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Taking Credit A Brief History of Federal and State Rehabilitation Tax Credits 1966: National Historic Preservation Act 1976: President Gerald Ford enacted the Tax Incentive Programs administered by the NPS Technical Preservation Services Division

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A Brief History of Federal and State Rehabilitation Tax Credits

1966: National Historic Preservation Act

1976: President Gerald Ford enacted the Tax Incentive Programs administered by the NPS Technical Preservation Services Division

1981 & 1986: Federal Investment Tax Credit for Real Estate

June 2005 the Kentucky Historic Preservation Tax Credit was enacted. March 31, 2006 the first round of tax credits was approved.

Tax Credits – How they work

Rehabilitation Tax Credit Program


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A historic property can be a commercial, industrial, agricultural, residential, or rental residential property.

For federal tax credits it must be of depreciable value (income producing).

The structure must be at least one of the following:

1. Listed individually on the National Register;

2. A certified contributing part of a National Register

Historic District.

The Federal Tax Credit program does have a process for properties not currently listed, the state tax credit does not.

Eligible Properties

Kentucky ranks 4th in the nation in the number of listings on the National Register of Historic Places

Rehabilitation Tax Credit Program


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Option A agricultural, residential, or rental residential property. : Tax Credit equal to 20% of the amount

spent on a Certified Rehabilitation of a

Certified Historic Structure.

Option B: Tax Credit equal to 10% of the amount

spent to rehabilitate a non-historic

building built and placed in service prior to 1936.

In FY2009 there were 25 projects completed to successfully earn federal tax credits with investment totaling $15,891,053. KY ranked 10th nationally in numbers of successfully completed projects.

Federal Rehabilitation Tax Credits

Rehabilitation Tax Credit Program


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State Historic Tax Credits agricultural, residential, or rental residential property.

Currently 26 states offer State Historic Tax Credits.

Kentucky established The Kentucky Historic Preservation Tax Credit in 2005

Key Points of the Approved Legislation :

30% of qualified rehabilitation expenses is offered as a state tax credit for owner-occupied residential properties (primary residence). A minimum investment of $20,000 is required, with the total credit not to exceed $60,000

20% of qualified rehabilitation expenses is available for all other properties, requiring a minimum investment of $20,000 or the adjusted basis, whichever is greater, with the total credit not to exceed $400,000

Transferability; Credit can be transferred to a financial institution.

The legislation caps total tax credit expenditures at $3 million annually. If that limit is exceeded by approved projects, an apportionment formula will be applied to determine the credit amount.

The Kentucky Historic Preservation Tax Credit

Rehabilitation Tax Credit Program


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A tax credit differs from an income tax deduction. An income tax deduction lowers the amount of income subject to taxation. A tax credit, however, lowers the amount of tax owed. In general, a dollar of tax credit reduces the amount of income tax owed by one dollar.

Note: Everyone’s tax status is different; we recommend anyone planning to undertake a tax credit project consult with their Tax Professional.

What is a Tax Credit?

Rehabilitation Tax Credit Program


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Summary of Applications Received by April 2009 income tax deduction lowers the amount of income subject to taxation. A tax credit, however, lowers the amount of tax owed. In general, a dollar of tax credit reduces the amount of income tax owed by one dollar.

81 Projects for proposed work were submitted from 24 counties:

58 for the 20% tax credit (commercial / other)

21 for the 30% tax credit (owner-occupied residential)

79 Proposed Projects were approved pending completion of the work.

The approved projects represent $49,705,604.02 in proposed private investment for historic rehabilitation.

The Kentucky Historic Preservation Tax Credit

Rehabilitation Tax Credit Program


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State Historic Tax Credits Deadlines: income tax deduction lowers the amount of income subject to taxation. A tax credit, however, lowers the amount of tax owed. In general, a dollar of tax credit reduces the amount of income tax owed by one dollar.

Annual approval cycle:

Applications should be approved prior to the project starting construction (any construction prior to approval is at the applicants own risk)

Applications will be due April 29 of each year.

Apportionment formula for the $3 million cap will be applied at this point.

The Kentucky Heritage Council sends the approved credit amounts to the applicants by June 30.

Once the project is approved for credit in can be completed within any 24 months.

The final Certification of Completed work and the Summary of Investment must be submitted after the project is placed in service.

