Transcript 20% Tax Credit - Florida Department of State

Historic Preservation
Tax Incentives Program
Kenneth H. Cureton, R.A., NCARB
Richard L. Hilburn, R.A.
Senior Preservation Architects
Bureau of Historic Preservation
Tax Credits
OBJECTIVE: To promote historic
preservation and community revitalization
by encouraging private sector investment in
the rehabilitation and re-use of historic
buildings.
PURPOSE: To provide assistance for
historic preservation by allowing credits to
a building owner’s Federal Income Tax or
Local Property Tax.
Program Overview
What Is a Tax Credit?
A tax credit differs from an income tax deduction. An income tax deduction lowers the amount of income
subject to taxation. A tax credit, however, lowers the amount of tax owed.
In general, a dollar of tax credit reduces the amount of income tax owed by one dollar.
Greystone Hotel, Miami Beach
Program Overview
What Is a Certified Historic Structure?
A building is classified as a Certified Historic Structure by the National Park Service, and eligible to be listed in the National
Register of Historic Places if it meets the following three requirements:
1.
Age – The building must be at least 50 years old (with exceptions)
2.
National Register Criteria – The building must meet one or more of the four (4) NPS Criteria for Evaluation
3.
A.
It is associated with events that have made a significant contribution to the broad patterns of our history; or
B.
C.
It is associated with the lives of significant persons in our past; or
It embodies the distinctive characteristics of a type, period, or method of construction, or that
represent the work of a master, or that possess high artistic values, or that represent a
significant and distinguishable entity whose components may lack individual distinction; or
D.
It has yielded or may be likely to yield, information important in history or prehistory.
Integrity – The building must retain enough of the historic fabric in its present state.
Further information on National Register requirements can be found at:
nps.gov/nr/publications/bulletins/nrb15/
or by contacting the Division of Historic Resources Survey and Registration Section at (850) 245-6333
Program Overview
Federal Programs
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Administered by the National Park Service (NPS), Internal Revenue Service (IRS) and the State Historic
Preservation Officer (SHPO).
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Include time-limited restrictive covenants on future changes to the building after rehabilitation is
completed.
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10% Rehabilitation Tax Credit allows a 10% Tax Credit to the building owner for qualified expenses related to
the rehabilitation of a non-historic building placed in service before 1936 that will be rehabilitated for nonresidential uses.
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20% Rehabilitation Tax Credit allows a 20% Tax Credit to the building owner for qualified expenses related to
the Certified Rehabilitation of an income producing Certified Historic building.
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Preservation Easements allow an Income Tax or Estate Tax deduction to the building owner for the granting
of a historic preservation easement (development restrictions) for the permanent protection of an historic
property, while retaining private ownership.
Program Overview
Local Property Tax (Ad Valorem) Exemption Programs
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A local program authorized by Section 196.1997, Florida Statutes that allows counties and municipalities to
adopt ordinances allowing a property tax exemption.
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Allows for a property tax exemption for up to 100% of the increase in assessed improvements resulting
from an approved rehabilitation of a qualified residential or commercial historic property.
•
Include time-limited restrictive covenants on future changes to the building after rehabilitation is
completed.
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The tax exemption may remain in effect for up to 10 years.
10% Rehabilitation
Tax Credit
Sherman Arcade, Panama City
10% Tax Credit - Basics
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The 10% tax credit is available for the rehabilitation of non-historic buildings placed in service before 1936.
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The building must be depreciable (income producing), and rehabilitated for non-residential use, (excluding
hotels).
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In order to qualify for the tax credit, the rehabilitation must meet three criteria:
1.
At least 50% of the existing external walls must remain in place as external walls;
2.
At least 75% of the existing external walls must remain in place as either external or internal walls;
and
3.
At least 75% of the internal structural framework must remain in place.
10% Tax Credit - Basics
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The rehabilitation must be substantial, exceeding either $5,000 or the adjusted basis of the property,
whichever is greater.
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There is no formal review process for rehabilitations of non-historic buildings. The 10% Tax Credit is
attained directly through the IRS, but owners are strongly advised to contact the SHPO office for guidance
to ensure compliance with the Secretary of the Interior’s Standards to the greatest extent possible.
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The tax credit must be claimed on IRS form 3468 for the tax year in which the rehabilitated building is
placed in service.
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Buildings individually listed or contributing to a district listed in the National Register of Historic
Places are not eligible for the 10% credit.
