…by Warren Kirshenbaum
The Louisiana Main Street program resides in the Louisiana Division of Historic Preservation. Louisiana has 34 designated local Main Street communities. Main Streets apply a four-point approach to the revitalization of their historic commercial districts: organizational development, design and preservation, economic development and promotion.
In order to facilitate preservation, federal and state tax credits exist for commercial historic rehabilitation.
The purpose of tax credits is to encourage the preservation of historic buildings through incentives to support rehabilitation of historic and older buildings.
What is a tax credit? A tax credit is a direct, dollar for dollar, reduction in the amount of money a taxpayer must pay in taxes for a given year. For example, if a taxpayer owes $5,000 in taxes to the Internal Revenue Service, but has a $3,000 credit, he only pays $2,000. A credit is much better than a deduction which merely reduces a taxpayer’s income and puts him in a lower tax bracket.
Federal Historic Rehabilitation Tax Credit
- The Federal Rehabilitation Tax Credit is for 20 percent of the costs of rehabilitation expenses for an income producing building.
- The credit is available for income-producing properties that are contributing elements to a National Register Historic District, or individually listed on the National Historic Register. All properties must be certified by the National Park Service.
- To qualify, the rehabilitation work must exceed the adjusted basis for the building (either the purchase price minus the value of the land, or the current depreciated value).
- The building must be a contributing element to a Downtown Development District (DDD) or a Cultural District.
- The building must be used for an income-producing purpose.
- Eligible expenses must exceed $10,000.
- This credit may be used in addition to the Federal Historic Rehabilitation tax credits, provided that the most stringent program requirements are met. It may also be combined with the State Residential Tax Credit Program if the building is mixed-use.
It is best for an owner not to start construction until after the Part 2 application has been approved. If work is begun without an approved application, the owner proceeds at his own risk.
All applicants are advised to consult with their attorneys and certified public accountants in developing projects to determine if the credit will work for you.
Original article –Leesville Daily Reader