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 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, www.illinishistry.gv/ps/taxcredits.htm), Natinal Park Service (NPS, www.nps.gv/histry/hps/tps/tax/index.htm), and Internal Revenue Service (IRS). Cntact Mike Ward at the IHPA: 217-785-5042, mike.ward@illinis.gv. This incentive reduces the building wners federal incme taxes by 20% f the prject s budget. Prgram nly fr incme-prducing 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 cntributing t a Natinal Register district); r A cntributing building within a lcal histric district certified by the NPS fr the tax credits. 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 the existing significant histric features and materials. Des nt require restring a building r its features t their riginal appearance. Nn-histric features may be remved r retained, if desired. New, cmpatible alteratins r additins may be added. New additins utside the existing building envelpe cannt be claimed fr the 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 and Engineering fees, survey, legal, develpment fees, cnstructin-related csts. Ineligible expenditures include acquisitin, furnishings, new additins, r landscape r site imprvements. It is strngly recmmended that applicatins be filed befre wrk begins t avid cstly mistakes r pssible denial. Must fill ut a three-part applicatin that is reviewed by IHPA and the NPS. Part I: Certifies that the building is histric. Part II: Describes the prpsed wrk. Must submit phts f the pre-cnstructin cnditins. Architectural drawings and specificatins must be submitted if/when available. 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. Part I must be submitted prir t placing the building in service r the applicatin will be denied. The building must be placed in service after cmpletin t claim the credit. Sliding fee fr review ranging frm free fr prjects < $20,000 up t $2,500 fr prjects > $1 millin. Owner must retain the building fr five years r return a prrated prtin f the credits. 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 (www.irs.gv/pub/irs-pdf/f3468.pdf) and read the instructins (www.irs.gv/instructins/i3468/index.html). Cntact the IRS: 800-829-1040. This prgram reduces the building wners federal incme taxes by 10% f the prject s budget. Receive a credit f 10% f the amunt spent t rehab a nn-histric building built befre 1936. Buildings that are nt listed n the Natinal Register are eligible. Incme-prducing residential (i.e., apartments) and wner-ccupied husing are nt eligible. 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. Eligible 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 and Engineering fees, survey, legal, develpment fees, cnstructin-related csts. Ineligible expenditures include acquisitin, furnishings, new additins, r landscape r site imprvements. 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. N review by IHPA r NPS. Applicant submits frm t the IRS fr IRS review. N applicatin fee. Dcumentatin f 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 prgram reduces the building wners federal incme taxes by 50% f the amunt spent making a 2
business handicap accessible, t a maximum f $5,000 f credit per year. Designed fr rehabilitatin f buildings that huse small businesses that pay r incur expenses; and have less than $1 millin in grss receipts in preceding year; r have fewer than 30 full-time emplyees in preceding year. The expenses must enable the eligible small business t cmply with the Americans with Disabilities Act f 1990. Wrk must meet current ADA Standards. 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 (http://ntcicfunds.cm/). This prgram prvides a credit t the investr that ttals 39% f the cst f the investment and is claimed ver a 7 year credit allwance perid. 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. In each f the first 3 years, the investr receives a credit equal t 5% f the ttal amunt paid fr the stck r capital interest at the time f purchase. Fr the final 4 years, the value f the credit is 6% annually. Investrs may nt redeem their investments in CDEs prir t the cnclusin f the 7-year perid. Syndicatin f the Federal Tax Credits Syndicatin invlves the transference f the tax credits t a crprate investr in exchange fr additinal equity capital that can help finance the prject. There are many large crprate entities that can syndicate federal tax credits. One such entity is the fr-prfit arm f the Natinal Trust fr Histric Preservatin: the Natinal Trust Cmmunity Investment Crpratin (NTCIC, http://ntcicfunds.cm/), which makes equity investments in real estate prjects that qualify fr federal histric tax credits and when available, state histric tax credits and New Markets Tax Credits. Syndicatin requires that the tax credit investr be admitted int a legal entity, such as a limited partnership r limited liability cmpany that will either wn the building r hld a lng-term perating lease n the building. The tax credit investr acts as either the limited partner r investr member while the building wner serves as either the general partner r managing member. 3
