State Rehabilitation Tax Credits
Background
Currently, over half of the states have adopted laws creating credits against state taxes to provide incentives for the appropriate rehabilitation of historic buildings. In most cases these tax credits take the form of the very successful federal income tax credit for historic rehabilitation contained in Section 47 of the Internal Revenue Code.
Although the credits vary from state to state, most programs include the following elements:
- Criteria establishing what buildings qualify for the credit.
- Standards to ensure that the rehabilitation preserves the historic and architectural character of the building.
- A method for calculating the value of the credit awarded, reflected as a percentage of the amount expended on that portion of the rehabilitation work that is approved as a certified rehabilitation.
- A minimum amount, or threshold, required to be invested in the rehabilitation.
- A mechanism for administering the program, generally involving the state historic preservation office and, in some cases, the state department of revenue.
State rehab tax credits can often be combined - or "twinned" - with the federal credit to create an even greater incentive to rehab. Additionally, federal rehab credits can be combined with other incentive programs, such as the low-income housing credit and the New Markets Tax Credit, to being even more value to preservation. Additionally, many state tax credit programs offer incentives for owner-occupied residential properties.
