HISTORIC PRESERVATION FINANCIAL INCENTIVES

HISTORIC PRESERVATION FINANCIAL INCENTIVES Financial incentives fall int fur majr categries: federal rehabilitatin tax credits, lcal incentives, lw-interest lans, and grants. Of these categries, grants are generally nly made t nn-prfit and gvernment entities. Only at the lcal level are grants generally made t private, fr-prfit prperty wners. FEDERAL REHABILITATION INVESTMENT TAX CREDITS The federal tax credits reduce the amunt f federal tax wed by wners whse buildings have been rehabilitated t meet certain criteria. Federal Rehabilitatin Investment Tax Credits (ITC) are credits applied t an wner s federal taxes wed r t future tax liabilities. The credit typically is wrth a percentage f the cst f the renvatin. The Passive Activity Limitatins, the Alternative Minimum Tax, and the At-Risk Rules all affect the amunt f credit an individual can claim in ne year. Eligible wners may be individuals r businesses and must pay federal incme taxes. Apprximately $9,000 is the maximum credit any ne individual can claim in any ne year. Larger credit amunts, hwever, can be divided up and carried t ther years. 20% Rehabilitatin Tax Credit fr Histric Buildings Administered by the Illinis Histric Preservatin Agency (IHPA), Natinal Park Service (NPS), and Internal Revenue Service (IRS). Cntact the IHPA: 217-785-4512. Federal Histric Preservatin Tax Incentives www.cr.nps.gv/hps/tps/tax/index.htm Histric Preservatin Certificatin Applicatin www.cr.nps.gv/hps/tps/tax/hpcappl.htm Only fr depreciable prperty: Prperties rehabilitated fr cmmercial, agricultural, industrial, rental residential. Owner-ccupied husing is nt eligible. Building must be a certified histric structure: Listed n the Natinal Register (individually r as a cntributing building within a Natinal Register district); r A cntributing building within a lcal histric district that has been certified by the Natinal Park Service. www.illinis-histry.gv FACSIMILE: 217.524.7525

Individually listed lcal landmarks are nt eligible. Prject must be certified by the NPS t meet the Secretary f the Interir s Standards fr Rehabilitatin. Requires the preservatin f as much f the existing significant histric features and materials as pssible. Des nt require restring a building r its features t their riginal appearance. Nn-histric features may be retained. New, cmpatible alteratins r additins may be added. New additins utside the histric building envelpe cannt be included in the amunt submitted fr credit. Owner must spend mre than $5,000 r the Adjusted Basis (explained at the end f this dcument), whichever is larger, during a 24-mnth perid. Owners may qualify fr a 60-mnth phased prject, but it requires mre up-frnt planning. Eligible rehabilitatin expenditures may include: Architectural and cnstructin csts n the histric building. Sft csts that are depreciable rather than taken as a ne-time expense: Architectural/ Engineering fees, survey, legal, develpment fees, cnstructin-related csts. Ineligible expenditures include acquisitin, furnishings, new additins, r landscape r site imprvements. Apply Early: It is strngly recmmended that applicatins be filed befre wrk begins t avid cstly mistakes r pssible certificatin denial. At a minimum, the Part 1 must be submitted prir t placing the prject in service r the prject will be denied. The building must be placed in service. The wner must retain the building fr five years. The NPS charges a sliding fee fr review, ranging frm free (fr prjects with budgets f under $20,000) t $2,500 (fr prjects with budgets in excess f $1 millin). Must fill ut a three-part applicatin that is reviewed by IHPA and the NPS. Part I: Certifies that the building is indeed histric. Part II: Describes the wrk t be dne t the building. Mst prpsals are described in written frmat, thugh architectural drawings and specificatins may be included. Phts f the existing cnditins f the building are als submitted. It is recmmended that Part II be certified befre cnstructin begins. Part III: Certifies that the wrk has been cmpleted, has met the Standards, and lists the value f the renvatin. The certified Part III is filed with the IRS fr claiming the tax credit in the year the prject is cmpleted. Apprval f prpsed wrk typically takes frm 3 t 6 mnths. 