OTHER TAX INCENTIVE PROGRAMS State Prperty Tax Assessment Freeze Prgram Administered by IHPA, www.illinishistry.gv/ps/taxfreeze.htm. Cntact Mike Ward: 217-785-5042, mike.ward@illinis.gv This prgram freezes the assessed value f wner-ccupied, histric residences at the pre-rehabilitatin rate fr 8 years, after which the value is raised in steps ver the next 4 years up t the current level. Buildings must be wner-ccupied husing: Single-family huses Residential buildings with up t six units as lng as the building wner resides in ne f the units Cndminium buildings Cperatives Buildings must be designated as histric in at least ne f the fllwing ways: Individually listed n the Natinal Register f Histric Places in any cmmunity in Illinis; A cntributing prperty within a Natinal Register Histric District in any cmmunity in Illinis; Individually listed n the Illinis Register f Histric Places in any cmmunity in Illinis; An individual lcal landmark in a cmmunity with an apprved preservatin rdinance; A cntributing prperty within a lcal histric district in a cmmunity with an apprved preservatin rdinance Prjects must be certified by the IHPA t meet the Secretary f the Interir s Standards fr Rehabilitatin. Requires the preservatin f significant histric features and materials. Des nt require restring a building r its features t riginal appearance. Nn-histric features may be remved r retained, if desired. New, cmpatible alteratins r additins may be added. Prject s eligible expenses must equal r exceed 25% f the assessr s fair cash value f the prperty fr the year the rehabilitatin started. N applicatin fee. It is strngly recmmended that applicatins be filed befre wrk begins t avid cstly mistakes r pssible denial. Ck Cunty Class L Incentive Prgram Administered by Ck Cunty Assessr s Office. Fr buildings within Chicag city limits, cntact Eleanr Grski (Deputy Cmmissiner, Preservatin Divisin, Department f Planning and Develpment, City f Chicag): 312-744-3201. Fr buildings utside Chicag city limits but still in Ck Cunty, cntact Dminick Spalla (Manager f Incentives, Ck Cunty Assessr s Office): 312-603-4137. www.ckcuntyassessr.cm/frms/clslb.pdf This incentive prvides a reduced prperty tax assessment rati t a lcally designated industrial r cmmercial prperty that has undergne a rehabilitatin whse budget is at least 50% f the building s market value. Requires apprval f Certified Lcal Gvernment. Only fr Ck Cunty. Fr example, real estate taxes fr a cmmercial prperty with a market value f $1 millin prir t rehabilitatin wuld be reduced frm $62,000 t $26,150, utilizing the 2007 cmbined tax rate. 4
Preservatin Easements Administered by varius entities. In Illinis, Landmarks Illinis (www.landmarks.rg, 312-922-1742) is a nnprfit preservatin advcacy rganizatin that accepts preservatin easements. Cntact Suzanne Germann: germanns@lpci.rg. A preservatin easement is a vluntary legal agreement between a prperty wner and a preservatin rganizatin t preserve and prtect all pen-air sides f a histric structure. Under current tax laws, an easement dnatin may qualify as a charitable cntributin, with federal incme-tax benefits, based n the value f the easement, as determined by a qualified appraiser. Building must be a certified histric structure: individually listed n the Natinal Register f Histric Places; a cntributing prperty within a Natinal Register Histric District; a cntributing prperty within a lcal histric district that has been certified by the Natinal Park Service. Individually listed lcal landmarks are nt eligible. The easement is granted in perpetuity and recrded against the deed. The prtin f the building prperty rights that are dnated are mnitred and prtected by the preservatin rganizatin. The wner seeks apprval frm the easement hlder prir t cnstructin. At the time f dnatin, the dnr als gives a ne-time, tax-deductible charitable cntributin t assist with the csts f mnitring and defending the easement in perpetuity. Owners taking the federal tax credit must wait until the 5-year recapture perid has elapsed befre pursuing an easement dnatin. 