Source: http://phoebus.info/tax-credit-information-2/
Timestamp: 2017-04-30 14:44:37
Document Index: 98375769

Matched Legal Cases: ['art 1', 'art 1', 'art 1', 'art 1', 'art 1', 'art 2', 'art 2', 'art 2', 'art 2', 'arts 1', 'art 1']

Frequently asked qustions about rehabilitation tax credits
Rehabilitation Tax Credits are dollar-for-dollar reductions in income tax liability for taxpayers who rehabilitate historic buildings. Credits are available from both the federal government and the State of Virginia.
With a few exceptions, a Virginia property that is listed on one of these registers is listed on the other. Please note, however, that historic districts listed in the national and Virginia registers may be different from locally designated historic districts. Certification that a building contributes to a listed district (or for purposes of the state credit is eligible for individual listing) is obtained only by submitting Part 1 of the tax credit application.
Technically speaking, eligible expenses include any work that is properly chargeable to a building’s capital account in connection with a certified rehabilitation. Essentially, this means that all work done to structural components of the building will be eligible, as well as certain soft costs such as architectural and engineering fees, construction period interest and taxes, construction management costs, and reasonable developer fees. Expenses related to new heating, plumbing and electrical systems are eligible, as well as expenses related to updating kitchens and bathrooms, compliance with ADA, and fire suppression systems and fire escapes. Acquisition costs, however, and any expenses attributable to additions or enlargements of the building, are not eligible. Under the federal program, site work and landscaping elements are not eligible expenses. Under the state program, certain site work may be eligible.
The credit is claimed in the year the rehabilitation is completed. If you cannot use up the full amount of the credit in the first year, it can be carried forward. The federal credit may be carried forward for up to twenty years, and back for one year. The state credit may be carried forward for up to ten years. There is no carryback for the state credit.
Under the federal program, if the building is disposed of, or if it loses its income-producing status, within five years after the rehabilitation is completed, the taxpayer will face recapture of the credit. The amount of recapture is reduced by 20% in each succeeding year after the year the rehabilitation is completed – in other words, if the building is sold after one year, there will be recapture of 80% of the credit, if it is sold after two years, there will be recapture of 60% of the credit, and so forth. In addition, the National Park Service reserves the right to inspect a rehabilitated property any time during the five-year period, and to revoke certification if work was not undertaken as presented in the application, or if further unapproved alterations have been made.
Applying for the credit is a three-part process. Part 1 requests certification that the building is historic – e.g. eligible for the program. For properties that are individually listed, Part 1 is not necessary. For all other properties – i.e. those seeking certification that they are contributing structures in a listed historic district or individually eligible for listing – a Part 1 is required. Photographs showing the property in its pre-rehabilitation state must be submitted with Part 1.
Part 2 requests certification that the proposed rehabilitation work appears to be consistent with the Secretary’s Standards. Part 2 is the most complex part of the application. It requires a description of each significant architectural feature of the property and how it will be treated in the rehabilitation. Many property owners choose to complete Part 2 themselves using the Department’s Sample Rehabilitation Proposal as a guide. Others hire a professional consultant to assist them. A list of consultants is available from the Department upon request. Additional photographs of the property are sometimes necessary to document Part 2.
The size and clarity of the photographic images must adequately document the before and after conditions of the building. 24 to 36 photographs are generally sufficient for the average project. However, it is better to have more photographs than to have too few. Conventional 35mm color photographs are preferred. Although the popularity of digital photographs has increased, they generally fail to provide adequate resolution of details that are an important source of information. If photographs are judged to be insufficient, the reviewer may place your application on hold and request additional photographs, which could delay your project’s progress.
Interior areas where major rehabilitation work is proposed
Possibly. It is much more difficult to qualify for the credits if you don’t submit Parts 1 and 2 before beginning work, but in some cases it may be possible. You must have good photographs showing the building before the rehabilitation work began, as described in the preceding question. If you do not have this documentation, you probably cannot qualify for the credits. Additionally, the work which you have already completed must meet the Secretary’s Standards.
The federal government allows a 10% rehabilitation tax credit for buildings which were constructed before 1936, but are not certified historic structures. If the building is listed on the National Register it is automatically a certified historic structure, and is not eligible for the 10% credit. If it is located within a listed historic district, it is eligible for the 10% credit only if it is certified (through the submission of a Part 1) as not contributing to the district. The building must also meet the following conditions:
Property owners are not required to follow the Secretary’s Standards in order to claim the 10% credit.
For additional information on the federal program, check out the National Park Service’s website.
To speak to a Virginia Department of Historic Resources tax credit staff member or to make an appointment, please call (804) 367-2323.