Historic Preservation Tax Credits
The PHMC assists the Pennsylvania Department of Community and Economic Development (DCED) and Department of Revenue with the administration of the Pennsylvania Historic Preservation Incentive Tax Credit (PA HPTC) program.
The PHMC, serving as the State Historic Preservation Office, administers the federal Rehabilitation Investment Tax Credit (RITC) program in partnership with the National Park Service (NPS) and the Internal Revenue Service (IRS).
Pennsylvania Historic Preservation Incentive Tax Credit Program
The Department of Community and Economic Development (DCED) has released program guidelines, application forms and application submission dates for the new Pennsylvania Historic Preservation Tax Credit Program. General information on the program is available on DCED’s website at:
Potential applicants are advised to review the program guidelines to understand the eligibility requirements, application process, review process, program limitations and the procedure to reserve and claim tax credits.
FY 2013-2014 Application Period
The timeframe is very short for the FY 2013-2014 application period. The Single Application system for the PA HPTC application opens on Tuesday April 15, 2014 and the first date for the submission of applications is on Thursday May 1, 2014.
· April 15, 2014 - Applicants can access DCED’s Single Application System to open and prepare an application for submission. The application must not be electronically submitted prior to May 1, 2014. Applications submitted prior to May 1, 2014 will be denied for PA HPTC consideration and the applicant will need to re-apply with a new application anytime on or after May 1, 2014.
· May 1, 2014 – Applicants may submit the application on May 1, 2014. If additional hard copy application materials are required, the materials must be sent to directly to DCED.
· Preliminary Certification and Reservation of Tax Credits are made available on a first-come, first-served basis based on the date of submission and credits are awarded equitably for each region of the commonwealth.
· All applications submitted on May 1, 2014 are considered submitted at the same time.
How to Apply
1) Qualified taxpayers must apply through DCED’s electronic Single Application system:
2) Applicants will also be required to submit the PHMC Historic Preservation Certification Supplemental Application to certify that the applicant has:
· A qualified historic structure (download pdf version of PHMC Part 1 application) and
· An approved qualified rehabilitation plan (download pdf version of PHMC Part 2 application) and
· A completed qualified rehabilitation project (download pdf version of PHMC Part 3 application)
3) All complete applications will be reviewed on a first-come, first-served basis by date received.
4) The PHMC application is available within DCED’s Single Application system or can be downloaded from the tax credit section of the PHMC website. The PHMC application forms must be uploaded to the Single Application system and, if necessary, supporting documents are submitted in hard copy form by mail/parcel delivery to DCED.
· If an applicant has received Part 1 and 2 certification from the National Park Service, a PA HPTC applicant only needs to complete the cover sheet of the PHMC Part 1 and 2 applications. There is no need to complete the narrative sections of the applications as PHMC has those materials on file with the federal submission.
· If an applicant has not received Part 1 and 2 certification from the National Park Service or is only applying for the state credit, a PA HPTC applicant needs to complete the entire PHMC Part 1 and 2 applications and provide the required supporting documents. Supporting documents may include but are not limited to: photographs of the building and its surroundings prior to any rehabilitation work, a map showing the boundaries of the historic district and the location of the building, a statement of historic and architectural significance, architectural plans for the existing and proposed conditions, and specifications for materials and/or treatments .
PHMC Contact Information
For more information on the tax credit program or to confirm the status of your project, please contact Scott Doyle at (717) 783-6012 or firstname.lastname@example.org.
Federal Rehabilitation Investment Tax Credit (RITC)
RITCs are the most widely used historic preservation incentive program. Certain expenses incurred in connection with rehabilitating an old building are eligible for a tax credit. RITCs are available to owners and certain long term leases of income-producing properties. There are two rates - 20% for a historic building and 10% for a non-historic building, with different qualifying criteria for each rate.
To be eligible for the 20% Tax Credit:
1) The building must be listed on the National Register, either individually or as a contributing building within a National Register Historic District, or be a contributing building to a Certified Local District (a locally designated historic district that has been certified by the National Park Service).
2) Building must be used for income producing purposes, for example office, retail, residential rental, bed and breakfast, and light manufacturing uses. The building must be a depreciable building and not used as a private residence.
3) Rehabilitation work itself must be undertaken according to the Secretary of the Interior's Standards for Rehabilitation.
4) The project must meet the "substantial rehabilitation test." This test is where the amount of money to be spent on the rehabilitation must exceed the adjusted basis of the building or $5,000, whichever is greater. Generally, projects must be finished within a 24-month period.
