Preservation Tax Incentives for Historic Buildings

1. PreservationTax Incentives for Historic Buildings A Joint Program of the following agencies: Department of the Treasury Internal Revenue Service Department of the Interior National Park Service The Oklahoma State Historic Preservation Office The Oklahoma Tax Commission

2. Harry Simms AIA Historic Preservation Architect & Tax Credit Program Coordinator Oklahoma State Historic Preservation Office a division of the Oklahoma Historical Society Oklahoma’sArchitecturalHeritage:32 Years ofPreservation Tax Incentives forHistoric Buildings

3. New Tax Applications 2008 Tulsa: Atlas Life Insurance Building Oklahoma City: United Founders Life Tower Edmond: Peoples Bank Of Edmond

4. More Oklahoma Statistics • Only 30% of the buildings rehabilitated were ON the National Register BEFORE participating in the tax credit program • 65% of Oklahoma’s tax credit rehabilitation projects have been for buildings located in National Register historic districts

5. Preservation Tax Incentives • Created in 1976 • Revised by the Tax Reform Act of 1986 • 20% Tax credit for certified rehabilitation of certified historic structures • 10% tax credit for rehabilitation of non-historicnon-residential buildings built before 1936 • Requirements for both credits • Must meet a substantial rehabilitation test • Must involve a depreciable building

6. What is a Tax Credit? • Deduction = a lowering of the income subject to taxation • Credit = lowering of the tax owed ($ for $) • 20% Credit = 20% of the amount spent in a certified rehabilitation of a certified historic building • 10% Credit = 10% of the amount spent to rehabilitate a non-historic building built before 1936.

7. “Certified Historic Structure” • A certified historic structure is... • a building that is listed individually in the National Register of Historic Places • OR • a building that is located in a registered historic district and certified by the National Park Service as contributing to the historic significance of that district.

8. What is a Substantial Rehabilitation? • During a 24 month period of time selected by the taxpayer rehabilitation expenditures must exceed the greater of: • $5,000.00 • The adjusted basis of the building and its structural components = purchase price, minus cost of land, plus improvements already made, minus depreciation already taken • Once the substantial test is met, all qualified expenditures, including those incurred outside of the measuring period, qualify for the credit

9. Rehabilitation Tax Credits: Who Does What? • SHPO State Historic Preservation Office • NPS National Park Service • IRS Internal Revenue Service

10. SHPO • 1st point of contact • Provides forms and program information • Maintains records of National Register buildings and historic districts • Assists those pursuing nomination of a property to the National Register • Provides technical assistance • Advises owners on applications • Makes site visits to assist owners • Makes certification recommendations to the NPS

11. NPS • Reviews all applications for conformance to the Secretary’s Standards • Issues all certification decisions • Transmits copies of decisions to IRS • Develops and publishes program regulations, standards, applications, and information

12. IRS • Publishes regulations of procedural and legal matters concerning the 20% and the 10% tax credit • Answers inquiries concerning legal and financial aspects of program • Ensures that only those eligible for the credits utilize them

13. 20% RehabilitationTax Credit • Historic Preservation Certification Application (HPCA) • Part 1- Evaluation of Significance • Part 2 - Description of Rehabilitation • Part 3 - Request for Certification of Completed Work

14. Application Process • Certification of rehabilitation work must be documented in the HPCA Part 2 - Description of Rehabilitation. • Seek advice BEFORE you begin work. • After work is completed, the Owner submits the HPCA Part 3 - Request for Certification of Completed Work • Only a completed project that meets the Standards for Rehabilitation is approved as a “Certified Rehabilitation”

15. HPCA Part 1 -Evaluation of Significance • Documents the physical appearance of the building • States the significance of the building

16. Obtaining Certified Historic Structure Status • Owners of buildings within historic districts MUST complete the HPCA Part 1 - Evaluation of Significance • Owners of buildings individually listed on the National Register of Historic Places are already certified. Part 1 of the HPCA is not required.

17. Building Not Yet Listed on the National Register? • Part 1 of the HPCA is completed and used to request a preliminary determination of significance • Building must be added to the National Register or to a National Registered Historic District to complete the Tax Credit process.

18. PART1

19. PART1

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21. QUALITYversusQUANTITY

22. On the back of the photograph and using an adhesive backed label: Labeling a Photograph

23. PART1REVIEW

24. PART1REVIEW

25. HPCA Part 2 -Description of Rehabilitation • Building and rehabilitation project data • Records anticipated cost of project • Itemized documentation of proposed project

26. “Certified Rehabilitation?” • A certified rehabilitation is a rehabilitation of a certified historic structure that is approved by the National Park Service as being consistent with the historic character of the property and, where applicable, the district in which it is located.

27. The Secretary of the Interior’s Standards for Rehabilitation • Certified rehabilitation projects must meet the standards as interpreted by the NPS • Standards are applied in a reasonable manner with consideration of economic and technical feasibility • Apply to all historic buildings of all types • Apply to interior and exterior • Encompass related landscape features, site and environment • Encompass attached, adjacent or related new construction

28. IRS Requirements • Building must be depreciable: used in a trade, business, or held for production of income • Rehabilitation must be substantial • May be phased construction • 60 month measuring period • Must have set of plans & specifications for each phase • Reasonably expect that all phases of rehabilitation will be completed • Property must be placed in service - credit is allowed 1st taxable year that rehabilitated property is placed in service • Must be a certified historic structure at time placed in service - HPCA Part 1 must have been filed before the building was placed in service • Qualifiedrehabilitation expenditures

29. NPS Processing Fees • If total rehabilitation cost is under $20,000 there is no fee. • Preliminary Fee • Assessed before review of Part 2 • $250.00 • Final fee • Assessed before review of Part 3 • Fee schedule based on total rehabilitation cost • Preliminary fee deducted from final fee total

30. PART2

31. PART2

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34. QUALITYversusQUANTITY

35. On the back of the photograph and using an adhesive backed label: Labeling a Photograph

38. PART2/3REVIEW

39. PART2/3REVIEW

40. PART2REVEIWCONDITIONS

41. CONTINUATION

42. HPCA Part 3 -Request for Certification of Completed Work • Documents final cost of project • Owner attests that the completed project conforms to “approved” HPCA Part 2

43. PART3

44. PART3

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46. QUALITYversusQUANTITY

47. On the back of the photograph and using an adhesive backed label: Labeling a Photograph

48. PART2/3REVIEW

49. PART2/3REVIEW

50. OK Tax Credit Projects Through Time(By Quantity of Project Numbers Assigned)