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A building that was moved after 1935 is not eligible for the 10% rehabilitation credit.
20% Rehabilitation
Tax Credit
Tampa Federal Courthouse / Le Meridien Hotel
20% Tax Credit - Basics
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The rehabilitation tax credit is available to the entity who holds title to the property.
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The tax credit is only available to properties that will be used for a business or other income–producing
purpose.
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The amount of credit available under this program equals 20% of the qualifying expenses of your
rehabilitation.
It is critical that owners apply for the rehabilitation tax credit before completing work and placing the
building in service, and preferably, well in advance of beginning work.
An interactive FAQ page from the National Park Service on the 20% Rehabilitation Tax Credit Program is
available at:
nps.gov/tps/tax-incentives/incentives/essentials_1.htm
20% Tax Credit - Eligibility
THE FOUR QUALIFICATIONS NECESSARY FOR 20% TAX CREDIT PROGRAM ELIGIBILTY :
1.
The subject building is required to be a Certified Historic Structure by the National Park Service, meaning that either:
• It is listed individually in the National Register of Historic Places;
• It is located in and certified by NPS as contributing to the historic significance of a registered historic district; or
• It is within a local historic district that may also qualify as a registered historic district if the district is certified by NPS
2.
The building must be depreciable (used for a business or other income–producing purpose) for at least five (5) years after
rehabilitation has been completed.
3.
The building must undergo a "substantial rehabilitation” meaning the amount must be spent rehabilitating the historic
building, qualifying rehabilitation expenses must exceed the greater of $5,000 or the adjusted basis of the building.
The cost of a project must exceed the greater of $5,000 or the building’s adjusted basis, where:
A - B - C + D = adjusted basis
A = purchase price of the property
B = the part of the purchase price attributed to the land cost
C = depreciation taken for an income-producing property
D = cost of any capital improvements made since purchase
4.
Rehabilitation work has to meet the all of the Secretary of the Interior’s Standards for Rehabilitation.
20% Tax Credit - Eligibility
OTHER ELIGIBILITY FACTORS
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Physical Integrity - Tax Incentives are not available where there is insufficient historic material to preserve
at the outset of the rehabilitation. The SHPO can assist in making such a determination.
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Multiple Buildings - For properties with multiple buildings that were functionally related historically, the
rehabilitation certification decision will be based on the effect of the overall rehabilitation on the entire
property, and not on each structure or individual component.
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Moved Buildings - Moving a historic building can jeopardize its listing in the National Register of Historic
Places, and special procedures must be followed to ensure its continued listing.
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Demolition - Projects that involve demolition require careful planning to ensure approval. This is true
whether whole accessory buildings will be demolished or only parts of the subject building.
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Commencement of Rehabilitation Work Prior to Application - beginning work prior to getting approval
from the NPS is done at risk, and is subject to requiring remedial work in order to meet the Standards. By
federal regulation, a rehabilitation project completed prior to submitting a request for certified historic
structure status (Part 1 Application) cannot qualify for the rehabilitation tax credit.
20% Tax Credit – Project Expenses
Costs associated with these items are “Qualified Expenses” and are generally eligible:
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Walls
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Partitions
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Floors
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Ceilings
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Permanent finishes
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Windows and doors
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Plumbing and fixtures
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Wiring and lighting fixtures
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Chimneys
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Stairs, escalators and elevators
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Fire escapes, alarms and sprinklers
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Other operational components
Blount and Moulton Buildings, Pensacola
20% Tax Credit – Project Expenses
Costs associated with these items are generally not eligible:
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Acquisition costs
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Moving (building) costs
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Appliances
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Building enlargement
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Cabinets
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Remote outdoor lighting
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Carpeting
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Parking lots
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Non-Historic Decks
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Paving
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Building Removal
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Planters
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Fencing
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Non-Historic Porches
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Feasibility studies
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Retaining walls
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Financing fees
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Sidewalks
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Furniture
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Signage
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Landscaping
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Storm sewer construction
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Leasing Expenses
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Window treatments
Hotel Floridan, Tampa
20% Tax Credit – Entities Involved
State Historic Preservation Officer (SHPO)
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Serves as the point of contact for property owners for Tax Credit Projects
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Administers the program for, and makes certification recommendations to the NPS
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Provides guidance on regulations, appropriate treatments and technical assistance.
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Provides and reviews applications, reviews existing building conditions and proposed work.
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Maintains records of buildings and districts listed in the National Register of Historic Places and local
certified historic districts.
