What is a Historic Tax Credit?

  • A tax credit based on designated expenses incurred in preserving a historic building for commercial or residential use.
  • A tax credit for 25% of qualified rehabilitation expenditures for a certified historic building used for income-producing or residential purposes. For a pre-1936, non-historic building used for income-producing purposes, a10% tax credit of qualified rehabilitation expenditures.

What buildings qualify for a Historic Tax Credit?

  • Buildings listed in National Register of Historic Places (NRHP) by the National Park Service.
  • Buildings listed as a contributing resource to a NRHP district.
  • Buildings eligible for listing in the NRHP.
  • Non-historic buildings meeting the Internal Revenue Code 47(c)(1)(a) or (b) and constructed before 1936, yetnot eligible for listing in the NRHP.
  • Non-historic structures built before 1936 and listed as a non-contributingresource in the NRHP.

Who can apply for a Historic Tax Credit?

  • Taxpayers filing a State of Alabama tax return or entities thatare exempt from federal income taxation and own title to a building or a leasehold interest in a building for a term of 39 years.

What type of project is eligible for a Historic Tax Credit?

  • Commercial developments and single-family residential projects.

How much must be spent to receive a Historic Tax Credit?

  • Project expenditures must exceed 50% of the owner’s original purchase price or $25,000, whichever is greater.

What guidelines must be followed to qualify for a Historic Tax Credit?

  • Work must meet the U.S. Secretary of the Interior Standards for Rehabilitation to insure that improvements are consistent with the historic character and maintain the historic integrity of the building.

What expenses qualify for a Historic Tax Credit?

Expenses incurred by the owner for improvement of the building including

  • repair of exterior materials, structural systems and interior finishes;
  • upgrades to HVAC, electrical, and plumbing; or
  • fees for architectural, engineering, and land surveying.

Is there a Historic Tax Credit cap? Yes.

  • A total of $20,000,000 in historic tax credits is allowable by the State of Alabama for each fiscal year (October 1 to September 30). Excess tax credits will be carried forward each year.
  • Commercial projects are limited to a reservation of $5,000,000 each in tax credits.
  • Residential projects are limited to a reservation of $50,000 each in tax credits.

When to take Historic Tax Credits

  • At the end of a project, owner should submit a final application providing information on the completed project including a cost and expense certification prepared by a licensed CPA and an appraisal by a qualified professional.
  • If the work of the project complies with the U.S. Secretary of Interior’s standards and all requirements of the final application are met, a tax credit certificate in the amount of the reservation is issued.
  • Owners claim the tax credit in the taxable year in which the approved rehabilitated building is placed in service. Any unused portion of the tax credit may be carried forward for up to ten years.

How to apply for Historic Tax Credits

  • Application information and a Historic Tax Credit Form will be available from the Alabama Historical Commission (AHC) on September 1, 2013.
  • Historic Tax Credit applications will be accepted on October 1, 2013. Note: An application fee will be required.
  • The AHC will have up to 60 days to review the application.
  • In general, Historic Tax Credits will be reserved for approved projects in the order in which completed applications are received.

When to Apply for Historic Tax Credits

  • Apply in the early planning stages of the project and before beginning work on the building.
    Note: The only work that may occur before an application is submitted must be related to design or development fees or emergency repairs that protect a building from deterioration. This work may not begin more than six months prior to submitting an application.
  • The first portion of a Historic Tax Credit application will determine if the building is eligible and if the proposed rehabilitation plan meets the U.S. Secretary of the Interior’s Historic Tax Credit Standards.

Parties interested in applying for Historic Tax Credits should study the bill carefully. Text of the bill may be viewed at the following website:

http://alisondb.legislature.state.al.us/acas/ACTIONViewFrameMac.asp?TYPE=Instrument&INST;=HB140&DOCPATH;=searchableinstruments/2013RS/Printfiles/&PHYDOCPATH;=//alisondb/acas/searchableinstruments/2013RS/PrintFiles/&DOCNAMES;=HB140-int.pdf,HB140-eng.pdf,HB140-enr.pdf

For information about the U.S. Secretary of Interior Historic Tax Credit Standards, visit http://www.nps.gov/tps/standards/rehabilitation.htm.