Federal Rehabilitation Tax Credit
The Federal Rehabilitation Tax credit was instrumental in transforming Knoxville’s Tennessee Theatre into a state-of-the-art performing arts facility. Learn more and see a photo slideshow – including before and after shots – of this amazing success story.
Credit: Nels Akerlund
The federal rehabilitation tax credit encourages the preservation and reuse of the nation's built environment by offering federal tax credits to the owners of historic properties. Since it was enacted in 1976, the tax credit has generated over $50 billion in renovation and revitalization dollars. As a disincentive to demolition, it allows the owner of a historic building to receive an income tax credit of 20% of the amount spent to rehabilitate a certified historic structure. There is also a 10% credit for older, non-historic buildings. With a five-to-one ratio of private investment to federal tax credits, the program has developed more than 35,600 projects nationwide. In 2008 alone the credit produced $5.64 billion in private investment and created over 67,000 new jobs – about 55 new jobs per project.
Important Update
While the credit has rehabilitated over 217 million square feet of commercial and residential space over the past ten years, it could do more. Over 1.3 million historic buildings are listed in or contribute to historic districts in the National Register of Historic Places, with thousands of contributing resources added each year. The National Park Service estimates that 20% of these buildings would qualify for the historic tax credit.
On October 1, 2009, Senators Blanche Lincoln (D-AR) and Olympia Snowe (R-ME), along with Representatives Allyson Schwartz (D-PA) and Pat Tiberi (R-OH), reintroduced the Community Restoration and Revitalization Act (H.R. 1043 and S 584 in the last Congress), a bill that would make beneficial changes to the federal rehabilitation tax credit and provide a greater incentive for the reuse of older and historic buildings. It would also encourage building owners to achieve substantial energy savings in building rehabilitations with graduated increases in the historic tax credit based on the level of efficiency achieved.
One of the key provisions of the reintroduced bill places greater emphasis on achieving energy savings in building rehabilitations through greater use of energy-efficient materials, systems, and appliances. In addition, the measure as a whole would increase the tax credit's value as an incentive, and reusing older and historic buildings is inherently sustainable.
Background Information
To qualify for the 20% rehabilitation credits, a building must be a "certified historic structure." A certified historic structures is one that is listed individually in the National Register of Historic Places or located in a registered historic district and certified by the Secretary of the Interior as being of historical significance to the district.
In addition, the rehabilitation work must qualify as "certified rehabilitation." A certified rehabilitation is one that is approved by the Secretary of the Interior as consistent with the historic character of the building and, where applicable, with the district in which the building is located. All elements of the project must meet certain standards to ensure that the historic character of the building is preserved in the process of the rehabilitation. Those standards, the Secretary of the Interior's Standards for Rehabilitation, were created to help preserve the distinct character of historic buildings and their sites, while allowing for reasonable changes to meet new needs.