10% Rehabilitatin Tax Credit fr Nn-Histric Cmmercial Buildings Built Befre 1936 Administered by IRS; des nt invlve review by IHPA. G t the IRS website t dwnlad Frm 3468 and instructins: www.irs.gv/pub/irs-pdf/f3468.pdf Cntact the IRS: 800-829-1040. Receive a credit f 10% f the amunt spent t rehab a nn-histric building built befre 1936. Only building that are nt listed n the Natinal Register are eligible. Incme-prducing residential and wner-ccupied husing are nt eligible. Must be a substantial rehabilitatin: Spend mre than $5,000 r the adjusted basis during a 24-mnth perid. Eligible wrk includes architectural cnstructin wrk (same as the 20%), such as masnry repair, exterir painting, interir remdeling, painting, mechanical and electrical wrk. Ineligible wrk includes building additins, appliances, furniture, and fixtures. Building must pass a physical retentin test: 50% f exterir walls must remain as exterir walls; and 75% f exterir walls must remain as exterir r interir walls; and 75% f building s internal structure must remain. 2

N IHPA, NPS, frmal design-review prcess. IRS reviews after submittal f applicatin. N applicatin fee. Applicant submits frm t the IRS. Dcumentatin f renvatin expenditures must be retained. 50% Disabled Access Tax Credit Administered by the IRS. G t the IRS website t dwnlad Frm 8826 (Disabled Access Credit) and instructins: www.irs.gv/pub/irs-pdf/f8826.pdf Cntact the IRS: 800-829-1040. This is a tax credit fr an eligible small business that pays r incurs expenses t prvide access t persns with disabilities. The expenses must be t enable the eligible small business t cmply with the Americans with Disabilities Act f 1990. Designed fr rehabilitatin f buildings husing small businesses: Less than $1 millin in grss receipts in preceding year; r Fewer than 30 full-time emplyees in preceding year. Wrk must meet current ADA Standards. Credit = 50% f the amunt spent making a business accessible. Credit may be taken n wrk expenditures between $250 and $10,250. A maximum f $5,000 f credit may be taken each year. Dcumentatin f the expenditures must be retained. Eligible expenses include installing ramps, restrms, elevatrs, sidewalks r walkways, and the redesign f entries and interir circulatin. Only wrk that is necessary fr accessibility may be claimed as a tax credit. New buildings are nt eligible. Credits may be claimed in mre than ne tax year prvided that the expenses claimed were made in the current tax year. New Markets Tax Credits Cntact the U.S. Treasury's Cmmunity Develpment Financial Institutins (CDFI) Fund (www.cdfifund.gv) r the Natinal Trust Cmmunity Investment Crpratin (www.natinaltrust.rg/ntcicfunds). U.S. Treasury s Cmmunity Develpment Financial Institutins (CDFI) Fund allcates the New Markets Tax Credit (NMTC) Prgram, which permits taxpayers t receive a credit (typically 5% t 6% f the amunt invested in a distressed area) against Federal incme taxes fr making qualified equity investments in designated Cmmunity Develpment Entities (CDEs). Substantially all f the qualified equity investment must in turn be used by the CDE t prvide investments in lw-incme cmmunities. The credit prvided t the investr ttals 39% f the cst f the investment and is claimed ver a seven year credit allwance perid. In each f the first three years, the investr receives a credit equal t five percent f the ttal amunt paid fr the stck r capital interest at the time f purchase. Fr the final fur years, the value f the credit is six percent annually. Investrs may nt redeem their investments in CDEs prir t the cnclusin f the seven-year perid. The Natinal Trust fr Histric Preservatin was the recipient f a $127 millin allcatin f the New Markets Tax Credit n March 14, 2005, which is then t be reallcated t prjects. 3

