What are Historic Tax Credits?

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Properties and sites listed on the National Register of Historic Places (the “Register”), as well as those properties considered as having historic significance to a local historic district “approved by the Park Service,” are eligible for federal tax credits.

The Biltmore The credit equals 20 percent of all qualified rehabilitation expenditures performed on certified historic structures. The 20 percent tax credit may be allocated to the members of developer entity or if structured as a lease then to the lessee of the developer entity. The rehabilitation undertaken may be made with respect to commercial, industrial, agricultural or rental residential property (the tax credit is not available for residential properties used exclusively as the owner’s private residence). The tax credit program is operated by the Federal Historic Preservation Tax Incentive program, which is jointly managed by the National Park Service, State Historic Preservation Office, and the IRS. The HTC is received all up-front not over the 7 years like NMTC . The HTC is generated in the year rehabilitation is complete.

Qualified expenditures can include costs of construction, along with certain developer fees, consultant fees (including legal, architectural and engineering fees), if added to the basis of the property. Costs that are not included in the qualified expenditures include property acquisition costs, new additions to the historic structure or other new buildings, parking and landscaping costs. Generally, to qualify for the credit, the qualified rehabilitation expenditures during the 24 month period selected by the taxpayer must exceed the purchase price of the building.

For example, if an owner spends $5 million on qualified expenditures for the project, there could be $1 million in tax credits available to offset income taxes owed. If the owner sells the 20 percent tax credit for 60 cents, the project will see a 12 percent net benefit at the end the rehabilitation is completed and all approvals for the National Park Services are obtained, which means a $5,000,000 qualified expenditure, should give $600,000 to the owner that sells the tax credit.

Apart from the 20 percent tax credit, the tax incentive program offers a 10 percent tax credit for rehabilitation to owners of non-historic, non-residential buildings constructed before 1936. See HTC on map

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