So You Have a Historic Building, Now What?

So You Have a Historic Building… Now What?

NTCIC assists developers and individuals seeking tax credits for historic rehabilitation, and our varied and stable investor base provides ready access to capital for qualified projects. If your knowledge of Historic Tax Credits is limited, take a look below to learn more about the tax credits that NTCIC works with. If you feel you have an eligible project and would be interested in working with us, please fill out this form and a member of our acquisitions team will be in touch.

Let’s Start With the Basics.

What are Tax Credits?

• Generally designed to encourage or reward certain types of investment and development that are considered beneficial to the economy, the environment or to further any other purpose the government deems important
• Tax credits reduce the amount of income tax dollar-for-dollar that individuals or companies owe to federal and state governments
• Investors with a large tax liability want to buy tax credits to lower taxes – e.g. large banks
• Historic restoration projects need inexpensive capital

Acronyms to know

As you look more into the tax credit world, it’s important to know a few frequently used acronyms.

• Low-Income Housing Tax Credit (LIHTC) – Used to finance construction and/or rehabilitation of affordable rental housing
• Historic Tax Credit (HTC) – Encourages rehabilitation and re-use of historic buildings
• New Markets Tax Credit (NMTC) – Provides an incentive for investment in low-income communities

What do Historic Tax Credits (HTCs) do?

• Encourage redevelopment of historic buildings
• Federal since 1976 and 35 state programs
• FHTC is administered by the National Park Service
• Credit is earned by the developer for qualified rehabilitation expenses
• 20% credit taken over a single or five-year period with a five-year compliance and recapture period

Is my project eligible to utilize HTCs? 

Check the following qualifications to see if your project could be eligible to utilize HTCs.

1. The building must be a “Certified Historic Structure
   1. Individually listed on the National Register, or
   2. A contributing building in a National Register Historic District
2. The project must be a “Certified Rehabilitation”
   1. Renovation adheres to the Secretary of the Interior’s Standards for Historic Rehabilitation
3. The property must be income-producing
   1. Apartments, hotels, offices, retail, theaters, etc.
   2. Owner-occupied residences do not qualify.
4. The project must be a “Substantial Rehabilitation”
   1. Spend > $5,000 or the “Adjusted Basis” of the building

To qualify as a “Certified Rehabilitation”, developers must complete a three-part application that is approved by the state SHPO and the NPS.

• Part One:
  • Presents information about the significance and appearance of the building
• Part Two:
  • Describes the condition of the building and the planned rehabilitation work
  • Proposed work is based on the Secretary of the Interior’s Standards for Rehabilitation
• Part Three:
  • Submitted after the project is complete and documents that the work was completed as described in part 2
  • Typically awarded when the project is “placed in service”
  • Officially when the HTC credits are awarded
  • Tax credits are equal to 20% of the qualified rehabilitation expenditures (QREs)
    • QREs are tax credit eligible development costs on which the HTC is calculated
    • What counts?
      • Hard Costs: Construction, Electrical, Plumbing, HVAC, etc
      • Some Soft Costs: Architectural Fees, Insurance, Construction Period Interest, Taxes, Application Fees, Project Management Fees, etc
    • What doesn’t count?
      • Acquisition costs, demolition costs, leasing expenses, new construction, and some non-historic construction
  • If the project is eligible, the building owner is able to attract capital from investors in exchange for these credits

The Compliance Period. 

In order to receive HTCs, the finished project must make it through a five year compliance period, during which the credits are delivered.

• Credit delivery
  • The HTC is generated when the building is placed in service (PIS), receives its Certificate of Occupancy
  • Credit is earned 4% per year over 5 years, but investors will typically schedule the equity payments over the development and construction period
• Five year compliance period
  • Period in which credits are subject to recapture
  • Cannot make material alterations to the building
  • Cannot transfer ownership via sale or foreclosure
  • Recapture amount decreases by 20% each year

How can NTCIC help you with your eligible tax credit project?

• NTCIC provides guidance to developers and individuals seeking tax credits for historic rehabilitation
• Evaluates specifics of development projects and identifies additional sources of capital available
• Connects individuals to investors actively seeking historic projects to support and finance
• Supports projects through their ongoing compliance periods from financial closing to exit

So you have a historic building… now you know what to do! Do you think your building would qualify for HTCs? Reach out to us below and someone from our acquisitions team will be in touch.

So you have a historic building… now you know what to do! Do you think your building would qualify for HTCs? Reach out to us below and someone from our acquisitions team will be in touch.