Presentation on theme: "Preservation Tax Incentives for Historic Buildings A Joint Program of the following agencies: Department of the Treasury Internal Revenue Service Department."— Presentation 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 Oklahoma State Historic Preservation Office The Oklahoma Tax Commission
Harry Simms AIA Historic Preservation Architect & Tax Credit Program Coordinator Oklahoma State Historic Preservation Office a division of the Oklahoma Historical Society Oklahoma’s Architectural Heritage: 32 Years of Preservation Tax Incentives for Historic Buildings
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.
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
OK Tax Credit Projects Through Time (By Quantity of Project Numbers Assigned)
OK Tax Credit Projects Through Time (By Completed Part of Application)
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 Colleen.firstname.lastname@example.org
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”