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Advises applicants on rehabilitation projects and reviews to ensure compliance with the Standards.
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Provides information dealing with the rehabilitation tax credit online at:
dos.myflorida.com/historical/preservation/architectural-preservation-services/rehabilitation-tax-credit/
*APPLICANTS ARE STRONGLY ADVISED TO CONTACT THE SHPO OFFICE FOR GUIDANCE PRIOR TO
PLANNING WORK ON ANY HISTORIC STRUCTURE.
20% Tax Credit – Entities Involved
National Park Service (NPS)
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Reviews applications for conformance with the Secretary of the Interior’s Standards for Rehabilitation.
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Issues certification decisions in writing and transmits copies of all decisions to the IRS.
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Publishes program regulations, the Secretary of the Interior’s Standards for Rehabilitation, the Historic
Preservation Certification Application, and information on rehabilitation treatments.
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Provides information dealing with the rehabilitation tax credit online at:
nps.gov/tps/tax-incentives.htm
Athens Theater, Deland
20% Tax Credit – Entities Involved
Internal Revenue Service (IRS)
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Publishes regulations on qualified rehabilitation expenses, time periods for incurring expenses, and all
other financial matters concerning the 20% tax credit.
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Audits taxpayers to ensure that only parties eligible for the 20% tax credits use them.
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Answers frequently asked questions regarding financial aspects of the program, the IRS code and
regulations dealing with the rehabilitation tax credit online at:
nps.gov/tps/tax-incentives/before-apply/irs.htm
City Hall / Firehouse, Belle Glade
20% Tax Credit - Process
A Certified Rehabilitation that qualifies for the 20% Tax Credit Program requires completion of a 3-part application
during the course of a rehabilitation project.
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Part 1 of the application determines if your building qualifies as a “certified historic structure” by the National Park
Service.
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Part 2 of the application documents the existing condition of the building and the planned rehabilitation work. The
proposed work will be evaluated based on the Secretary of the Interior’s Standards for Rehabilitation.
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Part 3 of the application is submitted after completion of the project and is used by the National Park Service to certify
that the project as completed meets the Standards and is therefore a “certified rehabilitation.”
Review Fees
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The NPS charges a fee for reviewing Part 2 and Part 3 applications based on the estimated rehabilitation costs reported on
the application forms according to the fee schedule posted on the program website:
http://www.nps.gov/tps/tax-incentives/app-process/fees.htm
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The NPS will bill the Owner for the review fee upon receipt of the application.
THE NPS WILL NOT REVIEW AN APPLICATION UNTIL THE FEE IS PAID
20% Tax Credit - Applications
Part 1 is the Evaluation of Significance of the property.
Owners of buildings located in a historic district or buildings eligible for listing in the National Register of
Historic Places must complete Part 1 of the application to determine if the building contributes to the
significance of the historic district. Properties that are individually listed in the National Register are automatically
certified historic structures and do not need a Part 1 form.
If the NPS determines that the building does contribute to the significance of the historic district, the NPS
issues a decision that the building is a certified historic structure.
The Part 1 application form must have been submitted and approved by the National Park Service before the
Part 3 application form, "Request for Certification of Completed Work," is submitted.
Tampa Water Works / Ulele Restaurant, Tampa
20% Tax Credit - Applications
Part 2 is the Description of Rehabilitation Work.
All owners of a certified historic structure who are seeking the 20% tax credit for the rehabilitation work must
complete a Part 2 application form, which is a description of the proposed rehabilitation work.
The National Park Service reviews the description of the proposed rehabilitation for conformance with the
Secretary of the Interior’s Standards for Rehabilitation.
If the proposed work meets the Standards, the National Park Service issues a preliminary decision approving
the work, or the proposed work may be given a conditional approval that outlines specific modifications
required to bring the project into conformance with the Standards.
Vagabond Motel, Miami
20% Tax Credit - Applications
Part 3 is the Request for Certification of Completed Work.
After the rehabilitation work is completed, the owner must submit a Part 3 application form requesting final
approval of the completed work.
The National Park Service evaluates the completed project and compares it with the work proposed in the Part
2 application form. If it meets the Standards, the National Park Service approves the project as a certified
rehabilitation eligible for the 20% rehabilitation tax credit.