5) After rehabilitation, the building must be owned by the same owner and operated as an income producing property for five years.
How to Apply
Two government agencies, the PHMC serving as the State Historic Preservation Office (SHPO) and the National Park Service (NPS), must review the project. The owner submits the application form to the SHPO. The project is reviewed and passed on to the NPS for their review and comment and final certification decision. Application forms are available from the NPS website.
The application is a three part process:
Part 1 – Evaluation of Significance
Part 1 documents the building as a certified historic structure and one that is eligible to receive the tax credit. Buildings that are individually listed in the National Register of Historic Places are automatically designated as "certified historic structures." If a building is located within a National Register Historic District, a Part 1 must be submitted.
Part 2 – Description of Rehabilitation
Part 2 explains the scope of the rehabilitation work and should be filed before work begins. The Part 2 must provide drawings to show the existing conditions and the proposed rehabilitation work and any new additions or new construction. All projects are reviewed and evaluated in accordance with the Secretary of the Interior's Standards for Rehabilitation.
Part 3 -Request for Certification of Completed Work
Part 3 documents the completed work and is proof (for the IRS) that the rehabilitation is "certified."
The application is substantiated by "before" and "after" photographs and plans. The SHPO provides ongoing technical assistance throughout the application process and encourages early communication with our office.
Additional information, tax application forms, and instructions are available from the Bureau for Historic Preservation upon request. As with any tax law, there are restrictions which may affect your ability to make use of these tax benefits, particularly Passive Activity rules and Alternative Minimum Tax rules, so you should seek the advice of a tax accountant.
The National Park Service website is the best resource for information on the federal historic preservation tax credit program. Below are a number of useful links to both the NPS website and some instructional documents prepared by PA SHPO staff.
NPS Tax Credit Links
NPS Tax Credit Home Page
NPS Application Forms
IRS Tax Credit Information
Rehabilitation Standards and Guidelines
Preservation Briefs and other publications
Applying the Standards
PA SHPO Guidance
Tax Credit Fact Sheet* (PDF, 100 KB)
Supplementary Instructions* (PDF, 540 KB)
Sample Work Description (PDF, 14 KB)
Amendments to Completed Projects (PDF, 9 KB)
Other federal tax incentives for buildings
To be eligible for the 10% Tax Credit:
1) The building must be built before 1936 and be non-historic - that is, not listed on the National Register, either individually or as a contributing building within a district, or it has been determined eligible for listing in the National Register of Historic Places.
2) Building cannot be used for rental residential purposes.
3) A building must meet the Wall Retention Requirement:
a. 50% or more of the building’s external walls remaining as exterior walls
b. 75% or more of the building’s external walls retained as exterior or interior walls
c. 75% or more of the building’s internal structural framework remaining in place
4) The project must meet the "substantial rehabilitation test," where the amount of money to be spent on the rehabilitation is greater that the adjusted basis of the building and is at least $5,000. Generally, projects must be finished within a 24 month period.
5) After rehabilitation, the building must be owned by the same owner and operated as an income producing property for 5 years.
There is no application for the 10% credit, and rehabilitation work is not subject to review by any state or federal agency. If the building is located within a National Register Historic District, then an owner cannot apply for the 10% credit. He/she must apply for the 20% credit. If the above criteria are met, the 10% rehabilitation credit can be claimed as an investment credit on an owner's federal income tax return.
Charitable Contribution Deduction
The charitable contribution deduction is taken in the form of a conservation easement and enables the owner of a "certified historic structure" to receive a one-time tax deduction. A conservation easement usually involves the preservation of a building's facade by restricting the right to alter its appearance. If you would like to see your building preserved for future generations and/or you could benefit from a significant tax deduction, a conservation easement is something to consider. Qualified professionals should be consulted on the matter of easement valuations and the tax consequences of their decision.
To be eligible for the charitable contribution deduction:
- The property must be listed in the National Register of Historic Places, either individually or as contributing building within an historic district. Buildings that are individually listed are automatically designated as certified historic structures. Buildings within National Register historic districts must have a Part 1 application reviewed by the SHPO and certified by the NPS.
By submitting materials with respect to state or federal historic preservation programs administered by the Pennsylvania Historical and Museum Commission (PHMC), you grant to the PHMC the rights to:
1) use the materials for education and promotional purposes and to promote the mission of the PHMC;
2) publish the materials on the PHMC Web site;
3) and make the materials available to researchers and scholars.