The Federal Tax Credit is equal to 20% of qualifying expenses
incurred during a qualified project on a qualified building.
Buildings must be qualified historic structures. Qualified
buildings are those that are listed on the National Register
of Historic Places, have been deemed contributors to a
National Register Historic District, or have been certified
as a historic structure by the National Park Service through
Part 1 of the application process. Buildings that are
not yet listed on the National Register, but have been
certified as historic for purposes of the tax credit program,
must be added to the National Register within 30 months
of the project's completion.
Proposed work must follow a qualified rehabilitation
plan. Qualified rehabilitation projects are those that
meet the Secretary of the Interior's Standards for Rehabilitation
and have been reviewed and approved by the National Park
Service (NPS) through the application process.
Buildings must be income-producing. Uses include hotels,
rental residences, bed & breakfasts, office space, retail
space, industrial or agricultural use.
The Internal Revenue Service requires that rehabilitation
projects be "substantial". This means that the cost
of the rehabilitation must exceed the adjusted basis of the
building. You must exceed that adjusted basis within a 24-month
period (or you may phase a project out for 60 months if needed.)
Please see the IRS
Connection or contact your financial advisor or the SHPO
for more information.
Work may begin before the rehabilitation plan is approved
by the NPS, but it is not recommended. Please contact
the SHPO as soon as possible to avoid risking denial of
your project.
The 20% Federal Tax Credit may be carried forward for
20 years if you are unable to use all of your credits
in one year.
Application Process
Contact the SHPO as soon as possible to verify that your
property and project will likely qualify for this program.
Contact your financial advisor to verify that you can
take advantage of these tax incentives.
All applications are sent first to the SHPO for preliminary
review.
Two copies of the application and all accompanying materials
are required. One will be retained by the SHPO and the
other sent to the NPS for final review.
The SHPO will forward applications to the NPS, generally
with a recommendation. State recommendations are generally
followed, but by law, all certification decisions are
made by the NPS on behalf of the Secretary of the Interior.
The NPS decision may differ from the recommendation of
the SHPO.
Applications may be sent at any time during the year
and may be sent separately or together.
Part 1 -- Evaluation of Significance
-- This form is used to certify that your building is
a historic structure for purposes of the tax credit program.
If your building is individually listed on the National
Register of Historic Places, you will not need to file
this portion of the application. Photographic documentation
of the building before work
is required. The building's eligibility must be evaluated
before work is started and photographs are usually the
only way to do this.
If your building is located in a National Register
Historic District, you will need to file this form
and provide photographic documentation. Information
should be sufficient to allow the NPS to evaluate
how the building relates to the district. This information
will be used to verify that your building is a contributing
element in the district.
If your building is not yet listed on the National
Register, either individually or as part of a district,
you will need to file this form and submit photographic
documentation of the building. Information should
be sufficient for the NPS to make a preliminary determination
as to whether or not the building would be eligible
for the National Register if it were nominated. Usually,
this means submission of a draft National Register
nomination. The SHPO can provide guidance and examples
to aid applicants.
Part 2 -- Description of Rehabilitation
-- This portion of the application must be submitted by all
applicants for the 20% Federal Tax Credit. The form is used
to certify that the proposed project will meet the Secretary
of the Interior's
Standards for Rehabilitation. It is recommended that Part
2 be submitted prior to initiation of the rehabilitation project.
Owners who undertake rehabilitation projects without prior
approval do so at their own risk. Parts 1 and 2 may be submitted
together, but Part 1 must be evaluated prior to review of
Part 2
Theapplicant should outline the building's existing
condition and all proposed work on this form. Photographs
showing all areas of proposed changes are required. If
you are proposing major changes or you are using an architect,
additional materials, such as drawings, may be required.
The SHPO staff will review the application and materials
to aid the applicant in the application process. The SHPO
will advise applicants and provide technical assistance
when needed. Applications will then be forwarded to the
NPS for final review and approval.
Part 3 -- Certification of Completed
Work -- A project does not become a "certified
rehabilitation" until it is completed and certified
by the NPS. This form, with supporting photographs of
the finished work, should be submitted when all work has
been completed. Upon review and approval by the NPS, projects
will be certified as complete and as qualifying for the
20% Federal Tax Credit.
Processing Fees -- An application
processing fee is required for the NPS to review applications
for the 20% Federal Tax Credit. The fee for review of
a Part 2 application for a project exceeding $20,000 is
$250. The fee for review of a completed rehabilitation
project is based on the dollar amount spent on the project.
The NPS will subtract the $250 paid for review of the
Part 2 if submitted previously. The following table shows
the fee schedule charge by the NPS for review of completed
projects. The fee is not due until requested by the NPS
in writing.
Fee
Project Expenses
$500
$20,000 - $99,000
$800
$100,000 - $499,999
$1,500
$5000,000 - 999,999
$2,500
$1,000,000 or more
Claiming the 20% Federal Tax Credit -- When the approved
work is complete and Part 3 of the Federal application has
been approved, property owners may claim the 20% Federal Tax
Credit on IRS Form 3468 (check the IRS
homepage )The IRS may require an itemized list of your
expenses, a copy of your Part 3 -- Certification of Completed
Work, or other materials. If the amount of the tax credit
exceeds your tax liability for the year in which the property
is placed in service, the excess amount may be carried forward
for up to twenty years. Please consult your financial advisor
for more information.
10% Credit for Non-historic Buildings
Requirements
This Federal Tax Credit is equal to 10% of expenses incurred
during a substantial rehabilitation of a qualified building.
Buildings must be income-producing, however, this credit
does not apply to buildings used for residential uses.
Rental housing does not qualify.
Buildings must have been built prior to 1936, but cannot
be buildings listed on the National Register or otherwise
determined to be eligible for the 20% Federal Tax Credit.
Rehabilitation projects must be "substantial".
This means that the expense of the rehabilitation must exceed
the adjusted basis of the building. Please see the IRS
Connection, consult your financial advisor, or contact
the SHPO for more information.
Buildings that have been moved do not qualify for this
tax credit program.
At least 50% of the building's walls, existing at the
time the rehabilitation began, must remain in place as
external walls at the conclusion of work.
At least 75% of the building's existing external walls
must remain in place as either external or internal walls.
At least 75% of the building's internal structural framework
must remain in place.
There is no formal review process for this program.
When the project is complete, the tax credit must be
claimed on IRS Form 3468 for the tax year in which the
building was placed in service. You may find forms at
the IRS website or contact
your financial advisor for more information.
Examples
of Qualified Costs
Walls
Doors
Partitions
Windows
Floors
Stairs
Ceilings
Chimneys
Fire escapes
Sprinkling systems
Escalators & Elevators
Engineering Fees
Electrical wiring &
lighting fixtures
Architect fees
Plumbing & plumbing fixtures
Reasonable developer fees
Construction management costs
Roofing
Construction period interest & taxes
Carpeting (if glued down)
Permanent coverings such as paneling
or tiling
Components of central air condition
or heating systems
Any fees paid that would normally be
charged to a capital account
Other components related to the operation/maintenance
of the building
Examples
of Unqualified Costs
Acquisition costs
Leasing expenses
Appliances
Fencing
Cabinets
Feasibility studies
Outdoor lighting remote from bldg
Financing fees
Carpeting (if tacked in place)
Parking lots
Decks (if not original to building)
Paving
Enlargement costs (increase in total
volume)
Planters
Moving (bldg) costs
Retaining walls
Porches & porticos (if not original
to bldg)
Furniture
Storm sewer construction costs
Sidewalks
Window treatments (curtains, blinds,...)
Signage
Demolition costs (removal of a building
on property site)
