New PA Tax Credit Available
for Qualified Income-Producing Historic Structures
Do you currently own, lease or have future plans to purchase a historic building in Pennsylvania? On June 30, 2012 PA Governor Tom Corbett established the Historic Preservation Incentive Act. Enactment of this Act made Pennsylvania the 30th state to establish this type of program which is designed to be a companion bill to the Federal Historic Preservation Tax Incentive program.
The program will go into effect on July 1, 2013 and provides a 25% state tax credit for the rehabilitation of historic structures in Pennsylvania. The program is capped the first year at a maximum of $3 million but an individual project could receive up to $500,000 in tax credit!
What is a Qualified Historic Structure?
A qualified historic structure is a building located in Pennsylvania that qualifies as a certified historic structure under Section 47 of the Internal Revenue Code of 1986.
This is the section of the Code that regulates the Federal Historic Preservation Tax Incentive program. The building must be listed in the National Register of Historic Places or be certified as contributing to a historic district listed in the National Register of Historic Places, or certified by the National Park Service.
What is a Qualified Rehabilitation Plan?
A qualified rehabilitation plan is a plan to rehabilitate a qualified historic structure that is approved by The Pennsylvania Historical and Museum Commission (PHMC) as being consistent with the Standards for Rehabilitation and Guidelines for Rehabilitation, as adopted by the United States Secretary of the Interior.
Is the Credit Available to Private Homeowners?
No, the property must be used for income-producing purposes, including commercial, industrial, agricultural, rental residential or apartment use.
How is the Amount of the Tax Credit Determined?
Only qualified rehabilitation expenditures that are made by the tax owner of the property at the time are eligible towards the credit scores. That includes costs directly related to repair or improvement of structural and architectural features of historic buildings; such as:
- Mechanical Systems
Fees for the developer, architect and other fees also qualify.
How is the Tax Credit Obtained?
A Historic Certification Application must be submitted to the Pennsylvania Department of Community and Economic Development (DCED). The application must be filed on or before February 1st of each year for qualified expenditures incurred in the prior calendar year or to be incurred in the current year. Applications are processed on a first-come-first-served basis.
The Pennsylvania Historical and Museum Commission (PHMC) will review the proposed rehabilitation plan, verify that the building is a qualified historic structure, is following a qualified rehabilitation plan and recommend approval or disapproval to DCED. This review will coincide with the PHMC review. Once the project is completed and approved by the PHMC, DCED will issue a PA tax credit certificate.
Unfortunately, navigating the process to acquire an approved PA tax credit certificate can be extremely difficult and confusing. Historic property owners are well advised to seek competent tax and accounting counsel before submitting an application.
At Herbein, our experienced tax and accounting professionals can provide invaluable guidance and help in preparing an application to the Pennsylvania Department of Community and Economic Development. For additional information or if you have any questions, please contact the author, Kris Keller.
Kris Keller, MBA – Herbein + Company, Inc.