Federal Historic Preservation Tax Credit

Historic building can benefit from a preservation tax credit

The Federal Historic Preservation Tax Credit Program is administered by the National Park Service along with the Internal Revenue Service. The two services have partnered with the State Historic Preservation Offices (SHPO) in order to foster participation in the program throughout the country. It was developed in 1976 by Congress, in order to encourage the revitalization of historic properties, thus preserving the historic integrity of neighborhoods and business districts.

Tax Incentive

In order to encourage participation in the program, 20 percent of the cost of rehabilitation can be used as a tax credit. For example; if a participant spends $40,000 to rehabilitate a historic property, $8,000 can be claimed as a tax credit on the individual's income tax.
The tax incentive is only available for income producing properties such as rental units or business properties. If the property is a mixed-use structure and part of it is owner occupied, but another part is business, the business part would be eligible.

Eligibility

According to the National Park Service the property must either be listed on the National Register of Historic Places or be a contributing structure in a "registered historic district". The property must be used for "income-producing" purposes for five years after rehabilitation. Another criteria for eligibility is that the property must be in need of "substantial rehabilitation". This means that the cost to rehabilitate the property must exceed the cost of the property before rehabilitation. This test must be met within two years, or five if the rehabilitation is completed in phases.

Physical Integrity

The physical historic significance of the building has to be intact. Rehabilitation repairs should eliminate deterioration without causing the loss of the historic features. Material used can not exceed the original material to a point that new exists and the old is gone. Replacing in kind is fine unless there are no original surfaces left. The property must remain historic, not become something that is new but looks old.

Non-Historic Surface Coverings

Some properties have been covered in non-historic material such as aluminum or vinyl siding. In order to determine if a property still maintains its historic integrity, the covering may have to be removed before determining its eligibility.

Buildings

Some structures include several buildings such a house with outbuildings and a mill. Eligibility is based upon the entire property and not one structure.
If a building is moved in or out of a historic district it can jeopardize its listing on the National Register of Historic Properties. The local SHPO office should be consulted before such a move.
If demolition of various structures is needed, it is essential to get approval and advice before any action takes place. Any change in the original look of the property can have an affect on its eligibility
.

References

• National Park Service US Department of Interior Historic Preservation Tax Incentives
• National Park Service Incentives
• National Park Service Incentive-Other Eligibility Factors