Historic Preservation Tax Credit

NOTE:  North Carolina state historic tax credits expired December 31, 2014.  Please see below for information regarding federal historic tax credits.
 
The following statements are taken from the "Federal Historic Rehabilitation Investment Tax Credit: Frequently Asked Questions" (State Historic Preservation Office, Division of Archives and History, NC Department of Cultural Resources, 4/15).

What is the Federal Historic Rehabilitation Investment Tax Credit?
  • An incentive to taxpayers who contribute to the preservation of historic buildings by rehabilitating them.
  • Provides a dollar-for-dollar reduction of federal income tax owed equal to 20 percent of the cost of         rehabilitating "certified historic structures".
  • Project must go through the three-part "Historic Preservation Certification Application" process at the state and federal levels - the State Historic Preservation Office (SHPO) and the Secretary of the Interior/National Park Service (NPS).
Who may apply for the tax credit?
  • Owners of potential "certified historic structures."
  • Lessees with a lease term of 27.5 years for residential property and 39 years for nonresidential property.
What buildings are eligible?
  • Buildings listed individually in the National Register of Historic Places or potentially eligible to be listed. Buildings not listed are required to be listed as part of the final certification.
  • Buildings located in a "registered historic district" or a potentially eligible district that contribute to the significance of the district.
  • Must be a "certified historic structure" as determined by the Secretary of the Interior/National Park Service through the "Historic Preservation Certification Application Part 1 - Evaluation of Significance."
  • Must be used in a trade or business or held for the production of income for either rental residential or nonresidential purposes.
What rehabilitations qualify?
  • Must be substantially rehabilitated - expenditures must exceed the greater, the "adjusted basis" of the building or $5,000, within 24 months or 60 months for phased projects.
  • Rehabilitation must be consistent with the historic character of the building and where applicable, with the district in which the building is located as determined by the Secretary of the Interior/National Park Service through the "Historic Preservation Certification Application Part 2 - Description of Rehabilitation."
  • Must meet The Secretary of the Interior's Standards for Rehabilitation
What rehabilitation expenditures qualify?
  • Any expenditure incurred in connection with the rehabilitation of a "certified historic structure" that are properly chargeable to a capital account.
  • Includes: rehabilitation costs; construction interest and taxes; architectural and engineering fees; legal and professional fees; developer's fees; and general and administrative costs.
  • Does not include: acquisition costs; enlargement costs; acquisition interest and taxes; realtor's fees; paving and landscaping costs; sales and marketing costs; or new building construction costs.
When can a taxpayer claim the tax credit?
  • Generally, for the taxable year in which the rehabilitated building is placed in service. If all of the credit cannot be used, the excess can be carried back one year and then forward 20 years.
  • For phased projects, before completion of the entire project on the basis of "qualified progress expenditures" if construction is planned for two or more years.
  • Must be a "certified rehabilitation" as determined by the Secretary of the Interior/National Park Service through the "Historic Preservation Certification Application - Request for Certification of Completed Work." A copy of this certified application must be filed with the tax return claiming the tax credit.
When are the tax credits subject to recapture?
  • Never, if a qualified rehabilitated building is held by the taxpayer for longer than five years after the building is placed in service.
  • One hundred percent is recaptured if the owner disposes of the property within one year and the amount of such recapture is reduced by 20 percent for each full year that elapses thereafter.
What are the fees for processing rehabilitation certification requests?
  • The National Park Service's fee for review of rehabilitation projects ranges from $500 to $2,500 for projects with rehabilitation construction costs ranging from $20,000 to $1,000,000 plus.
What is the 10 percent federal tax credit?
Available for non-historic buildings built before 1936 used for nonresidential purposes. No "Historic Preservation Certification Application" is required.
For more information and applications, contact

Tim Simmons, Senior Preservation Architect and Federal Tax Credit Coordinator
Restoration Branch
State Historic Preservation Office
Office of Archives and History
4617 Mail Service Center
Raleigh NC 27699-4617
Tel 919-807-6585  
Fax 919-807-6599
e-mail tim.simmons@ncmail.net

This information describes the federal historic preservation tax credit programs in very general terms only. Taxpayers should consult a professional tax adviser, the North Carolina Department of Revenue, or the Internal Revenue Service for help in determining the tax and other financial implications or any matter discussed here.