Historic Rehabilitation Tax Credit

Association of Construction and Development
June 5, 2013 — 1,407 views  

The Federal Historic Rehabilitation Tax Credit Act is a federal law that is primarily aimed at helping preserve ‘Historical’ buildings. The Historic Rehabilitation Tax Credit Act allows for 20% credit allowed for the rehabilitation of those buildings that are considered to be historical, and also allows for a 10% credit for the rehabilitation of non-historical buildings that were placed in service prior to 1936. The HTC is widely considered to be one of the most successful as well as cost-effective revitalization projects performed by the communities.

An overview of the Historic Rehabilitation Tax Credit

This historic preservation act is geared to allow private organizations to see benefit in being able to restore and rehabilitate certain buildings. Additionally, there are also additional benefits for rehabilitating and reconstructing buildings that are located in disaster zones. Certified historic buildings located in disaster zones will see an increase in the tax benefit by 6%, while non-historic buildings placed in service before 1936 will see the tax benefit rise to 13% from 10%.

There are also a number of other aspects of the Historic Rehabilitation Tax Credit Act that look at certain areas of the country where people may not usually get benefits for these rehabilitation programs and then use relaxed taxes to encourage the same. In addition, the program also encourages increased property value through the process of rehabilitation while also maintaining the area’s historical value.

Heritage tourism is a business that is also kept alive by this Law, while the employment data shows that a huge number of people are able to make a livelihood through the encouragement of rehabilitating historical structures via construction, engineering, and tourism.

Benefits of the Tax Credit

Apart from the obvious advantage of the tax benefit itself, the community in which the historical building is rehabilitated enjoys the advantages of having a landmark in the vicinity. Additionally, the businesses in the area are likely to boom as a result of tourism or even a simple rise in the economy of the region. Experts also suggest that another benefit that is encountered as a direct result of historic preservation is the pride attained by locals of the community, as well as an added value to local history and school curriculums with the addition of nearby historical landmarks. The history of the locality is not only maintained, but also handed down from generation to generation.

You should not ignore the fact that older buildings are usually built from some very solid materials. Historical buildings will generally be much harder to destroy when natural disasters strike and this is something that should be retained. The Historic Rehabilitation Tax Credit Act allows the community to rebuild and preserve something that is generally of great architectural significance.

Claiming the Tax Credit

As with any tax benefit law, it is important to understand the procedures you will be required to fulfill when claiming the tax credit under the Historic Rehabilitation Tax Credit Act. Unless the rehabilitation project is phased, the owner of the property can claim 20% tax benefit within a 24-month period. If it is a phased project, the law allows for a 60-month timeframe for completion. The tax benefit must then be claimed for the tax year in which the building is officially placed in service. Phased projects will allow the owner to claim part of the tax benefit in percentages of completion of the project on the basis of qualified progress expenditures.

In conclusion, this historic preservation law goes a long way into ensuring that the historic identity of the region is not lost to the new shining buildings we see in every nook and corner. It helps communities take great pride in the legends of yesteryear, while also adding architectural value to the locality.

Association of Construction and Development