Transcript Preservation Tax Incentives for Historic Buildings A Joint Program of the following agencies: Department of the Treasury Internal Revenue Service Department of the Interior National Park Service The.

Preservation
Tax
Incentives
for Historic
Buildings
A Joint Program of the following agencies:
Department of the Treasury Internal Revenue Service
Department of the Interior National Park Service
The Oklahoma State Historic Preservation Office
The Oklahoma Tax Commission
Oklahoma’s
Architectural
Heritage:
32 Years of
Preservation Tax
Incentives for
Historic Buildings
Harry Simms AIA
Historic Preservation Architect &
Tax Credit Program Coordinator
Oklahoma State Historic Preservation Office
a division of the Oklahoma Historical Society
New Tax Applications
2008
• Tulsa:
• Atlas Life Insurance Building
• Oklahoma City:
• United Founders Life Tower
• Edmond:
• Peoples Bank Of Edmond
More Oklahoma Statistics
• Only 30% of the buildings rehabilitated
were ON the National Register
BEFORE participating in the tax credit
program
• 65% of Oklahoma’s tax credit
rehabilitation projects have been for
buildings located in National Register
historic districts
Preservation Tax Incentives
• Created in 1976
• Revised by the Tax Reform
Act of 1986
• 20% Tax credit for certified
rehabilitation of certified
historic structures
• 10% tax credit for rehabilitation
of non-historic non-residential
buildings built before 1936
• Requirements for both credits
• Must meet a substantial
rehabilitation test
• Must involve a depreciable
building
What is a Tax Credit?
• Deduction = a lowering of the income subject to
taxation
• Credit = lowering of the tax owed ($ for $)
• 20% Credit = 20% of the amount spent in a
certified rehabilitation of a certified historic
building
• 10% Credit = 10% of the amount spent to
rehabilitate a non-historic building built before
1936.
“Certified Historic Structure”
A certified historic structure is...
• a building that is listed individually in the
National Register of Historic Places
OR
• a building that is located in a registered historic
district and certified by the National Park
Service as contributing to the historic
significance of that district.
What is a Substantial
Rehabilitation?
• During a 24 month period of time selected by the
taxpayer rehabilitation expenditures must exceed
the greater of:
• $5,000.00
• The adjusted basis of the building and its structural
components = purchase price, minus cost of land, plus
improvements already made, minus depreciation
already taken
• Once the substantial test is met, all qualified
expenditures, including those incurred outside of
the measuring period, qualify for the credit
Rehabilitation Tax Credits:
Who Does What?
• SHPO
State Historic Preservation Office
• NPS
National Park Service
• IRS
Internal Revenue Service
SHPO
• 1st point of contact
• Provides forms and program information
• Maintains records of National Register buildings
and historic districts
• Assists those pursuing nomination of a property
to the National Register
• Provides technical assistance
• Advises owners on applications
• Makes site visits to assist owners
• Makes certification recommendations to the NPS
NPS
• Reviews all applications for conformance to
the Secretary’s Standards
• Issues all certification decisions
• Transmits copies of decisions to IRS
• Develops and publishes program
regulations, standards, applications, and
information
IRS
• Publishes regulations of procedural and
legal matters concerning the 20% and the
10% tax credit
• Answers inquiries concerning legal and
financial aspects of program
• Ensures that only those eligible for the
credits utilize them
20% Rehabilitation
Tax Credit
• Historic Preservation Certification
Application (HPCA)
• Part 1- Evaluation of Significance
• Part 2 - Description of Rehabilitation
• Part 3 - Request for Certification of
Completed Work
Application Process
• Certification of rehabilitation work must be
documented in the HPCA Part 2 - Description of
Rehabilitation.
• Seek advice BEFORE you begin work.
• After work is completed, the Owner submits the
HPCA Part 3 - Request for Certification of
Completed Work
• Only a completed project that meets the Standards
for Rehabilitation is approved as a “Certified
Rehabilitation”
HPCA Part 1 Evaluation of Significance
• Documents the physical appearance of the
building
• States the significance of the building
Obtaining Certified Historic
Structure Status
• Owners of buildings within historic
districts MUST complete the HPCA Part 1
- Evaluation of Significance
• Owners of buildings individually listed on
the National Register of Historic Places
are already certified. Part 1 of the HPCA
is not required.
Building Not Yet Listed on the
National Register?
• Part 1 of the HPCA is completed and used
to request a preliminary determination of
significance
• Building must be added to the National
Register or to a National Registered
Historic District to complete the Tax Credit
process.
P
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P
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1
QUALITY
versus
QUANTITY
Labeling a Photograph
On the back of the photograph and using an adhesive backed label:
Heartbreak Hotel
1212 Boogie Woogie Avenue
Juno, Alaska
Entrance / South Elevation
E. Presley
2/2/02
Camera is pointing North
Photograph # 3 of 30
P
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REVIEW
P
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1
REVIEW
HPCA Part 2 Description of Rehabilitation
• Building and rehabilitation project data
• Records anticipated cost of project
• Itemized documentation of proposed
project
“Certified Rehabilitation?”
A certified rehabilitation is a rehabilitation
of a certified historic structure that is
approved by the National Park Service as
being consistent with the historic character
of the property and, where applicable, the
district in which it is located.
