State and Federal Rehabilitation Tax Credit

State Historic Preservation Office

Division of Archives and History

North Carolina Department of Cultural Resources

 

State and Federal Historic Rehabilitation Tax Credits

 

New state tax credits are now available for the rehabilitation of non-income-producing historic properties in addition to the previously available federal and state tax credits for income-producing historic properties. These tax credits make rehabilitations of historic buildings in North Carolina more attractive than ever before. The present historic preservation tax credit measures provide: 

·A 20% state tax credit for rehabilitations of income-producing historic properties that also qualify for the 20% federal investment tax credit. In effect, the combined federal-state credits reduce the cost of a certified rehabilitation of an income-producing historic structure by 40%.

· A 30% state tax credit for qualifying rehabilitation of non-income-producing historic structures, including owner-occupied personal residences. There is no equivalent federal credit for such rehabilitations. 

 

Non-income-producing properties

·The new credits will apply only to qualified expenditures made on or after January 1, 1998.

·Only certified historic structures will qualify for the credits. A “certified historic structure” is defined as a building that is listed in the National Register of Historic Places, either individually or as a contributing building in a National Register historic district, or as a contributing building within a local historic district that has been certified by the U. S. Department of the Interior. (There are only three of the latter in North Carolina. These are the Blount Street Historic District in Raleigh, the Goldsboro Historic District, and the Decatur-Hunter Historic District in Madison.)

·A non-income-producing building must be a “certified historic structure” at the time the state credit is taken—that is, it must be actually listed in the National Register or it will not qualify for the state credit. The property owner must begin taking the credit in the year the rehabilitation project is completed.

·An owner may begin a rehabilitation project on a non-income-producing property following approval of rehabilitation plans by the State Historic Preservation Office but prior to the listing of the property in the National Register, with the intention of having it listed in the Register by the time the project is completed. However, because listing of a property by a desired deadline cannot be guaranteed, owners are strongly urged to secure National Register listing of their non-income-producing property prior to beginning a certified rehabilitation.

·The rehabilitation of the historic structure must be substantial. For non-income-producing properties, the rehabilitation expenses must exceed $25,000 within a 24-month period.

·The State Historic Preservation Office reviews rehabilitation work on non-income-producing historic structures. All rehabilitation work must meet the Secretary of the Interior’s Standards for Rehabilitation. The applications must be approved prior to the commencement of work.

 ·The credits cannot be claimed against the cost of acquisition, new additions, site work, or personal property. Only costs incurred in work upon or within a historic structure will qualify. Interior work such as HVAC work and kitchen and bathroom remodeling will qualify if the work meets the Secretary of the Interior’s Standards for Rehabilitation.

·The application submitted by the owner describing the rehabilitation work on a non-income-producing historic structure must be approved by the State Historic Preservation Office prior to the commencement of work!!                                                                                                                              

 

Income-producing properties

· Only certified historic structures will qualify for the credits. A “certified historic structure” is defined as a building that is listed in the National Register of Historic Places, either individually or as a contributing building in a National Register historic district, or as a contributing building within a local historic district that has been certified by the Department of the Interior. (There are only three of the latter in North Carolina. These are the Blount Street Historic District in Raleigh, the Goldsboro Historic District, and the Decatur-Hunter Historic District in Madison.)

· The federal tax credit for income-producing buildings provides for “preliminary certification” that enables an owner to take the credit for a qualifying rehabilitation even before the structure is actually listed in the National Register of Historic Places.

·The rehabilitation of the historic structure must be substantial. For income-producing properties, the rehabilitation expenses must exceed the greater of the “adjusted basis” of the building or $5,000 within a 24- month period or a 60-month period for phased projects.

· All rehabilitation work must meet the Secretary of the Interior’s Standards for Rehabilitation. Applications for income-producing structures are subject to a joint review by the State Historic Preservation Office and the National Park Service, with final authority resting with the National Park Service.

·The credits cannot be claimed against the cost of acquisition, new additions, site work, or personal property. Only costs incurred in work upon or within a historic structure will qualify. Interior work such as the installation of new HVAC, electrical, or plumbing systems, finishes, and other alterations will qualify if the work meets the Secretary of the Interior’s Standards for Rehabilitation.

·Property owners of income-producing historic structures are strongly advised to consult with the State Historic Preservation Office before beginning a rehabilitation to resolve potential design and rehabilitation problems that could result in denial of the credits.

 

A property is listed in the National Register of Historic Places by a nomination, which is a research report prepared according to detailed state and federal guidelines. The final authority on National Register listing is the federal Keeper of the National Register in Washington, DC. In its role as administrator of the National Register program in North Carolina, the N. C. State Historic Preservation Office is charged with ensuring that nominations forwarded by the State Historic Preservation Officer to the Keeper are complete and correct. The State Historic Preservation Office provides direction to preparers but does not write nominations. Most nominations are prepared by private consultants hired by property owners, local governments, or private non-profit organizations. The nomination process may take six months to two years or longer.

 

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

 

For further information regarding the procedures for obtaining historic preservation certifications, contact:

 

Tim Simmons or David Christenbury, Preservation Architects/Tax Act Coordinators

Restoration Branch, N.C. State Historic Preservation Office

N.C. Division of Archives and History

4613 Mail Service Center

Raleigh, NC 27699-4613                  Telephone: 919/807-6570                Fax: 919/807-6599

 

For information about the National Register of Historic Places and the requirements and procedures for listing, contact:

 

Ann Swallow, National Register Coordinator

Survey and Planning Branch, N.C. State Historic Preservation Office

N.C. Division of Archives and History

4618 Mail Service Center

Raleigh, NC 27699-4618                  Telephone: 919/807-6570                Fax: 919/807-6599                   

 



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