OTHER TAX INCENTIVE PROGRAMS Prperty Tax Assessment Freeze Prgram Administered by IHPA. Cntact Andrew Heckenkamp: 217-782-8168, fax: 217-524-7525 www.state.il.us/hpa/ps/taxfreeze.htm Fr nn-cmmercial, residential-nly buildings. Building must be a certified histric structure: Listed n the Natinal Register (individually r as a cntributing building within a Natinal Register district); r A cntributing building within a lcal histric district in a cmmunity whse rdinance has been apprved by the IHPA fr the Tax Freeze Prgram; r An individually designated lcal landmark in a cmmunity whse rdinance has been apprved by the IHPA fr the Tax Freeze Prgram. Assessment level is frzen fr 8 years at the pre-rehabilitatin rate. Then it is raised in steps up t the current level ver the next 4 years, until the assessment reaches its current rate. Only ne level f design review by IHPA. Prject must be certified by IHPA that it meets the Secretary f the Interir s Standards fr Rehabilitatin. Eligible prperties include: Single-family wner ccupied Six-flats if ne unit is wner ccupied C-ps and cnds Class L Administered by Ck Cunty Assessr s Office. Cntact Brian Geken (within Chicag city limits): 312-744-3201; r Len Mtisi (if utside Chicag city limits, but still in Ck Cunty): 312-603-7929. www.ckcuntyassessr.cm/frms/clslb.pdf Class L is a prperty tax assessment reductin fr lcally designated industrial & cmmercial individual histric landmarks in Ck Cunty. Requires apprval f Certified Lcal Gvernment Only fr Ck Cunty Easements Administered by varius entities. In Illinis, the Landmarks Preservatin Cuncil f Illinis (LPCI) is an rganizatin that has an easement prgram. Cntact LPCI: 312-922-1742. www.landmarks.rg An easement is a vluntary legal agreement that prtects part r all f a building (r ther histric resurce) in perpetuity. Under the terms f an easement, a prperty wner grants a prtin f r interest in his prperty rights t an rganizatin whse missin includes histric preservatin. In return, the wner receives a substantial tax deductin because he has theretically reduced the value f his structure by reducing his and any future wner s ability t unduly alter r demlish the designated significant features prtected by the easement. The prtin f the building prperty rights that are dnated are mnitred and prtected by the preservatin rganizatin. Building must be a certified histric structure: Listed n the Natinal Register (individually r as a cntributing building within a Natinal Register district); r A cntributing building within a lcal histric district that has been certified by the Natinal Park 4

Service. Individually listed lcal landmarks are nt eligible. Easement equals the lss in value due t cntributin. A typical easement might average 10% f the value f the rehabilitated building. Timing is cmplicated and critical if an easement is cmbined with the histric tax credit. Entity hlding easement may a charge fee. Investment Tax Credit fr Lw Incme Husing Administered in Illinis by the Illinis Husing and Develpment Authrity (IHDA). Cntact the IHDA: 312-836-5200. www.ihda.rg/viewpage.aspx?pageid=150 The Tax Refrm Act f 1986 established a credit fr acquisitin, cnstructin, and rehab f lw-incme husing. Owner must retain fr 15 years. The amunt f credit funds is limited and is allcated by IHDA n an annual basis. The Architectural and Transprtatin Barrier Remval Deductin This is the same prgram as the 50% Disabled Access Tax Credit Administered by the IRS. G t the IRS website t dwnlad Frm 8826 frm and instructins: http://www.irs.gv/frms_pubs/frmpub.html See als Chapter 11 in Publicatin 535, Business Expenses: www.irs.gv/prd/frms_pubs/pubs/p5351107.htm This is a deductin (nt a credit) f the csts f remving barriers t the disabled and the elderly. This wrk entails making yur facility r public transprtatin vehicle mre accessible t, and usable by persns wh are disabled r elderly. The cst f an imprvement t a business asset is nrmally a capital expense. Hwever, yu can chse t deduct the csts f making a facility r public transprtatin vehicle mre usable by thse wh are disabled r elderly. Cannt deduct csts t cmpletely renvate r build a new facility r public transprtatin vehicle, r t replace depreciable prperty in the nrmal curse f business. Can deduct up t $15,000 per year. Can add any csts ver this limit t the basis f the prperty and depreciate the annual $15,000 tax deductin. 5