The Secretary of the Interior’s
Standards for Rehabilitation
• Certified rehabilitation projects must meet the
standards as interpreted by the NPS
• Standards are applied in a reasonable manner with
consideration of economic and technical feasibility
• Apply to all historic buildings of all types
• Apply to interior and exterior
• Encompass related landscape features, site and
environment
• Encompass attached, adjacent or related new
construction
IRS Requirements
• Building must be depreciable: used in a trade, business, or
held for production of income
• Rehabilitation must be substantial
• May be phased construction
• 60 month measuring period
• Must have set of plans & specifications for each phase
• Reasonably expect that all phases of rehabilitation will be
completed
• Property must be placed in service - credit is allowed 1st
taxable year that rehabilitated property is placed in service
• Must be a certified historic structure at time placed in
service - HPCA Part 1 must have been filed before the
building was placed in service
• Qualified rehabilitation expenditures
NPS Processing Fees
• If total rehabilitation cost is under $20,000 there is
no fee.
• Preliminary Fee
– Assessed before review of Part 2
– $250.00
• Final fee
– Assessed before review of Part 3
– Fee schedule based on total rehabilitation cost
– Preliminary fee deducted from final fee total
P
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P
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2
QUALITY
versus
QUANTITY
Labeling a Photograph
On the back of the photograph and using an adhesive backed label:
Heartbreak Hotel
1212 Boogie Woogie Avenue
Juno, Alaska
Entrance / South Elevation
E. Presley
2/2/02
Camera is pointing North
Photograph # 3 of 30
P
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2/3
REVIEW
P
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2/3
REVIEW
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REVEIW
CONDITIONS
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HPCA Part 3 Request for Certification of
Completed Work
• Documents final cost of project
• Owner attests that the completed project
conforms to “approved” HPCA Part 2
P
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3
P
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3
QUALITY
versus
QUANTITY
Labeling a Photograph
On the back of the photograph and using an adhesive backed label:
Heartbreak Hotel
1212 Boogie Woogie Avenue
Juno, Alaska
Entrance / South Elevation
E. Presley
2/2/02
Camera is pointing North
Photograph # 3 of 30
P
A
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T
2/3
REVIEW
P
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2/3
REVIEW
OK Tax Credit Projects Through Time
(By Quantity of Project Numbers Assigned)
19
76
19
79
19
82
19
85
19
88
19
91
19
94
19
97
20
00
20
03
45
40
35
30
25
20
15
10
5
0
New Projects
OK Tax Credit Projects Through Time
(By Completed Part of Application)
45
40
35
30
25
20
15
10
5
0
04
20
02
20
00
20
98
19
96
19
94
19
92
19
90
19
88
19
86
19
84
19
82
19
80
19
78
19
19
76
Part 1
Part 2
Part 3
Getting a Project “Certified”
with Ease
• Apply as soon as possible – and in
any case, before beginning work
–
–
–
–
Consult with SHPO
Read information carefully
Submit early in the project planning
Wait to get approval in writing before
beginning work
Getting a Project “Certified” with
Ease (continued)
• Photograph the building inside and outside before and after the project
• Read and follow the Secretary of the
Interior’s Standards for Rehabilitation and
the Guidelines for Rehabilitating Historic
Buildings
• After application is filed notify the SHPO of
any changes in the project
Claiming the 20%
Rehabilitation Tax Credit
• For tax year that rehabilitated building is
placed in service
• Phased project? = once the substantial
rehabilitation test has been met
• Building not ever taken out of service? = once
the substantial rehabilitation test is met
• NPS certification (Part 3) shall be filed with
tax return claiming credit
• If certification is denied the credit will be
disallowed
Recapture of the Credit
• Owner must hold property for 5 years after completing
rehabilitation or pay back credit
• If building sold within one year then 100% of credit is
recaptured
• Sold between 1 and 5 years = 20% per year
• NPS and SHPO may inspect property at any time during 5
year period
• NPS may revoke credit for any work not done in
accordance with HPCA
• Revocation for additional work done in 5 years and not
approved - NPS notifies IRS of such revocations
Depreciation
•
•
•
•
•
Rehabilitated property is depreciated
Straight line method
27.5 years for residential property
39 years for nonresidential property
Depreciable basis of rehabilitated building
is reduced by full amount of the tax credit
claimed
10% Rehabilitation Tax Credit
• Available for the rehabilitation of non-historic
buildings built before 1936
• Rehabilitation must be substantial
• Property must be depreciable
• Only non-residential uses apply (no rental
housing, hotels qualify)
• Moved buildings are ineligible
• Must meet specific physical test
• No formal review process
Other Tax Incentives for
Historic Preservation
• State Tax Incentives
• Investment Tax Credit for
Low Income Housing
Internal Revenue Service
National Coordinator:
Colleen Gallagher
(651) 726-1480
[email protected]
For More Information
• NPS publications
• HPCA
• NPS regulations on “Historic Preservation
Certifications” = 36 CFR Part 67
• IRS regulations on “Investment Tax Credit for
Qualified Rehabilitation Expenditures (Treasury
Regulation Section 1.48-12)
• IRS: “Market Segment Specialization Program:
Rehabilitation Tax Credit”