Earning the Tax Credit
How to earn the 20 percent Historic Tax Credit
Resources:
- Learn more about the Historic Preservation Certification Application
- Read the Secretary of Interior's Standards for Rehabilitation
Once the property has qualified for the 20 percent credit, the rehabilitation project must be certified by the National Park Service (NPS) as in compliance with the Secretary of Interior's Standards for Rehabilitation in order to actually earn the credit. This ensures that the elements that make the building historic are preserved and/or restored in the course of the rehabiltiation.
The certification process consists of a three-part Historic Preservation Certification Application. Parts 1, 2 and 3 must be submited to the appropriate State Historic Preservation Office (SHPO) for review and then forwarded with recommendations to the NPS for approval or denial.
Parts 2 and 3 are essential for earning the 20 percent credit (recall that Part 1 of the Application, Evaluation of Significance, involves obtaining certified historic structure status for the property and is essential to qualifying for the 20 percent credit). Part 2, Description of the Rehabilitation, consists of a property narrative, pictures that outline the architectural and historical features of the building in its current state and a description of the proposed work. It should be filed before the rehabilitation begins. The NPS will approve the submission if the work conforms to the Secretary's Standards. NPS also may grant conditional approval, wherein approval is granted contingent upon certain modifications to the rehabilitation plan. The SHPO can provide valuable guidance to property owners as to how rehabilitation plans may comply with the Secretary's Standards.
After the rehab is finished, Part 3 of the application, Request for Certification of Completed Work must be approved. This final part of the application process is intended to notify the SHPO and NPS that the project is complete and that the owners request it be reviewed for certification. NPS will approve the work if it is consistent with the plan laid out in Part 2 and with the Secretary's Standards.
Once NPS has approved the Part 3 application, the owner calculates the total qualified rehabilitation expenses incurred and multiplies this number by 20 percent to determine the total tax credit earned.
The credits are allowed and considered to be earned on the date that the building (or applicable component part of a building) is placed-in-service.
Note: It is very important to determine prior to the time that the building is placed in service whether the owner will be able to use and redeem the credits against his/her federal tax liability. Contact your tax attorney or accountant before the building is placed in service if you are unsure whether you will be able to use any or all of the credit.
Also, visit Other Options for more information.