LOCAL INCENTIVES Lcal incentives are designed by individual cmmunities t encurage specific renvatin prgrams. They can supplement the federal tax credits and ften apply t prjects nt eligible fr the credits. Matching grants are ne f the mst cmmn lcal incentives. Grants may be given t eligible applicants fr such things as façade renvatins, exterir maintenance, new signage and interir remdeling. Grants are cmmnly matched with private funds in the range f 20% t 50%. Lw-interest lans are anther cmmn lcal incentive. The lans are given at reduced interest rate, typically 2 t 5 pints belw prime. Eligible prperties and prjects are similar t thse f matching grants. Lw-interest lans can be given n a matching basis r have a cap n the lw-interest prtin. Lcal gvernments ften have resurces available t prvide incentives such as grants, lw-interest lans, and public investment incentives. The prgrams can be administered much like any ther lcal incentive prgram. Grants and lw-interest lans can be funded frm special taxes r ecnmic develpment districts. Tax Increment Financing (TIF) and special service area taxing districts (SSA) are cmmn funding surces. The TIF district cllects increased prperty tax revenue frm a specially defined district ver a specific numbers f years. Special service districts cllect a special tax n prperties in the district. The mneys cllected must be reused fr the imprvement f the districts. Other cmmunities have been designated as state r lcal ecnmic develpment r empwerment znes that can prvide fr financial incentives fr district imprvements. Sme cities have ffered public imprvements as incentives. Fr example, if a prperty wner invests a certain amunt in a façade renvatin, the city will agree t replace sidewalks, add pedestrian amenities, r make imprvements in the alley next t the building. Anther incentive fr building imprvements is a prperty tax freeze n renvated buildings fr a specified number f years. LOAN PROGRAMS Lw-interest lans enable wners t brrw mney t rehabilitate histric buildings usually at a reduced interest rate. Experience Illinis Prgram Administered by the Illinis State Treasurer, Judy Baar Tpinka. Cntact Cry Jbe: 217-524- 4910, Fax: 217-557-5726. www.state.il.us/treas/prgrams/experience.htm A shrt-term, lw-cst lan prgram fr develping r further enhancing turism-riented prjects including: Histric preservatin, Turism develpment, r Cmmunity-enhancement prjects. The applicant must be a nn-prfit crpratin r rganizatin: A lcal municipality, cunty gvernment, r ther unit f gvernment; r An independent develper, jint venture assciatin, r crpratin. Histric preservatin prjects must be certified histric: Listed n the Natinal Register (individually r as a cntributing building within a Natinal Register district); r Lcated in certified lcal histric district; r An individually designated lcal landmark. Minimum lan amunts range frm $10,000 t $25,000 up t a maximum amunt f $2,000,000 t $5,000,000, depending n the type f prject. 6

203(k) Rehabilitatin Lan Prgram Administered by the U. S. Department f Husing and Urban Develpment (HUD). Cntact the lan fficer at yur bank r mrtgage institutin t find ut if they participate. www.hud.gv/ffices/hsg/sfh/203k/203kabu.cf HUD s 203(k) Rehabilitatin Lan Prgram allws a qualifying private wner t brrw a single, lngterm mrtgage lan t finance bth the acquisitin and rehabilitatin f an lder hme. The mrtgage amunt, which is usually at a higher rate than mst mrtgages, is based upn the prjected value f the prperty with the wrk cmpleted, taking int accunt the cst f the wrk. The lan can als be used t refinance the mrtgage n a hme ne already wns in rder t rehabilitate it. The lan cannt be used fr rehabilitating prperties fr resale. Cmmunity Partners within the Natinal Trust fr Histric Preservatin Fr mre infrmatin, g t the Trust s website: www.natinaltrust.rg/lan_funds/index.html r cmplete the infrmatin request frm at www.natinaltrust.rg/lan_funds/lan_inf_request.html Natinal Trust Lan Funds are the vehicle by which the Trust prvides lans and lines f credit t preservatin prjects that stimulate revitalizatin in lder residential and/r cmmercial areas. The Natinal Preservatin Lan Fund (NPLF): This is a mre flexible fund in terms f prject criteria that