1. Historic Preservation Tax Credit IPED HTC Developers Conference February 5, 2009 Brett Weal 2002 Summit Boulevard Atlanta, Georgia 30319 Brett.Weal@reznickgroup.com 404-847-7624

2. Reznick Group Building Business Value Credits vs. Deductions A Credit Offsets Tax Liability Dollar for Dollar DeductionCredit Income$100 Less: Deductions(20)- Taxable Income80100 Gross tax Due @ 35%2835 Less: Credits-(20) Net Tax Due @ 35%2815

3. Reznick Group Building Business Value Calculating the CreditEligible Basis Qualified Rehabilitation Expenditures (QREs) The term qualified rehabilitation expenditure means any amount properly chargeable to capital account (i) for property for which depreciation is allowable under section 168 and which is (I) nonresidential real property, (II) residential rental property, (III) real property which has a class life of more than 12.5 years, or (IV) an addition or improvement to property described in subclause (I), (II), or (III), and (ii) in connection with the rehabilitation of a qualified rehabilitated building. Hard Costs for construction related activity in the historic building Soft Costs related to rehabilitation, if such costs are added to the property's basis and are determined to be reasonable and related to the services performed, e.g., architectural and engineering fees, site survey fees, legal expenses, and development fees

4. Reznick Group Building Business Value Calculating the CreditWhat is Not a QRE? Land & Interest Carry on Land Building Acquisition & Interest Carry on Acquisition Acquisition-Related Costs Site Improvements & Landscaping Enlargements & Demolition Personal Property Tax Exempt Use Property

5. Reznick Group Building Business Value Sample Development Budget

6. Reznick Group Building Business Value Calculating the Credit QREs$ 500,000 Credit Rate 20%* Credits$ 100,000 Calculate the equity amount: $1.00 per credit multiplied by $100,000 credits = $100,000 * Credit Rate is sometimes 10%.

7. Reznick Group Building Business Value Test Periods Qualified Expenditures during a 24-month period selected by the taxpayer must exceed the greater of $5,000 or the adjusted basis of the building as the beginning of the 24- month period Owner can substitute 60 months for 24 in substantial rehab test rules if… Can document that the Rehab is expected to take longer than 24 months, and will be completed in stages, and Documentation must be dated prior to date of start of physical construction 24 Month Test Period60 Month Test Period

8. Reznick Group Building Business Value Who Can Claim the Credit? Timing of Ownership Relative to Placed in Service is Critical Owned during rehab & sold prior to placed in service Bought into ownership just prior to and owned the day placed in service Bought into ownership after placed in service No Credit to old owner Credit to owner No Credit to new owner