FEDERAL REHABILITATION INVESTMENT TAX CREDIT
Income tax credits are the principal governmental subsidy available for privately owned and funded historic preservation activities. The federal government offers a Rehabilitation Investment Tax Credit (RITC) equaling 20 percent of rehabilitation costs for qualified work at income-producing properties that are certified historic buildings. Eligible properties include commercial buildings, factories or even old houses, but they must be income-producing, such as rental properties.
Certified Historic Buildings
For participation in the federal RITC program, a building must have been determined to be eligible for listing in the National Register of Historic Places. The building may be individually significant or a contributing resource within a historic district. If the federal RITC is claimed, the building must be listed in the National Register within 30 months after claiming of the credit. Information on the National Register of Historic Places.
In order to qualify for the RITC, all work must meet the Secretary of the Interior's Standards for the Treatment of Historic Properties. This distinguishes bona-fide historic preservation activities from more general remodeling projects. Although a project may include additions and site work, only costs related to the rehabilitation of the historic building(s) may be used in calculating the tax credits. The federal RITC requires that the rehabilitation costs equal or exceed the value of the building (excluding the land) before rehabilitation work (known as the adjusted basis rule). Single-phased projects must meet these requirements in a 24-month period. Projects filed for multi-phased development may stretch the qualifying period up to 60 months.
THE SECRETARY OF THE INTERIOR’S STANDARDS FOR REHABILITATION
The intent of the Standards is to assist the long-term preservation of a property’s significance through the preservation of historic materials and features. The Standards pertain to historic buildings of all materials, construction types, sizes, and occupancy, and cover the exterior and interior of buildings. They also encompass related landscape features and the building’s site and environment, as well as attached, adjacent, or related new construction.
To be certified for federal tax purposes, a rehabilitation project must be determined by the Secretary of the Interior to be consistent with the historic character of the structure(s), and, where applicable, the district in which it is located.
Rehabilitation is understood to include some necessary repair or alteration of the historic building in order to provide for an efficient contemporary use. However, these repairs and alterations must not damage or destroy materials, features, or finishes that are important in defining the building’s historic character. The Standards are to be applied to specific rehabilitation projects in a reasonable manner, taking into consideration economic and technical feasibility.
In brief, the Standards cover new uses for historic buildings, repair and cleaning methods, retention of historic fabric and features, protection of archaeological resources, and sympathetic new additions.
To supplement the 10 points of the Secretary of the Interior’s Standards for Rehabilitation, the National Park Service has prepared a number of technical documents that apply these criteria to specific rehabilitation methods. These publications, titled Preservation Briefs, cover a variety of topics, including: repairing and repointing historic masonry, repairing wooden and steel windows, repairing historic flat and ornamental plaster, conserving energy in historic buildings, and providing accessibility in historic buildings. Each Brief covers recommended repair methods in great detail and includes a number of helpful illustrations. The Preservation Briefs are available here.
THE APPLICATION PROCESS
To assure all work meets the Secretary of the Interior’s Standards for the Treatment of Historic Properties, it is highly recommended that the proposed work program be submitted for approval before beginning any work. Project plans and specifications will be reviewed to assure that the project meets these standards.
The federal RITC requires a three-part application. Part 1 verifies that the property is eligible for the program (this step may be omitted if a building has been individually listed in the National Register of Historic Places). Part 2 describes the construction activities for which the credit is to be claimed. Part 3 is filed upon the project’s completion.
CLAIMING THE CREDIT
A taxpayer should claim the federal tax credit in the tax year during which the building (or phase of project) is placed in service. The RITC program permits carryover of unused credit to subsequent tax years. The taxpayer has up to 30 months after the claim of a federal tax credit to complete the certification that the project meets the Secretary of the Interior’s Standards.
However, the Part 1 application, Determination of Eligibility, must have been submitted before filing the credit claim.
For questions regarding the tax credit programs, please contact Ashley Thomas at 317-234-7034 or email@example.com.
For questions regarding the National Register of Historic Places, please contact Paul Diebold at 317-232-3493 or pdiebold@dnr.IN.gov or Holly Tate at 317-234-3919 or htate@dnr.IN.gov.