Under the provisions of the Tax Reform Act of 1986, a 20 percent tax credit is available for the substantial rehabilitation of income-producing commercial, industrial, agricultural or rental residential buildings that are certified as historic. (There is also a 10 percent investment tax credit for renovating non-historic buildings, if constructed before 1936 and used for nonresidential purposes.) The Federal Rehabilitation Investment Tax Credit (RITC) may be deducted from the property owner’s federal income taxes, equal to 20 percent of the rehab costs. The tax credit does not include the purchase price of the historic building.
According to the National Park Service, over $441 million in certified new investment was generated in Pennsylvania using the Federal RITC over the past five years.
Preservation tax credits can help to:
• Save historic buildings and encourage their reuse
• Capitalize on historic preservation as a means of economic growth
• Increase the value of rehabilitated properties
• Return underutilized structures to the tax rolls
• Revitalize older commercial districts and historic neighborhoods
• Stimulate private sector investment and development
• Increase affordable housing units within a community
To qualify for the RITC, a property owner must:
• Have a certified historic structure that is individually listed in the National Register of Historic Places or be a contributing resource within a historic district that is eligible or listed in the National Register.
• Use the building for an income-producing purpose.
• Undertake rehabilitation work in accordance with the Secretary of the Interior’s Standards for Rehabilitation. The National Park Service(NPS), with advice from the state historic preservation office (Pennsylvania Historical and Museum Commission), must certify the rehab work and determine whether a project meets the standards.
• Spend an amount greater than either the building’s adjusted basis (the currentde preciated value of the building, not including land value) or at least $5,000, on the approved rehab project.
• Complete the work in a timely manner (a maximum of five years to complete a phased project, if the plans are approved in advance).
• Hold onto the building for at least five years (to avoid recapture of the tax credit by the federal government).
• Pay a fee to NPS for review of the project, based upon the qualifying rehab expenditures.
For More Information on the RITC:
Contact the Pennsylvania Historical & Museum Commission. The Bureau for Historic Preservation administers the RITC within the Commonwealth, in partnership with the National Park Service. Visit their web site, www.phmc.state.pa.us, to download detailed information, tax credit application forms and instructions, and a sample work description. Or phone Bonnie Wilkinson Mark, the Bureau’s Historical Architect in Preservation Services, at (717) 787-0772 to discuss your proposed tax credit project.