prvides funding fr a variety f preservatin prjects. These may include establishing r expanding lcal and statewide preservatin revlving funds, acquiring and/r rehabilitating histric buildings, sites, structures and districts, and preserving Natinal Histric Landmarks. The Inner-City Ventures Fund (ICVF): This fund prvides financial assistance t rganizatins that serve lw and mderate incme husehlds r prvide ecnmic benefit in lw and mderate incme cmmunities. GRANT PROGRAMS Mst grants are targeted fr publicly wned r nn-prfit-wned buildings and may be geared fr specific building r ccupancy types. They ffer lump sums f mney fr specific rehabilitatins. They can invlve stringent qualifying criteria and can be cmpetitive. Turism Attractin Grant Prgram Administered by the Department f Cmmerce and Ecnmic Opprtunity (DCEO). Cntact Cindi Fleischli: 217-785-6337. www.illinisbiz.biz/bus/gri/grants_tur_tap.html Funds histric prjects that are heritage-turism related. Prperty must be pen t the public n a regular basis (at least 5 days a week). Must be able t shw that the prject will result in visitrs staying vernight in htels in yur regin f Illinis. Prjects are funded n a 1:1 (50/50) matching basis, and the maximum grant is $100,000. Preservatin Heritage Fund Grants Administered by the Landmarks Preservatin Cuncil f Illinis (LPCI). Cntact LPCI: 312-7

922-1742. See www.landmarks.rg/heritage_fund_guidelines.htm fr full guidelines and prcedures. Funds (grants r lans) may be applied t ne r mre f the fllwing services: Engineering, architectural, and feasibility studies Stabilizatin Legal services Surveys and Natinal Register Nminatins Preservatin rdinance supprt Grant amunts are determined by need and are awarded n a matching basis. Fr significant structures r sites in Illinis that are under threat f demlitin, imminent deteriratin, r are f such architectural imprtance that their preservatin will benefit the public. Applicants must be nt-fr-prfit rganizatins r gvernmental bdies that wn r have sufficient legal cntrl f the resurce. A prject must preserve all r part f the resurce. Ordinary maintenance expenses are nt cnsidered preservatin expenses. A prject must cmply with the Secretary f the Interir s Standards fr Rehabilitatin, Restratin, r Adaptive Reuse. Public Museum Grants Prgram Administered by the Illinis Department f Natural Resurces, Illinis State Museum. Cntact Karen Fyfe: 217-782-7388, Fax 217-782-1254, Email: kfyfe@museum.state.il.us www.museum.state.il.us/prgrams/musgrants/mgrants.html Prvides perating funds and capital prject funding. Grants given t museums perated by r lcated n land wned by a unit f lcal gvernment. At the time f applicatin, the museum must have been in existence fr 2 years and have prfessinal staff. A minimum grant f $10,000 is available fr perating expenditures, and it must be matched lcally n a 1:1 basis. Transprtatin Enhancement Prgram (TEA-LU) Administered by the Illinis Department f Transprtatin (IDOT). Cntact: IDOT 217-782- 7388. The expected applicatin fr the next six years f funding is in late 2005 r 2006. www.dt.state.il.us/pp/iltep.html The current runds rules have nt yet been develped, but it is expected that they will parallel the past tw runds. In the past runds: Funding fr a variety f transprtatin-related prgrams, including histric preservatin prjects, transprtatin museums, rehabilitatin f histric transprtatin buildings, scenic r histric highway prgrams (including visitrs centers), and histric streetscape prjects. Funding was available n an 80/20 basis, with the 20% being the lcal match. Applicant must have had a unit f gvernment spnsr fr the prject. Sme prgram categries required the prperty t be listed in the Natinal Register f Histric Places r designated by a Certified Lcal Gvernment (CLG). Plan ahead nw fr the next rund f funding. Prjects shuld be designed and cst-estimated, and the buildings shuld be listed n the Natinal Register r designated by a CLG befre the next rund is funded, r they will get left behind. Natinal Trust fr Histric Preservatin 8

