Historic Tax Credits

Federal Historic Tax Credits (HTC), which are also referred to as Historical Tax Credits and Historic Rehabilitation Tax Credits, make restoring historic buildings economically viable. They do so by encouraging the preservation and adaptive reuse of certified historic buildings, primarily in low- and moderate-income census tracts and economically distressed areas, via private investment. Since the program’s inception in 1976, more than 44,000 historic properties throughout the United States have been preserved and over 2.5 million jobs created. 

Previously, the HTC program consisted of two separate tax credits: 1) a 20% credit for the rehabilitation costs of buildings listed on the National Register of Historic Places; and 2) a 10% credit for the rehabilitation of non-historic, non-residential buildings built before 1936. 

In December 2017, however, a federal tax bill was passed that retained the 20% Historic Tax Credit for certified rehabilitation of historic structures but eliminated the 10% tax credit. The 20% Historic Tax Credit must be claimed at a rate of 4% per year over a five-year period

To qualify for Historic Tax Credits, a building must either:

• Be listed on the National Register of Historic Places, or
• Be a contributing element of a historic district listed on the National Register of Historic Places or another qualifying local historic district.

Historic Tax Credits can either be used to offset the historic building owner’s federal tax liability or transferred to a corporate investor in exchange for additional equity capital that can be used for long-term project financing. Because the Internal Revenue Code’s Passive Activity Rules severely limit, and sometimes prohibit, the use of tax credits by individuals, most building owners syndicate tax credits to a third-party investor who can utilize them.

Syndicated Historic Tax Credit transactions require the investor to be admitted into a legal entity, such as a limited partnership or limited liability company that will either own the historic building or holds a long-term operating lease. In these circumstances, the Historic Tax Credits investor serves as either the limited partner or investor member while the building owner serves as either the general partner or managing member.

The majority of Historical Tax Credits syndication transactions generate over $1 million in tax credits and are highly structured, tax code-intensive deals. Since NTCIC has already raised millions of dollars in equity for Historic Tax Credit-only and multi-credit projects, we can greatly simplify and expedite the process of obtaining funding for your certified historic building renovation.

To qualify for Historic Tax Credits, property owners or developers must complete a 3-part application process that is approved by the National Park Services and their State Historic Preservation Office. This application will ensure the owner/developer undertakes the certified substantial rehabilitation of a certified historic structure with an eligible end-use.

• Certified Historic Structure: A building that is:
  • Either individually listed on the National Register of Historic Places, or a contributing building in a National Register Historic District
  • Income-producing (owner-occupied residential buildings do not qualify)
• Certified Substantial Rehabilitation: A property rehabilitation where:
  • Renovation costs are greater than either $5,000 or the Adjusted Basis of the building, whichever sum is larger; and
  • Adheres to the Secretary of the Interior’s Standards for Rehabilitation

To get started, contact your local State Historic Preservation Office for more information and technical assistance, and connect with a trusted tax advisor.