December 13, 2017 Presented by Kimberly & Jack Alvarez - PowerPoint PPT Presentation

December 13, 2017 Presented by Kimberly & Jack Alvarez Landmark Consulting LLC 83 Grove Avenue, Albany, NY 12208 www.landmarkconsulting.net

The Historic Tax Credit Program Landmark Consulting LLC is a small, Albany-based historic preservation and architectural firm combining more than 50 years of construction, historic preservation and architectural design experience.

The Historic Tax Credit Program History of the Federal Rehabilitation Tax Credit Kimberly Konrad Alvarez, Preservation Consultant

The Historic Tax Credit Program  National Historic Preservation Act passed in 1966 to protect nation’s heritage from rampant federal development projects.  Federal Highway Administration’s interstates through urban cores.  Urban Renewal Program’s attempts to rid cities of blight.

The Historic Tax Credit Program  Preservation Act of 1966 established a national policy,  Set up the partnership between the National Park Service and SHPOs  Created the National Register of Historic Places  Created the Section 106 Review process.

The Historic Tax Credit Program With new Federal focus on historic preservation came the change in the tax code in 1976 which had previously favored demolition of older buildings to the preservation and reuse of them. Tax Reform Act of 1976  The Revenue Act of 1978  The Tax Treatment Extension Act of 1980  The Economic Recovery Tax Act of 1981  The Tax Reform Act of 1986  Reagan Administration’s 1986 “pro-growth tax code” described by President Reagan as “ not only a matter of respect for our nation’s beauty and history, but good economic sense. ” The goal of the financial incentive was to encourage historic preservation efforts – to encourage private expenditures in areas deemed in the public good, because it was believed that the marketplace otherwise would not sufficiently invest to achieve the public good.

The Historic Tax Credit Program Jointly administered by the National Park Service and the Internal Revenue Service in partnership with the State Historic Preservation Offices. Is one of the nation’s most successful and cost-effective public/private revitalization programs. By fostering private sector rehab of historic buildings, the program promotes economic revitalization efforts while providing a strong alternative to government ownership and management of such properties.

The Historic Tax Credit Program As opposed to speculative investment and economic growth, has been quantifiably proven to increase investment. The Federal Historic Preservation Tax Incentives  program has leveraged over $130 billion in private investment to preserve more than 42,293 historic properties since 1976 by encouraging private sector investment in the rehabilitation and re-use of historic buildings. It has created 2.4 million jobs .  Developed 550,000 housing units with 30% being  affordable for low and/or moderate income families. Has generated $145 billion in gross domestic  product For the $25.2 billion in Federal Tax Credits  “returned” to investors, $29.8 billion in new tax revenues were returned to the Federal Treasury .

The Historic Tax Credit Program New York State Tax Credit Program  34 States across the country offer incredible leveraging power of the Federal Tax Credit, through creation of State Historic Tax Credit programs.  Requires that property be located in a qualifying Federal census tract having a median family income at or below the State median.  Qualifying rehab expenditures must exceed $5,000.  Simply piggy-backs on the Federal process – using the same application and review process.  Unused state tax credits are refundable.

The Historic Tax Credit Program

The Historic Tax Credit Program Current Administration and Congress working on what is dubbed the biggest tax reform since 1986. Federal Historic Tax Credit is at risk of being eliminated.

The Historic Tax Credit Program The current tax reform plan is using the argument that reduced income tax rates will result in “economic growth” as a result of increased investment. The reason that historic tax credits were originally created was because it was decided that investment in historic buildings was deemed in the public good, and up to that time the marketplace (private sector) was not sufficiently investing in those assets on its own.

The Historic Tax Credit Program The Basics: Federal Historic Tax Credit consists of 20% of qualifying rehab  costs. Property must be certified – meaning it must be listed on the  National Register of Historic Places. Rehab must be on an income-producing property.  Tax credit is available to the person(s) or entity that hold the title  to the property. The rehabilitation work must be substantial – exceeding the  adjusted basis of property or $5,000, whichever is greater. Project must go through the 3-part application process and  requires review & approval from SHPO and NPS. Approval of work is based on  compliance with the Secretary of the Interior’s Standards for Rehabilitation. Tax credit is claimed once property is  placed into services. New York State also has a matching  Commercial Properties Rehabilitation Tax Credit of 20%.

The Historic Tax Credit Program Property must be certified – meaning it must be listed on the National Register of Historic Places.

The Historic Tax Credit Program

The Historic Tax Credit Program

The Historic Tax Credit Program The 3-part Application Process  Important to recognize the added layer of process & associated timeframe  Possible need for additional professionals (consultant, architect, engineer, CPA or tax attorney)  First step is determining whether property can be or is already eligible as a listed property on the National Register.  If not already listed, full National Register Nomination will need to be prepared prior to Part 1 application.

The Historic Tax Credit Program Part 1 Application  Form requires property and applicant/owner information  Summary paragraph of physical appearance/condition  Summary paragraph stating significance.  Reference to National Register Nomination or Historic District  Current representative interior and exterior photos keyed to drawings or site plan.  Review period can range from 2 weeks to 2 months total.

The Historic Tax Credit Program Part 2 Application Form requires preliminary anticipated info on  project such as start and completion dates, estimated rehab costs, floor area, before and after rehab uses, etc. Full description of existing  conditions/appearance of interior and exterior features and spaces Full description of work that is proposed –  methods and materials. Each feature is numbered, dated, & cross  referenced to photos and architectural drawings. Full photo-documentation is required of  “before” conditions Full set of noted architectural plans &  elevations are required. Review period generally takes 1 to 3 months .,  but can take longer if there are questions on the scope and repair methods.

The Historic Tax Credit Program Rehabilitation is defined as the act or process of making possible a compatible use for a property through repair, alterations, and additions while preserving those portions or features which convey its historical, cultural, or architectural values.

The Historic Tax Credit Program 158 Knox Street – “before” Part 3 Application  Upon completion of the rehabilitation work, the Part 3 application is submitted requesting Certification of Completed Work.  Form asks for final project data such as start and completion dates, date placed in service, estimated rehab costs and total actual rehab costs, number of housing units before and after (if applicable), and applicants and any other owners contact information including tax identification number(s).  Full photo-documentation is required of “after” conditions. 158 Knox Street – “after”

The Historic Tax Credit Program What qualifies as eligible expenses?  Exterior & Interior Walls  Partitions  Floors  Ceilings  Permanent coverings, such as wood paneling, glued down carpeting or tiles  Windows and doors  Components related to heating or central air conditioning systems  Plumbing and plumbing fixtures  Sprinkler systems  Electrical wiring and lighting fixtures  Chimneys  Roofs  Stairs  Escalators, elevators, fire escapes  Other components related to the operation or maintenance of the building  PLUS soft costs (architectural/engineering, consulting & other prof. fees.)

The Historic Tax Credit Program What DOES NOT qualify for the tax credit?  Property Acquisition costs  Site Work such as landscaping, fencing, outdoor lighting, paving, parking lots or structures, retaining walls, sidewalks, storm sewers, planters or signage.  Moving, new construction of demolition costs for removal a building on property.  Appliances  Cabinetry  Interior furnishings as well as window treatments  Tacked or area rugs  Computer equipment, A/V equipment or technology equipment Recently the NPS has indicated that solar panels, wind turbines and geothermal equipment if essential to the operation or maintenance of the historic building will qualify for the tax credit.