What exactly is a tax credit?
A tax credit is not money up front nor is it a grant. The tax credit is awarded upon completion of the project and is a direct, dollar for dollar, reduction in the amount of money a taxpayer must pay in taxes for a given year. It’s much better than a deduction, which only reduces a taxpayer’s income and may or may not put him in a lower tax bracket.
How do I find out if my building is located in an eligible district?
To determine if your building is listed on the National Register of Historic places or located within the boundaries of a National Register Historic District, search the Louisiana National Register database or contact Patricia Duncan, National Register Coordinator at 225.219.4595 or firstname.lastname@example.org.
To determine if your building is within the boundaries of a local historic district, contact your city or parish government.
How do you compute the adjusted basis?
Adjusted basis of a building is the cost of the property (excluding land) plus or minus adjustments to basis. The Tax Assessor's office would be able to provide a building to land value ratio. Increases to basis include capital improvements, legal fees incurred in perfecting title, zoning costs, etc. Decreases to basis include deductions previously allowed or allowable for depreciation. See Treasury Regulation 1.48-12(b)(2)(iii).
For the substantial rehabilitation test, the date to determine the adjusted basis of the building is the first day of the 24-month measuring period or the first day of the taxpayer's holding period of the building, whichever is later. Generally the holding period is deemed to begin the day after acquisition.
What are some expenses that qualify for the rehabilitation tax credit?
Any expenditure for a structural component of a building will qualify for the rehabilitation tax credit. Treasury Regulation 1.48-1(e)(2) defines structural components to include walls, partitions, floors, ceilings, permanent coverings such as paneling or tiling, windows and doors, components of central air conditioning or heating systems, plumbing and plumbing fixtures, electrical wiring and lighting fixtures, chimneys, stairs, escalators, elevators, sprinkling systems, fire escapes, and other components related to the operation or maintenance of the building.
In addition to the above named "hard costs", there are "soft costs" which also qualify. These include construction period interest and taxes, architect fees, engineering fees, construction management costs, reasonable developer fees, and any other fees paid that would normally be charged to a capital account.
What are some examples of expenses that do not qualify for the rehabilitation tax credit?
Carpeting (if tacked in place and not glued)
Decks (not part of original building)
Demolition costs (removal of a building on property site)
Enlargement costs (increase in total volume)
Moving (building) costs (if part of acquisition)
Outdoor lighting remote from building
Porches and Porticos (not part of original building)
I own an old building, but it isn't’t in a National Register Historic District. Can I still qualify for Federal tax credits?
There are two options possibly available for buildings that are not currently listed on the National Register or within a national Register Historic District. First, the 10% rehabilitation tax credit is available for the rehabilitation of non-historic buildings placed in service before 1936. The 10% credit applies only to buildings rehabilitated for non-residential uses. Rental housing would thus not qualify. Hotels, however, would qualify. They are considered to be in commercial use, not residential. The 10% rehabilitation tax credit applies only to non-historic, non-residential buildings built before 1936. The 20% rehabilitation tax credit applies only to certified historic structures, and may include buildings built after 1936. The two credits are mutually exclusive. Only one applies to a given project. Which credit applies depends on the building—not on the owner’s preference. For more information on the 10% credit, click here
Second, the owner may contact the Division of Historic Preservation’s National Register Coordinator to determine whether or not the building is eligible for the National Register of Historic Places. If listed on the National Register, the building would then be eligible for the 20% Federal Rehabilitation Tax Credit. For more information on the National Register Program contact Patricia Duncan, National Register Coordinator at 225.219.4595 or email@example.com
I have already started the rehabilitation of my property. Is it too late to apply for tax credits?
As long as the building has not been placed in service you may still apply. Keep in mind, however, that when you begin a project prior to Part 2 or Part B approval you are proceeding at your own risk.
My rehabilitation is complete. Is it too late to apply?
Yes. A Part 1 application or Part A application must be submitted prior to the completion of the rehabilitation project.
However, if the building is individually listed in the National Register and you are applying for the Federal Rehabilitation Tax Credit, you may apply even after the rehabilitation has been completed.
I received approval for my exterior work from the local historic district commission. Does that mean I qualify for the tax credit program
No. Approval by a local commission does not guarantee approval by the Division of Historic Preservation or National Park Service for the rehabilitation tax credit. The owner must submit the required applications to the Division of Historic Preservation and receive the necessary approval from the Division of Historic Preservation or National Park Service in order to qualify for the rehabilitation tax credit programs.
I have tax related questions. Who can help me?
The Tax Incentives Program Staff are Architectural Historians, not tax experts. Therefore, we recommend you contact an accountant or tax attorney. Additionally, you may find the answers to your questions in the IRS Connection Frequently Asked Questions http://www.nps.gov/history/hps/tps/tax/IRS.htm.
I am not sure how to fill out the application. Are there instructions?
The Tax Incentive Program Staff has created a step-by-step illustrated guide to completing each application. Additionally, there are application instructions available for download. Please see the Tax Incentives Programs on our website
I heard about Restoration Tax Abatement. Is it the same as the tax credit?
The Restoration Tax Abatement (RTA) Program is a separate program administered by the Louisiana Department of Economic Development. The RTA is an economic development incentive created for use by municipalities and local governments to encourage the expansion, restoration, improvement and development of existing commercial structures and owner-occupied residences in Downtown Development Districts, Economic Development Districts or Historic Districts. The program grants a five year deferred assessment of ad valorem property taxes normally assessed on improvements. For more information, contact Shamelda Peete, 225-342-5341, firstname.lastname@example.org or view the website here http://www.ledlouisiana.com/opportunities/incentives--programs/restoration-tax-abatement.aspx