Shelborne Hotel, Miami Beach
20% Tax Credit - Applications
Frequently asked questions, recommendations on how to proceed and instructions for completing Tax Credit
Applications are provided at the following website:
nps.gov/tps/tax-incentives/taxdocs/hpca-instructions.pdf
All certification applications must be on the 2014 forms provided at the following website:
nps.gov/tps/tax-incentives/application.htm
Please contact the Department of State Division of Historical Resources, Architectural Preservation Services
with any questions. Contact information can be found at:
dos.myflorida.com/historical/preservation/architectural-preservation-services/
or by calling the Bureau of Historic Preservation at (850) 245-6333.
20% Tax Credit – Time Schedule
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Rehabilitation Time Frame - During a 24-month measuring period selected by the taxpayer, rehabilitation
expenditures credit may be claimed for all qualified expenditures incurred before, during and after the
measuring period through the end of the taxable year that the building is placed in service.
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Phased rehabilitations—For rehabilitations expected to be completed in two or more distinct stages of
development, the measuring period is 60 months rather than 24 months.
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The property must be placed in service (returned to use). The rehabilitation tax credit is generally allowed
in the taxable year the rehabilitated property is placed in service.
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Refer to guidance on detailed IRS conditions at:
nps.gov/tps/tax-incentives/before-apply/irs.htm
224 Second Ave., Gainesville
20% Tax Credit – Revocation
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The owner must hold the building for five full years after completing the rehabilitation, or pay back the credit.
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If the owner disposes of the building within a year after it is placed in service, 100% of the credit is recaptured.
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For properties held between one and five years, the tax credit recapture amount is reduced by 20% per year.
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Per 36 CFR 67, completed projects may be inspected by an authorized representative of the Secretary to
determine if the work meets the Standards, and reserves the right to make inspections at any time up to five
years after completion of the rehabilitation.
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A certification may be revoked if it is determined that the rehabilitation project was not undertaken as
represented by the owner, or the owner, upon obtaining certification, undertook further unapproved project
work inconsistent with the Standards.
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The full text of the Historic Preservation Certifications Under The Internal Revenue Code (36 CFR 67) can be
found at:
nps.gov/tps/tax-incentives/taxdocs/36cfr67.pdf
Historic Preservation
Easements
Ice Plant, Melbourne
Historic Preservation Easements
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A historic preservation easement is a voluntary legal agreement, typically in the form of a deed, that
permanently protects a certified historic structure or a historically important land area.
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Through the easement, a property owner places perpetual restrictions on the development of or
changes to the historic property, then transfers these restrictions to a preservation or conservation
organization.
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A historic property owner who donates an easement may be eligible for tax benefits, such as a Federal
income tax deduction for the value of the easement, and Federal estate taxes also may be reduced.
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Tax benefits for Easements may be combined with the 20% Rehabilitation Tax Credit.
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Easement rules are complex, so property owners interested in the potential tax benefits of an easement
donation should consult with their accountant or tax attorney.
More information on Historic Preservation Easements may be found at:
nps.gov/tps/tax-incentives/taxdocs/easements-historic-properties.pdf
Property Tax Exemptions
Sarasota Times Building, Sarasota
Property Tax Exemption
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A local program authorized by Section 196.1997, Florida Statutes that allows local governments to adopt ordinances
allowing a property tax exemption for up to 100% of the increase in assessed improvements resulting from an approved
rehabilitation of a qualified historic property.
•
The exemption may remain in effect for up to 10 years and applies only to that portion of the property tax levied by the
unit of government granting the exemption.
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Qualified properties may be residential or commercial and must be either individually listed in the National Register of
Historic Places, a contributing building in a National Register District, or designated as historic under the provisions of
a local preservation ordinance.
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The rehabilitation work must be in accordance with the Secretary of the Interior' Standards for Rehabilitation and
Guidelines for Rehabilitating Historic Buildings.
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Applications for the property tax exemption are either reviewed by local preservation office in communities designated
as a Certified Local Government or by the Division of Historical Resources for communities not designated as a CLG.
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To qualify for an exemption a covenant is required for the term of the exemption.
Further information and application forms can be found at:
dos.myflorida.com/historical/preservation/architectural-preservation-services/property-tax-exemption-for-historicproperties/
The Secretary of the
Interior’s Standards for
Rehabilitation
Boswell House, Bartow
Applying The Standards Rehabilitation
Rehabilitation is the most commonly used of the four approaches to the
treatment of historic buildings, and provide direction in making
appropriate choices in planning a rehabilitation project.
