Committee hears testimony on bill raising historic rehabilitation tax credit in larger cities

Senate Bill 227 would change the percentage and qualifying thresholds for the Kansas historic rehabilitation tax credit and took a public hearing before the Committee on Taxation, which heard proponents describe economic benefits and the Department of Revenue present an estimate of reduced state revenue.

The bill would tier credits by community size and project cost. Under the bill as described to the committee, qualified expenditures in cities with a population greater than 50,000 would be eligible for a 25 percent credit when the expenditures are at least $5,000 but less than $50,000 and a 40 percent credit when expenditures exceed $50,000. The bill would also allow a 40 percent credit for qualified expenditures on historic structures that are exempt from federal income taxation. The changes would apply to any qualified rehabilitation plan placed in service on or after July 1, 2025.

Supporters told the committee the tax credit helps bridge financing gaps that otherwise prevent rehabilitation projects from moving forward. Jennifer Sork, who said she represents Clayton Properties and Clock Tower LLC, told the committee that using historically accurate materials and specialized labor raises project costs and makes financing difficult for many projects. "These tax credits are important as they offset the extraordinary cost," Sork said.

Blade Majes, executive director of Wareham Hall in Manhattan, Kansas, described his nonprofitled project to restore the Wareham Theatre and said the credit is necessary to attract private investment in smaller cities. Majes said the theatre project will add about $4,600,000 a year to the regional economy, attract 40,000 to 50,000 patrons to the historic district and create hundreds of construction jobs over two years; he said the building would have about 550 seats in a seated configuration and up to about 800 standing for other events. "Senate Bill 227 is a fiscally responsible way to encourage private investment," Majes said.

Terry Humphrey, executive director of Friends for Historic Preservation and executive director of AIA Kansas, said Kansashistoric rehabilitation program has contributed more than $1 billion to the state economy since it began and noted that only the most significant buildings qualify and that credits are issued only after rehabilitation is complete. Humphrey summarized the bill as bringing parity to communities that currently do not qualify for the higher 40 percent credit.

The Department of Revenue presented the bills fiscal estimate. Kathleen Smith of the department told the committee the state general fund revenue impact would be a decrease of about $600,000 in fiscal year 2026, about $1.9 million in fiscal year 2027, and about $3.1 million in fiscal year 2028. The departments estimate was based on historic preservation tax credit usage and projected that the bill would increase total tax credits by roughly $3.7 million per year; the department assumed one-third of additional credits would be allowed against current-year liability and the remainder carried forward.

A State Historical Society staff member identified as Eric told the committee that between 2014 and 2024 there were 818 projects in the societys dataset; the society could not confirm ownership for each project but said projects are categorized by type (single-family, commercial, civic, multifamily) and that about 306 of the projects in that period appeared to have received the nonprofit credit amount. Committee members asked for that spreadsheet to be made available to the committee.

No opponents or neutral witnesses appeared in person. The committee closed the hearing on Senate Bill 227 without taking action.

Why it matters: supporters say the change makes it easier to finance rehabilitation in larger cities and smaller-city projects alike; the Department of Revenues fiscal note shows a multi-million-dollar reduction to state general fund revenue over the next several years if the bill becomes law.

Whatwas not in the record: the committee did not receive a comprehensive ownership breakdown (private vs. government vs. nonprofit) for all historical projects during the hearing; Eric said that information could be pulled from the State Historical Societys spreadsheet.

Next steps: the hearing record was closed; the committee did not vote on the bill during this meeting.