State tax-credit program for downtown building rehabs draws strong demand; funding cap eyed for increase

Caitlin Corgan, program administrator with the Vermont Department of Housing and Community Development, told the Senate committee that the Downtown and Village Center Tax Credit Program offers state income tax credits to offset investments in building improvements within designated downtowns and village centers.

The program, Corgan said, “offers state income tax credits to offset the investments made in certain types of building improvements, within these designated areas.” She told members the program was created in 1998, is currently funded at about $3,000,000 annually and that the governor has proposed increasing funding to $5,000,000 a year.

Why it matters: committee members said the credits are a key lever for downtown economic development and housing. Corgan said the program helps convert vacant or underused historic and commercial buildings into housing, retail and community space and often works as a financing tool for projects that otherwise could not start.

Program basics and eligibility

Corgan outlined the program’s eligibility and four credit categories. To qualify under the current rules, a building generally must be at least 30 years old and located within a designated downtown or village center. She said Vermont is in a transition tied to Act 181, which will change mapping and designation processes, but staff are applying the current designations until new maps are finalized.

The program’s four credit categories are: - Historic credit: a 10% state credit that mirrors the federal Rehabilitation Investment Tax Credit; applicants using this state historic credit must also apply to and receive approval from the federal program and the National Park Service process (National Register/Rehabilitation Investment Tax Credit and Secretary of the Interior standards are implicated). - Façade credit: focused on exterior work, a 25% credit capped at $25,000 in tax credit per project; for National Register-listed buildings, exterior work is expected to meet federal preservation standards. - Code (accessibility and safety) credit: supports upgrades such as electrical, plumbing, elevator, sprinkler or other code-required work that enable a building to reopen or change use. - Flood mitigation credit: added to the program in 2023 to help owners make resilience and post‑flood rebuild investments (raising utilities, reinforcing foundations, moving equipment out of basements).

Corgan said credits may be carried forward for up to nine years and can be sold to banks or insurance companies so nonprofits and small businesses with little tax liability can monetize awards. She described the structure as a financing tool that can be used to secure construction loans earlier in a project’s timeline and then be sold to repay those loans once projects are certified.

Preservation standards and dispute points

Committee members pressed staff on how preservation requirements are applied and whether any state-only preservation requirements add costs beyond federal standards. Corgan said the state uses the Secretary of the Interior’s standards for rehabilitation — the same federal criteria used by the National Park Service — and that, for the state historic tier, applicants must also be approved by the federal program.

On questions about subjective calls that could add cost (for example, interior historic elements such as staircases), Corgan said her office routinely works with applicants, the Division for Historic Preservation and the federal reviewers to find solutions that meet preservation standards while maximizing housing units. She emphasized the program is voluntary: if an owner does not access federal or state historic credits, they are not bound by those preservation conditions.

Coordination with other regulators and supports

Corgan described regular coordination with the Division of Fire and Safety on code and safety upgrades and with the Center for Independent Living on accessibility. She said staff do on-site meetings to reconcile accessibility, fire‑safety and historic‑preservation concerns and that, in her experience, workable solutions are typically found.

Outreach and demand

Committee members asked how owners find information about the credits. Corgan said her office maintains a funding directory online and that regional planning commissions, local downtown organizations and the Division of Fire and Safety often refer applicants to her. She said the program is heavily oversubscribed: demand exceeds available funds most years. The program’s historical average leverage, she said, is about $17 in total investment for every $1 of state tax credit awarded.

Examples and program impact

Corgan gave examples of recently supported projects, including mid‑sized multiunit rehabilitations that combined federal and state credits and smaller façade and code funding that allowed storefronts to become a health clinic or childcare space. She cited the conversion of an older school building in Bennington as an example where flood adaptations and code upgrades enabled new community uses. Corgan said she could provide additional project-specific detail on request.

Committee follow-up and next steps

Committee members signaled interest in clarifying whether any state-level practices beyond written federal standards were being applied, in obtaining the program scoring rubric used by the Community Investment Board, and in measuring long-term economic impacts on downtown grand lists. Corgan said staff can share scoring materials and that regional mapping and planning work may help measure longer-term downtown impacts.

Ending

Corgan closed by reiterating that the program is competitive, that the governor’s budget proposal to raise the cap would help meet demand, and that staff aim to help projects navigate preservation, code and financing requirements so buildings return to productive use.