The Kentucky Historic Preservation Tax Credit

Rehabilitation Tax Credit Program


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Who Is Involved in the State Process? income tax deduction lowers the amount of income subject to taxation. A tax credit, however, lowers the amount of tax owed. In general, a dollar of tax credit reduces the amount of income tax owed by one dollar.

  • Property Owner(s)

  • SHPO: State Historic Preservation Office (The Kentucky Heritage Council)

  • Kentucky Department of Revenue

PLEASE REMEMBER:

Historic Tax Credits are truly a no risk opportunity. If you get your application pre-approved and execute the work according to the approved application. The project is guaranteed the credit

However, a single deviation from the approved application may cause the project not to receive any credits.

Rehabilitation Tax Credit Program


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Property Owner(s) income tax deduction lowers the amount of income subject to taxation. A tax credit, however, lowers the amount of tax owed. In general, a dollar of tax credit reduces the amount of income tax owed by one dollar.

SHPO: State Historic Preservation Office (The Kentucky Heritage Council)

NPS: National Park Service

IRS: Internal Revenue Service

Who is involved with the Federal Process?

PLEASE REMEMBER:

Historic Tax Credits are truly a no risk opportunity. If you get your application pre-approved and execute the work according to the approved application. The project is guaranteed the credit

Rehabilitation Tax Credit Program


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Federal Historic Preservation Tax Incentives income tax deduction lowers the amount of income subject to taxation. A tax credit, however, lowers the amount of tax owed. In general, a dollar of tax credit reduces the amount of income tax owed by one dollar. http://www.cr.nps.gov/hps/tps/tax/index.htm

Federal Historic Preservation Certification Application http://www.cr.nps.gov/hps/tps/tax/hpcappl.htm

Boyle, Jayne F., Stuart Ginsberg, and Sally G. Oldham. A Guide to Tax-Advantaged Rehabilitation, Revised by Donovan D. Rypkema. Washington, D.C.: National Trust for Historic Preservation, 1994.

The Secretary of the Interior’s Standards for Rehabilitation http://www.cr.nps.gov/hps/tps/tax/rehabstandards.htm

IRS Connection http://www2.cr.nps.gov/tps/tax/IRS.htm

Recommended Sources

Rehabilitation Tax Credit Program


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Documents in PDF format included on the Kentucky Heritage Council Website at http://www.heritage.ky.gov

Kentucky Historic Preservation Tax Credit Instructions and Guidelines

Frequently Asked Questions

Part 1 Application: Evaluation of National Register Status

Part 2 Application: Description of Rehabilitation

Part 3 Application: Certification of Completed Work

Amendment Form

Summary of Investment

Who do I contact for more information?

Kentucky Department of Revenue http://www.revenue.ky.gov

KRS 171.396 http://www.lrc.ky.gov/KRS/171-00/396.PDF

KRS 171.397 http://www.lrc.ky.gov/KRS/171-00/397.PDF

The Kentucky Historic Preservation Tax Credit

Rehabilitation Tax Credit Program


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Buildings that Qualify Council Website at

Preservation Standards

The Rehabilitation Standard

Resources


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Buildings that Qualify Council Website at

National Register Nomination - Individual Listing – Period of Significance

Liberty Hall

Entered to the Register:

1971

Period of Significance:

1750-1799

Criterion A, C

Areas of significance:

Architecture, Politics/

Government

*Liberty Hall is also a National Historic Landmark – one of thirty in the state


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Buildings that Qualify Council Website at

National Register Nomination - District Listing – Period of Significance

Corner in Celebrities Historic District

Entered to the Register:

1971

Period of Significance:

1750-1928

Criterion A, B, C

Areas of significance:

Architecture, Landscape, Literature, Military, Politics/Government, Religion


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Buildings that Qualify Council Website at

National Register Nomination - District Listing – Period of Significance

Central Frankfort Historic District

Entered to the Register:

July 2009

Period of Significance:

1750-1961

Criterion A, B, C

Areas of significance:

Architecture, Politics/ Government, Commerce,

Community Planning & Development


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Buildings that Qualify Council Website at

Preservation Standards

The Rehabilitation Standard

Resources


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Preservation Council Website at

focuses on the maintenance and repair of existing historic materials and retention of a property's form as it has evolved over time. (Protection and Stabilization have now been consolidated under this treatment.)

