Firm Profile
 
Services
What's New
Contact Us
  white box

 

 

white box

Federal Tax Incentive Programs

Rehabilitation Investment Tax Credit of 20%
Rehabilitation Investment Tax Credit of 10%
Income Tax Incentives for Easement Donation
Federal Income Tax Credit for Low Income Housing

To be eligible for the Rehabilitation Investment Tax Credit of 20%

  1. The building must be listed, or eligible for listing, in the National Register of Historic Places, either individually or as a contributing building within a historic district.
  2. The project must meet the “substantial rehabilitation test.” This test means that the cost of the rehabilitation must be greater than the adjusted basis of the property and must be at least $5,000.
  3. Generally, projects must be finished within two years.
  4. After the rehabilitation, the building must be used for an income-producing purpose for at least five years.
  5. The rehabilitation work itself must be done according to The Secretary of the Interior’s Standards for Rehabilitation; these are guidelines for appropriate and sensitive rehabilitation.
  6. The application process has three parts:
    • Part 1: Evaluation of Significance – Must be submitted and approved prior to rehabilitation of the building
    • Part 2: Description of Rehabilitation – Must be submitted and approved prior to rehabilitation of the building
    • Part 3: Request for Certification of Completed Work – Must be submitted after all rehabilitation of the building has been completed

To be eligible for the Rehabilitation Investment Tax Credit of 10%

  1. The building must be built before 1936 and be non-historic. A non-historic building is one that is not listed in the National Register, either individually or as a contributing building within a historic district. If the property is located in a National Register Historic District, a Part 1 must be submitted and reviewed by the State Historic Preservation Office and National Park Service for certification of non-historic significance.
  2. The building must meet the physical wall retention test:
    • Minimum of 50% of the building’s walls existing before the rehabilitation must remain as external walls
    • Minimum of 75% of the external walls must remain in place as either external or internal walls
    • Minimum of 75% of the internal structure must remain in place
  3. The project must meet the “substantial rehabilitation test.” This test means that the cost of the rehabilitation must be greater than the adjusted basis of the building and must be at least $5,000.
  4. Generally, projects must be finished in two years
  5. The building must be used for non-residential, income-producing purposes for at least five years after the rehabilitation. Therefore, properties used for residential rental income are excluded.
  6. The application process has one part
    1. Part 1: Evaluation of Significance – Must be submitted and approved prior to rehabilitation of the building

To be eligible for an Income (Federal) Tax Incentives for Easement Donation

  1. The Building must be listed individually in the National Register of Historic Places or be a building that contributes to a National Register Historic District.
  2. May be  an owner-occupied residence or income-producing property
  3. Rehabilitation work is not required for this incentive. The incentive is based on the charitable contribution of a partial interest in a historic property (i.e. easement) to a government or nonprofit organization
    • When donors donate partial interests – or easements – on historic buildings, they pledge to preserve significant historic features and agree to obtain the easement holder’s consent before making alterations.
  4. Authorized by the Tax Reform Act of 1986 (Internal Revenue Code Section 170(h))
  5. The application process is determined by agreements between the SHPO and the government/nonprofit organization

To be eligible for the Federal Income Tax Credit for Low Income Housing

  1. Many developers have used the Low Income Housing Tax Credit in conjunction with the 20% Federal Historic Rehabilitation Tax Credit to rehabilitate historic buildings to provide rental units for low income residents.
  2. Authorized by the Tax Reform Act of 1986 (Internal Revenue Code Section 42)
  3. The application process is determined by the State Housing Finance and Development Authority.