INDIANAPOLIS — Advocates of historic preservation are pushing state lawmakers to expand a tax credit they say will create economic development and help boost restoration of Indiana’s downtowns.

Currently, the Indiana Historic Preservation Tax Credit is ineffective, said Marsh Davis, president of Indiana Landmarks, a nonprofit group that works to protect historically significant properties.

That’s because the cap on the amount of credits issued annually is so low that developers and investors must now wait more than a decade to reap its rewards, he said. That means the credit fails to act as an incentive for projects that need just a small boost to become reality, Davis said.

“We don’t support it. We don’t promote it to people,” Davis told the legislature’s Commission on State Tax and Financing Policy during a meeting Monday at the Statehouse. “Who really wants to wait until 2023 to get a credit? As a preservation tool, it would be the first thing we’d be out championing, but we can’t do that right now because of this decades-plus backlog.”

Lawmakers, though, said that while the tax credit is a worthy program, any expansion would cost the state money at a time when the budget is already tight.

Simply paying off the credits that have been approved but pushed into future years would cost nearly $5 million, according to a report from the state’s Division of Historic Preservation and Archaeology, which certifies projects that qualify for the tax credit.

The tax commission’s chairman — Sen. Brandt Hershman, R-Buck Creek — said the state doesn’t have that kind of money “lying around to fund all the credits out there.”

“A tax credit in essence means someone has to pay more in taxes or some program has to be cut to keep a balanced budget,” Hershman said. “I like this program. But how are we going to make this work and keep our fiscal house in order?”

The General Assembly created the Indiana Historic Preservation Tax Credit in 1994. It offers users a state income tax credit of up to 20 percent of the cost of the preservation or restoration, up to a maximum of $100,000 per project.

A project qualifies if the structure is at least 50 years old, on the Indiana Register of Historic Sites and Structures, and will be income-producing. Restoration of an old downtown building for a restaurant space might qualify. So might the renovation of an old school into apartments or condos.

The Division of Historic Preservation and Archaeology is required to certify any project that meets the qualifications. However, the total amount of credits assigned can’t top more than $450,000 annually. So because the dollar value of the projects certified exceed the annual limit, the redemption of the tax credits gets pushed into future years, creating a backlog.

State Rep. Ed Clere, R-New Albany, introduced legislation in January that would have immediately increased the cap to $2 million and then moved it up another $2 million annually until it reached $10 million per year. He said half the money each year would have been used to pay off credits that are backlogged; the other half would have gone to new projects.

The House Ways and Means Committee considered the legislation earlier this year but did not take a vote.

Clere told the tax commission Monday that raising the cap would cost the state more money in one respect. But he said it would spur economic development that would lead to additional sales, income and property tax revenue to help state and local governments.

“Here’s a tool already in our toolbox but it’s a tool that has become dull because of the cap,” Clere said. “It’s time to take a hard look at this existing tool that — sharpened — could be very effective for economic development and job creation.”

The federal government and 31 states offer similar credits, although most are far more expansive than Indiana’s program. Davis said Indiana’s tax credit is “arguably the least effective,” primarily due to the cap but also because it can’t be assigned from one taxpayer or organization to another.

Members of the tax commission, though, were skeptical of expanding the program. Rep. Eric Turner, R-Cicero, said he was concerned that most of the projects — and the money — would be earmarked for Indianapolis, even though the dollars to fund the tax credit are generated statewide.

Turner said too that he doesn’t favor expanding a tax credit that could reward developers who would have finished a project even without the incentive.

But Indianapolis attorney Jonathan Anderson, who specializes in historic preservation projects, said the extra 20 percent credit could save many preservation projects. It doesn’t now, he said, because many investors aren’t willing to wait more than 10 years to recoup some of their cash.

“There are projects every day we see that are not getting done because there is not this extra incentive to get them done,” Anderson said.

And Bill Konyha, president of the Economic Development Group of Wabash County, said that many of those projects will take place on Main Street in small towns across Indiana.

“For rural communities in particular, our downtowns have been battered for far longer than this latest recession,” Konyha said. “The thing the legislature can do to help rural areas — to help us save our towns — is to increase the allocation with the understanding that this is an economic investment that pays off a lot more heavily in the Wabash, Ind., than in the Indianapolis, Ind., because it creates so much more ripple effect.”