Properly documenting building conditions can make or break your chance of securing tax credits.
In order to be eligible, a project must meet the Secretary of the Interior’s Standards for Rehabilitation. These guidelines will help you determine what to document in your application.
The Secretary of the Interior’s Standards for Rehabilitation
To be eligible for the 20% rehabilitation tax credit, projects must qualify as “certified rehabilitations” by meeting the following Standards. These requirements apply to both the exterior and interior of historic buildings, and also apply to landscape features, the structure’s site and any attached, adjacent, or related new construction.
The Rehabilitation Standards are:
- A property shall be used for its historic purpose or be placed in a new use that requires minimal change to the defining characteristics of the building and its site and environment.
- The historic character of a property shall be retained and preserved. The removal of historic materials or alteration of features and spaces that characterize a property shall be avoided.
- Each property shall be recognized as a physical record of its time, place, and use. Changes that create a false sense of historical development, such as adding conjectural features or architectural elements from other buildings, shall not be undertaken.
- Most properties change over time; those changes that have acquired historic significance in their own right shall be retained and preserved.
- Distinctive features, finishes, and construction techniques or examples of craftsmanship that characterize a historic property shall be preserved.
- Deteriorated historic features shall be repaired rather than replaced. Where the severity of deterioration requires replacement of a distinctive feature, the new feature shall match the old in design, color, texture, and other visual qualities and, where possible, materials. Replacement of missing features shall be substantiated by documentary, physical, or pictorial evidence.
- Chemical or physical treatments, such as sandblasting, that cause damage to historic materials shall not be used. The surface cleaning of structures, if appropriate, shall be undertaken using the gentlest means possible.
- Significant archaeological resources affected by a project shall be protected and preserved. If such resources must be disturbed, mitigation measures shall be undertaken.
- New additions, exterior alterations, or related new construction shall not destroy historic materials that characterize the property. The new work shall be differentiated from the old and shall be compatible with the massing, size, scale, and architectural features to protect the historic integrity of the property and its environment.
- New additions and adjacent or related new construction shall be undertaken in such a manner that if removed in the future, the essential form and integrity of the historic property and its environment would be unimpaired.
Applying for the Program
To qualify for the 20% credit, you need to complete a three-part application.
In documenting your application for a tax credit, you should pay attention to the three parts of the application.
- Part 1 documents the building’s eligibility as a certified historic structure.
- Part 2 describes the condition of the building and the planned rehabilitation work. The proposed work will be evaluated based upon the Secretary of the Interior’s Standards for Rehabilitation (see list above).
- Part 3 of the application is submitted after the project is complete and documents that the work was completed as proposed. National Park Service approval of the Part 3 application certifies that the project as executed meets the Standards.
What NPS Reviews
For purposes of the 20% tax credit, the project scope includes the entire building, along with any historically associated property under the same ownership. Individual condominiums or commercial spaces within a larger historic building are not considered individual properties apart from the whole.
The boundaries associated with the National Register listing may be used to determine which buildings on a property are eligible for the tax credit. These boundaries, however, do not limit the scope of review if part of the historic property lies outside that boundary.
For example, consider a historic property that consists of a school building, a separate gymnasium building, playgrounds, and ball fields. If the National Register boundary only includes the school building, that does not exclude the historically associated gymnasium, playground and ball fields from the scope of review. However, in order for work done on the gymnasium building to be eligible for the tax credit, the National Register nomination may need to be updated.
The Review Process
Understanding how the National Park Service applies the Secretary of the Interior’s Standards for Rehabilitation facilitates the design and review processes, minimizing the need to adjust designs during the review process.
Your 20% credit must be submitted to the State Historic Preservation Office (SHPO). The application will be assessed, and the SHPO may ask for more information to complete their review. A property visit could be required. Once the SHPO reviews the application, they send it on to the NPS for their review, along with a recommendation about whether or not the project adheres to the Standards for Rehabilitation.
Once the NPS has received the application, they will bill the owner for the review. After you pay the fee, NPS will evaluate the application and notify the owner if it has been approved or denied. By law, all certification decisions are made by the NPS taking into consideration the recommendations of the SHPO.
In my next post, I’ll explain how to manage risks associated with applying for tax credits.
For recommendations on how to determine whether your building is eligible for the program, how to apply, and how to ensure you receive the credits, download the guide here