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 Administered by the IRS. G t the IRS website t dwnlad Frm 8826 frm and instructins: www.irs.gv/pub/irs-pdf/f8826.pdf. See als Chapter 11 in Publicatin 535, Business Expenses: www.irs.gv/publicatins/p535/ch11.html. This is the same prgram as the 50% Disabled Access Tax Credit This is a deductin (nt a credit) f up t $15,000 per year f the csts f making a facility r public transprtatin vehicle mre accessible t, and usable by persns wh are disabled r elderly by remving barriers. The cst f an imprvement t a business asset is nrmally a capital expense. Hwever, an wner can chse t deduct the csts f making a facility r public transprtatin vehicle mre usable. Can deduct up t $15,000 per year. 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 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 (SSA) taxing districts are cmmn funding surces. The TIF district cllects increased prperty-tax revenue frm a specially defined district ver a specific numbers f years. SSAs cllect a special tax n prperties in the district. The mneys cllected must be reused t imprve the district in which they were cllected. 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. Cmmunity Invest Lans Administered by Illinis State Treasurer Dan Rutherfrd: CmmunityInvest@treasurer.state.il.us, (312) 814-1244. www.treasurer.il.gv/prgrams/cmmunity-invest/cmmunity-develpment-lans/nn-prfit-develpment.aspx This prgram ffers lw-interest, cmmunity develpment lans fr rganizatins t restre their histric buildings fr the benefit f future generatins. Brrwers can receive up t $10 millin. The lan duratin is tw years with the pssibility f a three-year extensin. A site visit may be required fr apprval. Interest Rates are indexed daily here r cntact the Treasurer s ffice at (217) 782-2072. The listed rates are psted t give ptential brrwers an indicatin f current rate figures. The final depsit rate is determined n the business day prir t issuing the lan. Prgram Eligibility Nn-prfit rganizatins must prvide their nn-prfit certificatin letter frm the Illinis Secretary f State r tax-exempt letter frm the IRS. Faith-based rganizatins must submit a Secular Acknwledgement Frm, certifying that n state funds will be used fr nn-secular purpses. The applicant must shw that with the help f the Cmmunity Invest lan, their business r rganizatin will prvide a benefit t their cmmunity. The applicant must prvide a brief explanatin why cnventinal lan financing is nt adequate 6
and why a Cmmunity Invest lan is necessary incentive. A participating Illinis financial institutin must apprve the applicatin. Fr histric preservatin, the Natinal Park Service r a certified lcal gvernment entity must designate the prperty as a histric landmark. Fr histric preservatin, the applicant must present dcumentatin certifying that he/she will fllw the Secretary f the Interir's Standards f Rehabilitatin. 203(k) Rehabilitatin Lan Prgram Administered by the US 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/203k--df.cfm This prgram allws a qualifying private wner t brrw a single, lng-term 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. Can als be used t refinance the mrtgage n a hme ne already wns in rder t rehabilitate it. Cannt be used fr rehabilitating prperties fr resale. 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. Preservatin Heritage Fund Grants Administered by the Landmarks Illinis, 312-922-1742. Fr full guidelines and prcedures, see: www.landmarks.rg/heritage_fund_guidelines.htm. This grant and lan prgram prvides mnetary assistance t preserve r prtect significant structures r sites in the state f Illinis that are under threat f demlitin, imminent deteriratin, r are f such architectural imprtance that their preservatin will benefit the public and Illinis cmmunity. 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. 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 r Restratin. Public Museum Grants Prgram Administered by the Illinis Department f Natural Resurces, Illinis State Museum. Cntact Damn Sttts, f the Public Museum Grants Prgram, Illinis Department f Natural Resurces: damn.sttts@illinis.gv, 217-7