Cntact the Natinal Trust s Midwest Office in Chicag: 312-939-5547. www.natinaltrust.rg The Natinal Trust has a variety f grant prgrams fr nn-capital prjects, including the Preservatin Services Fund, which prvides funding t nn-prfit, public agencies, r educatinal institutins fr cnsultant services, educatinal prgrams, r cnferences. Dnnelley Family Preservatin Fund: This fund prvides nnprfit rganizatins and public agencies matching grants frm $500 t $5,000 (typically frm $1,000 t $1,500) fr preservatin planning and educatin effrts. Funds may be used t btain prfessinal expertise in areas such as architecture, archelgy, engineering, preservatin planning, land-use planning, fund raising, rganizatinal develpment and law as well as preservatin educatin activities t educate the public. Many rganizatins have fund that PF funds prvided the crucial bst t get a prject ff the grund. There are typically three grant runds per year, February 1, June 1 and Octber 1. The next PF rund will be Octber 1, 2007. Hart Family Fund fr Small Twns: The purpse f the Hart Family Fund fr Small Twns is t assist small twn preservatin and revitalizatin initiatives arund the cuntry, with a fcus n twns with ppulatins f 5,000 r less. The Fund will perate within the framewrk f Preservatin Fund grants same applicatin, same eligibility requirements, same match requirements, and same deadlines. There will be just tw imprtant differences: Grants will range frm $5,000 t $10,000. Reginal ffices will be asked t frward the grant applicatins they recmmend fr cnsideratin by the Hart Family t the PF Grants Crdinatr within a mnth f the rund deadline, alng with cmments that d nt exceed ne-page. There are typically three grant runds per year, February 1, June 1 and Octber 1. Jhanna Favrt Fund fr Histric Preservatin: This fund prvides nnprfit rganizatins and public agencies matching grants ranging frm $2,500 t $10,000 fr prjects that cntribute t the preservatin r the recapture f an authentic sense f place. Individuals and fr-prfit businesses may apply nly if the prject fr which funding is requested invlves a Natinal Histric Landmark. Funds may be used fr prfessinal advice, cnferences, wrkshps and educatin prgrams. The next applicatin deadline is February 1, 2007. Cynthia Wds Mitchell Fund fr Histric Interirs: This fund prvides nnprfit rganizatins and public agencies matching grants ranging frm $2,500 t $10,000 t assist in the preservatin, restratin, and interpretatin f histric interirs. Individuals and fr-prfit businesses may apply nly if the prject fr which funding is requested invlves a Natinal Histric Landmark. Funds may be used fr prfessinal expertise, print and vide cmmunicatins materials, and educatin prgrams. The next applicatin deadline is February 1, 2007. Save American Treasures Cntact the Natinal Park Service: 202-354-2020, ext. 1 fr histric building grants; http://www.cr.nps.gv/hps/treasures/index.htm Grants are available fr preservatin and/r cnservatin wrk n natinally significant intellectual and cultural artifacts and histric structures and sites. Intellectual and cultural artifacts include artifacts, cllectins, dcuments, sculpture, and wrks f art. Histric structures and sites include histric districts, sites, buildings, structures, and bject. The histric prperty will be cnsidered t be natinally significant accrding t the definitin f Natinal Significance listed abve if it meets ne f the fllwing criteria: Designated as a Natinal Histric Landmark Listed in the Natinal Register f Histric Places fr natinal significance. Grants are awarded t Federal, state, lcal, and tribal gvernment entities, and nn-prfit rganizatins thrugh a cmpetitive matching-grant prgram, administered by the Natinal Park Service 9