The Standards for Rehabilitation are regulatory for the Historic Preservation
Tax Incentives program and are the Standards most often used by local
historic district commissions nationwide.
The Guidelines for Rehabilitating Historic Buildings apply the Standards and
describe specific treatments that do and do not meet The Standards for
historic fabric. The Guidelines allow for “alterations” as an integral part of
the process of updating a historic building for a new or continuing use.
The Secretary of the Interior’s Standards are applied to projects in a
reasonable manner, taking into consideration economic and technical
feasibility.
Secretary of the Interior’s Standards for
Rehabilitation
1.
A property shall be used for its historic purpose or be placed in a new use that requires minimal
change to the defining characteristics of the building and its site and environment.
2.
The historic character of a property shall be retained and preserved. The removal of historic
materials or alteration of features and spaces that characterize a property shall be avoided.
3.
Each property shall be recognized as a physical record of its time, place, and use. Changes that
create a false sense of historical development, such as adding conjectural features or architectural
elements from other buildings, shall not be undertaken.
4.
Most properties change over time; those changes that have acquired historic significance in their
own right shall be retained and preserved.
5.
Distinctive features, finishes, and construction techniques or examples of craftsmanship that
characterize a historic property shall be preserved
Secretary of the Interior’s Standards for
Rehabilitation
6.
Deteriorated historic features shall be repaired rather than replaced. Where the severity of
deterioration requires replacement of a distinctive feature, the new feature shall match the
old in design, color, texture, and other visual qualities and, where possible, materials.
Replacement of missing features shall be substantiated by documentary, physical, or
pictorial evidence.
7.
Chemical or physical treatments, such as sandblasting, that cause damage to historic
materials shall not be used. The surface cleaning of structures, if appropriate, shall be
undertaken using the gentlest means possible.
8.
Significant archeological resources affected by a project shall be protected and preserved. If
such resources must be disturbed, mitigation measures shall be undertaken.
9.
New additions, exterior alterations, or related new construction shall not destroy historic
materials that characterize the property. The new work shall be differentiated from the old
and shall be compatible with the massing, size, scale, and architectural features to protect
the historic integrity of the property and its environment.
10.
New additions and adjacent or related new construction shall be undertaken in such a
manner that if removed in the future, the essential form and integrity of the historic
property and its environment would be unimpaired.
Consult the following website and links within for further guidance:
http://www.nps.gov/tps/standards/rehabilitation.htm
Palm Beach County Courthouse
Case Study
Adaptive Reuse Project
Utilizing the 20% Rehabilitation Tax Credit Program
Tyer Temple United Methodist Church / Sanctuary Lofts
Tampa
Case Study
Conditions Prior to Renovation
Located at 502 E. Ross Ave. in Tampa, the building was originally constructed
in 1910 as the Tampa Heights United Methodist Church, and served the
historic Tampa Heights neighborhood until the late 1980s.
The 41,501 square foot rehabilitation project to convert this building to
apartments was completed in 2003 at a cost of $2,162,861, resulting in an
estimated rehabilitation tax credit of $432,572 to the owner.
Case Study
Conditions Prior to Renovation
It is important to understand that the Secretary of the Interior’s Standards for
Rehabilitation requires preservation or minimal change, it also makes
allowances for the adaptive reuse of buildings by taking into account
cumulative effect of the changes on the historic character.
Case Study
Conditions Prior to Renovation
Both the interior and exterior finishes were in varying states of decay, but
the structural system itself was intact. The geometry of the sanctuary and
volume of the space presented both challenges and opportunities to the
architect in converting such a space into individual apartments.
The 3-story Sunday school wing allowed a more straightforward
approach to such a conversion.
Case Study
Completed Project
It was determined that since the sanctuary was the
principal public space, subdividing it into apartments
was contrary to the Standards, and would make the
project ineligible for the Tax Credit.
After the 5 year program covenant expired, the owner
proceeded with the sanctuary work, thus retaining
their qualification for the full tax credit.
Case Study
Completed Project
Although this project resulted in demonstrating a
circumvention of the intent of the program, it was
executed within the rules of the program.
The reason the project was chosen for this presentation
was to show how an adaptation can be achieved for
two distinctly different uses, while simultaneously
preserving a significant historic building .
Case Study
Completed Project
Apartment Loft and Galley
Apartment Living Area
Case Study
Completed Project
Apartment Bedroom
Apartment Galley Kitchen
Case Study
Completed Project
Entrance Hall
Stair Hall