credits on an owner-occupied building. On April 22, Governor Hutchinson signed Act 840 into law. This legislation improved the state historic tax credit by increasing the annual statewide cap from $4 million to $8 million per fiscal year, extending the program sunset to 2037 and supporting the personnel who administer the program. The expansion of the annual cap represents years of advocacy efforts and the first increase since the state historic tax credit program was created in 2009. Historic tax credits are often a critical piece of project financing, making the availability of more credits per year essential to keep projects moving.
One or two successful historic rehabilitation projects can spur the revitalization of an entire downtown or neighborhood. Located at 340 Central Ave. in downtown Hot Springs, the 1913 Thompson Building was designed by architect George R. Mann to house a pharmacy and physicians’ offices. As the years went by, the first floor stayed in use as retail while the upper floors sat vacant and deteriorated. The building was included on Preserve Arkansas’s Most Endangered Places list in 2014, along with all of downtown Hot Springs, following the tragic Majestic Hotel fire. Later that year, TKZ LLC bought and rehabilitated the building with the help of federal and state historic tax credits. It is now The Waters Hotel, a 62-room boutique hotel with restaurant, lounge and sundry shop. The project was completed in February 2017 at a total cost of $6.9 million. Federal and state historic tax credits provided $1.8 million and $109,000 in equity, respectively (this was before the per-project cap for income-producing properties was increased to $400,000 in credits). The project created 50 jobs, and The Waters Hotel now has an average annual payroll of $1.2 million. Rehabilitated buildings also boost property values, which benefits the community at large. In the case of The Waters Hotel, which was reassessed soon after the project’s completion, the annual property tax bill went from $4,100 to $57,000. Downtown Hot Springs has prospered in the last five years, with additional historic tax credit projects completed on Bathhouse Row — both the Superior Bathhouse Brewery and the Hotel Hale — as well as numerous projects in the Ouachita Avenue Historic District.
Downtown Batesville is also experiencing a renaissance thanks to its Main Street program and a few key rehabilitation projects. Opened in 1940, the Melba Theater at 115 W. Main St. was one of Arkansas’s first Cinemascope theaters. By 2015, the Melba had deteriorated and suffered extensive water damage. It was on the verge of closing for good when it was purchased by two local couples, Joe and Janelle Shell and Adam and Mandi Curtwright. They restored the theater with the help of federal and state historic tax credits. The Melba Theater has enjoyed tremendous success since reopening in August 2016 and has acted as a catalyst for the revitalization of Batesville’s Commercial Historic District. With a total project cost of $650,000, the Melba Theater had nearly $500,000 in qualified rehabilitation expenses (expenses that qualify for historic tax credit purposes). This earned the project almost $100,000 in federal historic tax credits and $125,000 in state historic tax credits (before the per-project cap increase for income-producing projects). The project created 16 permanent jobs and brought new life to downtown through special movie promotions and events. Since the Melba was renovated, The Royal on Main, a boutique hotel, and Stella’s Brick Oven Pizzeria and Bistro have each opened in historic buildings rehabilitated with the help of historic tax credits. These historic tax credit projects spurred additional public and private investment, including the Independence County Library’s outstanding renovation of the historic Barnett Building on Main Street as its new home and the construction of Maxfield Park on a vacant lot between Main Street and Poke Bayou with the help of a generous bequest from Anne Strahl and private donations. All of these improvements support existing businesses and attract new ones to the downtown area.
Historic tax credits are also a valuable tool for neighborhood revitalization. The historic tax credit encourages owners to maintain their historic properties and retain the character-defining features that create rich streetscapes. Rehabilitating existing buildings means no new streets or other infrastructure are required. Often, original building materials can be reused, cutting down on waste. Those refurbished urban residential neighborhoods are often within walking distance to commercial districts, providing a steady stream of foot traffic for businesses. Take Fort Smith’s oldest neighborhood as an example. Over the past five years, Justin Skinner and his company, Historical Holdings, redeveloped five vacant properties in Fort Smith’s Belle Grove Historic District. As a resident of the district, Skinner has an obvious passion for restoring Belle Grove and transforming decrepit properties into comfortable homes. Together, these five projects have created 11 new dwelling units and were awarded $460,000 in state historic tax credits and more than $360,000 in federal historic tax credits. The Samter-McGinty House at 410 N. Seventh St. is the company’s most recent project. The house was built in 1897 for Louis and Sara Samter, parents of noted author Thyra Samter Winslow. After it sat vacant for more than 10 years, Historical Holdings bought and rehabilitated it to serve as two market-rate housing units. The project created 10 to 13 full-time jobs for 12 months. Plus, the occupants of these new housing units are within walking distance to restaurants, bars and shops on Garrison Avenue.
Rachel Patton is the executive director of Preserve Arkansas, the statewide nonprofit advocate for historic preservation.

Historic tax credits are an important tool for the revitalization of downtowns and neighborhoods throughout Arkansas.