Illinis Clean Energy Cmmunity Fundatin Cntact: Illinis Clean Energy Cmmunity Fundatin; email: inf@illiniscleanenergy.rg, web: www.illiniscleanenergy.rg The Illinis Clean Energy Fundatin has a variety f grants fr public and nn-prfit rganizatins t make energy efficiency upgrades t their prperties. There are als grants fr new cnstructin and majr renvatin. There is n specific criteria fr histric prjects within there verall frmat, but public eligible buildings include schls, libraries, city halls, etc., any f which culd als be histric. There is a new prgram that prvides partial funding fr green building design. Mst f the funding categries prvide prprtinal funding related t energy efficiency. GENERAL INFORMATION Illinis Histric Preservatin Agency (IHPA) Preservatin Services Divisin One Old State Capitl Plaza Springfield, IL 62701-1507 phne: 217-785-4512; fax: 217-524-7525 IHPA, Preservatin Services Divisin: Illinis Clean Energy Cmmunity Fundatin Natinal Park Service, Heritage Preservatin Services Natinal Park Service, Save America s Treasures: www.illinis-histry.gv/ps www.illiniscleanenergy.rg/ www.cr.nps.gv/hps www.cr.nps.gv/hps/treasures/index.htm Internal Revenue Service: www.irs.gv 800-829-1040 Landmarks Preservatin Cuncil f Illinis (LPCI): www.landmarks.rg 312-922-1742 Natinal Trust fr Histric Preservatin (NTHP): www.natinaltrust.rg Natinal Trust fr Histric Preservatin Midwest Office: 312-939-5547 Natinal Main Street Center: www.mainstreet.rg 10

DETERMINING ADJUSTED BASIS & DEPRECIATION Adjusted Basis is rughly equal t: Purchase price land value annual depreciatin + previus capital imprvements Depreciatin 31.5 years fr cmmercial 27.5 fr rental residential Land Value is determined thrugh sales f cmparable prperties and assessed values. Virtually every cmmercial prperty establishes a land value at the time the prperty is placed in service, as this is necessary t begin claiming the depreciatin deductin n incme taxes. The value f previus imprvements is als added int the adjusted basis. EXAMPLE OF 20% INVESTMENT TAX CREDIT FOR HISTORIC BUILDINGS Owner: Individual, single wner. Building: Built in 1890, 2 stries, listed as cntributing t a Natinal Register District, grund flr retail, secnd flr frmer residential unit nw used as strage fr the stre. Owner purchased five years ag fr $80,000. The land under the building is valued at $20,000. Prject: Renvate façade, repinting, new rf, interir remdeling. T rughly calculate the Adjusted Basis, the Depreciatin must first be calculated: Depreciatin fr cmmercial flrs within a building = ([Purchase Price] [Land Value]) [Number f flrs in building] 31.5 X [Number f years f wnership] X [Number f flrs f cmmercial usage]: ($80,000 $20,000) 2 ttal flrs 31.5 X 5 years X 1 cmmercial flr = $4,762 Depreciatin fr rental residential flrs within a building = ([Purchase Price] [Land Value]) [Number f flrs in building] 27.5 X [Number f years f wnership] X [Number f flrs f rental residential usage]: ($80,000 $20,000) 2 ttal flrs 27.5 X 5 years X 1 residential flr = $5,455 Add the tw depreciatin amunts t get the building s ttal depreciatin = $10,217 Adjusted Basis (rughly): $80,000 [Purchase Price] $20,000 [Land Value] $10,217 [Ttal Depreciatin] + $5,000 [Previus Capital Imprvements] = $54,783 Minimum Expenditure: Since $54,783 is greater than $5,000, the minimum expenditure is $54,783 Must spend Adjusted Basis n rehabilitatin within 24 mnths, r can take up t five years with a phased rehabilitatin plan Prject Cst: $75,000 [Cnstructin] + $5,250 [Prfessinal Fees] + $500 [applicatin fee fr the tax credit prgram] = $80,750 Tax Credit: $80,750 [Prject Cst] x 20% [Credit percentage] = $16,150 Unused credit may be carried frward 15 years 11

Prject Cst After Tax Credit: $80,750 [Prject Cst] $16,150 [Tax Credit] = $64,600 EXAMPLE OF 50% DISABLED ACCESS TAX CREDIT Owner: Small business with annual grss receipts f $750,000 and 5 emplyees. Building: Built in 1915, ne-stry, nt listed n Natinal Register, grund flr cmmercial. Prject: Replace existing nn-accessible restrms t meet current ADA standards. Minimum Expenditure: $250 [$10,250 maximum], per year Prject Cst: $8,000 Tax Credit: 50% X ($8,000 [Prject Cst] $250 [Minimum Expenditure]) = $3,875 Prject Cst After Tax Credit: $8,000 [Prject Cst] $3,875 [Tax Credit] = $4,125 This brief summary was cmpiled by the Illinis Histric Preservatin Agency and is accurate t the best f ur knwledge. Hwever, fr further infrmatin and cmplete, up-t-date and exact details, and t be certain all infrmatin is crrect, please cntact the spnsring agency fr each funding surces. We aplgize fr any inaccuracies r missins. In all cases we recmmended wrking with a knwledgeable tax accuntant r attrney regarding the financial aspects these prgrams. 12