Articles

Real Estate Developers Can Qualify for Historic Tax Credits by Karen Lake, CPA


Posted on October 30, 2014 by Karen Lake

Developers that renovate or rehabilitate historic buildings in Florida may qualify for significant tax credits offered by federal, state, county and city governments. The aim of each of these programs is to honor and preserve the state’s historic structures while putting these buildings to new use to meet community needs. Eligible projects include those for residential, commercial and/or industrial use, but exclude private, owner-occupied residential properties.

 

Federal Programs

 

Through the federal Rehabilitation Federal Income Tax Credit, the government provides a tax credit equal to 20 percent of allowable renovation costs on structures certified as “historic” by the government and listed or deemed eligible for listing in the National Register of Historic Places.

 

Developers that rehabilitate non-historic buildings built before 1936 may qualify for a 10 percent tax credit, when properties are intended for non-residential use and meet the following criteria:

 

o   At least 50 percent of existing external walls must remain as such

o   At least 75 percent of existing external walls must remain in place as either external or internal walls

o   At least 75 percent of the internal structural framework must remain in place

 

The federal government also offers property owners a Preservation Easement income and estate tax deduction for charitable contributions of partial interest in the preservation of historic properties. To claim the tax credit, the properties need not be depreciable, but developers must preserve the entire exterior façade of the property and pay a $500 filing fee.

 

Local Programs

 

State and local municipalities in Florida offer several programs that reward developers with tax incentives for restoring and reusing historic structures.   For example, in Miami-Dade, the county may exempt historic properties from ad valorem property taxes equal to 100 percent of the assessed value of qualified improvements for 10 years. To claim this credit, property owners must apply to the Miami Beach Preservation Board.

 

Additionally, owners of commercial properties certified as historic by the National Register of Historic Places or by local ordinance, may qualify for lower property taxes when the Miami-Dade County Property Appraiser assesses a building based on its actual use rather than its highest and best use. To be eligible, the property must remain open to the public at a minimum of 40 hours per week for 45 weeks of the year, and the developer must apply through the property appraiser’s office by March 1 of each year.

 

Other counties throughout the state offer similar programs as those in Miami. Developers seeking to claim historic building tax credits should seek the counsel of advisors and accountants familiar with federal and local opportunities and guidelines for standards of rehabilitation.

About the Author: Karen A. Lake, CPA, is an associate director of Tax Services with Berkowitz Pollack Brant. She can be reached at the Miami CPA firm’s office at (305) 379-7000 or via email info@bpbcpa.com.