524-8538. www.museum.state.il.us/prgrams/musgrants/mgrants.html This prgram is designed t assist museums in expanding and upgrading facilities and creating new exhibits t enhance the ability f public museums t meet their missins. 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; must be matched n a 1:1 basis. Transprtatin Enhancement Prgram (ITEP) Administered by the Illinis Department f Transprtatin (IDOT): 217-782-7388. Fr mre infrmatin visit www.dt.il.gv/pp/itep.html This prgram prvides funding fr cmmunity-based prjects that expand travel chices and enhance the transprtatin experience by imprving the cultural, histric, aesthetic and envirnmental aspects f ur transprtatin infrastructure. Prject spnsrs may receive up t 80% reimbursement fr prject csts. Prject must qualify as ne f the 12 eligible categries listed in the ITEP Guidelines Manual Prject must relate t surface transprtatin t be eligible fr funding. Matching Grants frm the Natinal Trust fr Histric Preservatin Administered by the Natinal Trust fr Histric Preservatin, www.preservatinnatin.rg. Cntact Chris Mrris in the Natinal Trust s Midwest Office in Chicag: 312-939-5547, x37231, christina_mrris@nthp.rg. The Natinal Trust has a variety f matching 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 Preservatin Fund fr Illinis: Prvides nn-prfit rganizatins and public agencies matching grants frm $500 t $5,000 (typically frm $3,000 t $5,000) 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, wners, and business wners. Many rganizatins have fund that these funds prvided the crucial bst t get a prject ff the grund and attract ther ptential cntributrs t the prject. There is ne grant rund per year n February 1, with an additinal rund n June 1 and Octber 1, depending n the availability f funding. The Preservatin Fund applicatin is available nline at www.preservatinnatin.rg/resurces/find-funding/nnprfit-public-funding.html. Hart Family Fund fr Small Twns: Assists small twn preservatin and revitalizatin initiatives arund the cuntry, with a fcus n twns with ppulatins f 5,000 r less. The Fund prvides nnprfit rganizatins and public agencies matching grants frm $5,000 t $10,000 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. The Hart Family Fund uses the Preservatin Fund applicatin frm, which is available fr dwnlad frm the Natinal Trust website at www.preservatinnatin.rg/resurces/find-funding/nnprfit-public-funding.html. Jhanna Favrt Fund fr Histric Preservatin: Prvides nn-prfit rganizatins and public agencies matching grants ranging frm $2,500 t $10,000 fr prjects that cntribute t the preservatin 8
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. Cynthia Wds Mitchell Fund fr Histric Interirs: 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. Jeffris Heartland Fund: Established by the Jeffris Family Fundatin t supprt the develpment f imprtant histric preservatin prjects in the states f Iwa, Illinis, Indiana, Michigan, Minnesta, Missuri, and Ohi. The fund makes grants in the range f $5,000 t $50,000 fr Histric Structure Reprts and ther advanced planning studies. Funds must be matched dllar-fr-dllar with cash frm surces unrelated t the Natinal Trust and the Jeffris Family Fundatin. Established 501(c)(3) nnprfit rganizatins r gvernment agencies in partnership with a 501(c)(3) rganizatin are eligible t apply. Applicants must be able t demnstrate the viability f their prject thrugh the submittal f early planning studies, and must be ready fr the preparatin f a Histric Structure Reprt, r ther advanced planning studies, leading tward a cmmunity-centered capital fund drive. Prjects in cmmunities with mre than 150,000 in ppulatin are NOT eligible t apply. Pririty will be given t prjects lcated utside f metrplitan areas. Please see the Jeffris Heartland Fund Criteria fr Prject Selectin fr mre details n eligibility requirements, available at www.preservatinnatin.rg/abut-us/reginalffices/midwest/. Illinis Clean Energy Cmmunity Fundatin Cntact: Illinis Clean Energy Cmmunity Fundatin (ICECF); email: inf@illiniscleanenergy.rg, web: www.illiniscleanenergy.rg The ICECF 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 eligible public 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 Illinis Clean Energy Cmmunity Fundatin Natinal Park Service, Heritage Preservatin Services www.illinis-histry.gv/ps www.illiniscleanenergy.rg/ www.nps.gv/histry/hps/ Internal Revenue Service: www.irs.gv, 800-829-1040 Landmarks Illinis www.landmarks.rg, 312-922-1742 Natinal Trust fr Histric Preservatin (NTHP): www.preservatinnatin.rg/ Natinal Trust fr Histric Preservatin Midwest Office: 312-939-5547 9
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 10
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. 11