Legislative Chronology
1976 – Tax Reform Act of 1976 (P.L. 94-455)
Enacted two significant provisions intended to encourage the renovation, restoration, and protection of historic buildings either on the National Register of Historic Places or in locally-designated historic districts:
-
Allowed owners of historic buildings used in a trade or business or for the production of income to “amortize” or write off their rehabilitation expenditures over a period of 60 months. This was a major change from previous tax laws that allowed the owner to write off rehab expenditures over the life of the improvements, typically from
-
Second incentive was an alternative to five-year amortization. The owner of a qualifying historic building who performed ‘substantial rehabilitation’ on that building could choose to use the same form of depreciation available to the owner or developer of a new construction project of similar type. For example, a developer renovating an apartment building in a qualifying historic district could choose to use a 200 percent declining balance form of depreciation rather than the straight-line or 125% declining balance rates otherwise available to owners of used residential buildings. Owners of historic commercial buildings could choose to use the 150 percent declining balance depreciation rate normally available only to developers constructing new commercial buildings.
1978 – The Revenue Act of 1978 (P.L. 95-600)
Created additional incentives for renovation and restoration of historic buildings and tax rules governing investment tax credits were modified so that more kinds of real estate rehab projects qualified. Specifically:
-
Rehabilitation expenditures made after
-
Costs for exterior, as well as interior, renovation could be included (but at least 75% of the exterior walls had to be retained and no new additions or new construction associated with the project could be included among the expenditures that qualified for the 10% credit.
-
There were also limitations on combining the ITC with the historic incentives provided in 1976. The Revenue Act of 1978 specifically prohibited combined use of the five-year amortization and the investment tax credit on qualifying historic structures; it did permit use of accelerated depreciation, however.
1981 – Economic Recovery Tax Act of 1981 (P.L. 97-43)
Created a three-tier investment tax credit for qualified rehabilitation expenditures, including:
-
15% for nonresidential buildings at least 30 years old
-
20% for nonresidential buildings at least 40 years old
-
25% for certified historic structures (including residential buildings)
Tax Reform Act of 1986 (P.L. 99-514)
Replaced the three-tier credit with two-tier credit for qualified rehabilitation expenditures:
-
20% for certified historic structures
-
10% for non-certified structures originally placed in service before 1936
Three amendments were made to the federal rehabilitation tax credit as part of a housing and mortgage relief bill signed into law on July 30, 2008, providing:
- An exemption from the alternative minimum tax for investors who buy historic tax credits. This should attract new corporate investors and increase interest in smaller historic properties currently underserved by the credit.
- A requirement that all state housing finance agencies consider historic properties when allocating affordable housing credits. Currently only a handful of states do so.
- An increase in the percentage of leasable space developers can rent to nonprofit groups, many of whom provide valuable social services in their neighborhoods, in buildings redeveloped by the rehabilitation credit.