Rehabilitation

acknowledges the need to alter or add to a historic property to meet continuing or changing uses while retaining the property's historic character.

Restoration

depicts a property at a particular period of time in its history, while removing evidence of other periods.

Reconstruction

re-creates vanished or non-surviving portions of a property for interpretive purposes.

The Standards


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Rehabilitation Council Website at

  • “Rehabilitation” is defined by the Secretary of Interior as “the process of returning a property to a state of utility, through repair or alteration, which make possible an efficient contemporary use while preserving those portions and features of the property which are significant to its historic, architectural, and cultural values.”

Appropriate Rehabilitation of Historic Buildings


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Secretary of the Interior’s Standards for Rehabilitation Council Website at

Standards for Rehabilitation

  • Property shall be used for its historic purpose or be placed in a new use that requires minimal change to the defining characteristics.

  • Historic character of a property shall be retained and preserved.

  • New changes that create a false sense of historical development shall not be undertaken.

  • Existing changes that have acquired historic significance in their own right shall be preserved.

  • Distinctive features, finishes, and construction techniques that characterize a historic property shall be preserved.

  • Deteriorated historic features shall be repaired rather than replaced.

  • Treatments that cause damage to historic materials shall not be used.

  • Significant archeological resources shall be protected and preserved.

  • New additions shall not destroy historic materials that characterize the property. New work shall be differentiated from the old.

  • New additions shall be done in such a manner that if removed in the future, the essential form and integrity of the historic property and its environment would be unimpaired.


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National Park Service Resources Council Website at

Rehabilitation Tool Box – Technical Resources

  • Preservation Briefs

  • http://www.nps.gov/history/hps/tps/briefs/presbhom.htm

  • Tech Notes

  • http://www.nps.gov/history/hps/tps/technotes/tnhome.htm

  • Interpreting the Standards

  • http://www.nps.gov/history/hps/tps/tax/its/itshome.htm

Preservation Brief #2: Repointing Mortar Joints in Historic Masonry Buildings

Preservation Tech Notes - Historic Glass #1: Repair and Reproduction of Prismatic Glass Transoms

ITS 21: Adding New Openings: New Openings in Secondary Elevations or Introducing New Windows in Blank Walls



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The Application Process Council Website at

Kentucky Rehabilitation Tax Credit Application

Forms mirrors Federal Application

Three part process

Part 1

Confirms property’s eligibility in the program

Part 2

Defines scope of work being proposed – for review and comment

Part 3

Submits documentation of completed work for certification


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The Application – Part 1 Council Website at

Confirms eligibility in the program


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The Application – Part 1 Council Website at


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The Application – Part 1 Council Website at


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  • Photographs of Council Website at

  • streetscape

  • each exterior side of building

  • major interior spaces

  • character defining details

  • Keyed to plans

identify property on district map

The Application – Part 1


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The Application – Part 2 Council Website at

Defines scope of work being proposed


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The Application – Part 2 Council Website at


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We love before photos Council Website at

The Application – Part 2


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The Application – Part 2 Council Website at


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The Application – Part 2 Council Website at


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The Application – Part 2 Council Website at


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The Application – Part 2 Council Website at


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The Application – Part 2 Council Website at


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The Application – Part 2 Council Website at


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before Council Website at

after

The Application – Part 2


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The Application – Part 3 Council Website at

Documents completed work


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The Application – Part 3 Council Website at


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The Application – Part 3 Council Website at


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The Application – Part 3 Council Website at


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The Application – Part 3 Council Website at


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The Application – Part 2 Council Website at


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Case study Council Website at


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Mount Sterling Gateway Regional Center for the Arts Council Website at

Non-Profit - Case Studies


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Save Americas Treasures Grant Council Website at Renaissance Kentucky Façade GrantCommunity Development Grant administered by DLG and HUDState Rehabilitation Tax CreditsLocal GovernmentsPrivate Fundraising

Non-Profit - Case Studies


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Mount Sterling Gateway Regional Center for the Arts Council Website at

Non-Profit - Case Studies


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Mount Sterling Gateway Regional Center for the Arts Council Website at

Non-Profit - Case Studies


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Non-Profit - Case Studies Council Website at


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Non-Profit - Case Studies Council Website at


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Non-Profit - Case Studies Council Website at


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Non-Profit - Case Studies Council Website at


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Non-Profit - Case Studies Council Website at