Federal Rehabilitation Investment Tax Credit
The Federal Historic Rehabilitation Investment Tax Credit is administered by the National Park Service and the Internal Revenue Service in partnership with the State Historic Preservation Office which, in Indiana, is the Division of Historic Preservation & Archaeology (DHPA). The Federal Historic Rehabilitation Investment Tax Credit offers a 20% income tax credit on qualified expenses for the rehabilitation of historic, income-producing buildings.
Any questions regarding this program can be directed to the Tax Credit Reviewer.
1) Building must be listed in the National Register of Historic Places (National Register), either individually or as a contributing property to a historic district. The easiest way to verify that your property is listed in the National Register is to check the Indiana Historic Buildings, Bridges, and Cemeteries (IHBBC) Map, which can be accessed from the SHAARD Database page. There is a user guide on that page for both the IHBBC Map and the SHAARD Database to help you.
2) Property must be income producing for at least five years following rehabilitation. This may include, but not be limited to, proposed uses such as hotel, restaurant or bar, retail, office, rental residential, industrial, or agricultural. Owner-occupied residential properties do not qualify for this program, but may be eligible for the Residential Historic Rehabilitation Tax Credit.
3) The project must meet the "substantial rehabilitation test." The cost of a project must exceed the greater of $5,000 or the building’s adjusted basis. The National Park Service provides the following formula to calculate the adjusted basis:
A — B — C + D = adjusted basis
A = purchase price of the property (building and land)
B = the cost of the land at the time of purchase
C = depreciation taken for an income-producing property
D = cost of any capital improvements made since purchase
Not every expense associated with a rehabilitation project contributes toward the calculations for the credit. In general, only those costs that are directly related to the repair or improvement of structural and architectural features of the historic building will qualify. The National Park Service provides a list of typical Qualified Rehabilitation Expenses.
4) The rehabilitation work must be done according to the Secretary of the Interior’s Standards for Rehabilitation (Standards). Links for the Standards along with other important rehabilitation guidance resources from the National Park Service can be found under the Buildings Rehabilitation Guidance header on the Review & Compliance Resources page. After the project is complete, all subsequent work within a 5-year period must comply with the Standards and be approved via an amendment by the National Park Service. Not complying with the Standards puts you at risk for having your credits recaptured.
Additional information can be found on the Eligibility Requirements page of the National Park Service website.
How to Apply
The application for the Federal Historic Tax Credit is a three-part process. All three parts will need to be completed for the application to be considered finished. Application forms and the instructions document are available on the National Park Service website. Do not open the forms from the NPS website in a browser tab or window. Instead, please download the forms, save them to your computer, and open them in Adobe Acrobat Reader.
Note for Mac users: You must right click and "Save As" or "Download As" on the form link on the NPS website rather than clicking on the link. Clicking on the link will tell you that you must update your Adobe Acrobat Reader.
Note for PC users: The application forms are fillable PDFs. Download and “Save As” under a new file name before filling out the form.
The DHPA reviews all applications and makes comments and recommendations. The DHPA has 30 days to review an application once it is received. If additional information or revisions are needed then a new 30-day review period begins from the date of receipt of the new information. Once applications are determined to be complete, they are forwarded by DHPA to the National Park Service in its Washington, D.C. office for final review and approval. It is important to start the application process as soon as possible and to allow ample time for its completion within the overall project timeline.
Part 1 – Evaluation of Significance: Part 1 verifies that the property is eligible to use the program as a building that is, or will be, listed on the National Register. Buildings located within historic districts that are listed on the National Register must be contributing resources within the district. Individually listed properties with only one building do not need to complete a Part 1 and can proceed directly to Part 2. If you are unsure if a Part 1 is required for your property please contact the Tax Credit Reviewer.
Part 2 – Description of Rehabilitation: Part 2 outlines the construction activities for which the credit is to be claimed. This part requires additional photographs of the property before work begins and architectural drawings or sketches to show the proposed work. You will want to double check all proposed work against the Secretary of the Interior’s Standards to verify that what you are proposing to do is appropriate. Links for the Standards along with other important rehabilitation guidance resources from the National Park Service can be found under the Buildings Rehabilitation Guidance header on the Review & Compliance Resources page.
Part 3 – Request for Certification of Completed Work: Part 3 requests approval of completed work. This form should show that all completed work matches what was described in the Part 2 application. This application requires photographs of the completed work items, both the estimated rehabilitation costs and total costs, and an ownership statement (if applicable).
Amendments: An Amendment form must be completed if changes are made to the project after Part 2 was approved or for any changes made after the certification of the Part 3 during the 5 year recapture period.
Financial Questions and Claiming the Tax Credit
Before submitting an application, consult your accountant or tax advisor to make sure that this federal tax credit is beneficial to you. Certain income and other restrictions may have a bearing on whether an owner is able to use the credit. The Internal Revenue Service (IRS) administers the Department of the Treasury’s involvement with the Federal Historic Preservation Tax Incentives Program.
Information on claiming the tax credit along with copies of the IRS regulations for the program can be found on the IRS Information page of the National Park Service website.