Federal Historic Property Tax Credit

History

The Federal Historic Rehabilitation Investment Tax Credit program has been around since 1976, and is potentially available to owners of commercial buildings designated as “Contributing” in National Register Historic Districts – like ours here in Irvington. Rehabilitation projects that qualify, result in a tax credit for the owners equal to 20% of the cost of the rehabilitation – that is a credit, which actually reduces taxes owed, not a deduction, which only reduces one’s taxable income. And, for owners whose income taxes aren’t high enough in one year to absorb that much credit, the credit can be spread over multiple years!

Eligibility Criteria

There are several thresholds that you have to clear for your property to be eligible for this program:

  • Most important, the property must be commercial or a rental residential property.

  • Single family homes that you occupy are not eligible.

  • Duplexes may be, if you don’t live in one of the units.

  • 3-plexes, 4-plexes and larger, plus storefront buildings with residential on upper floors, typically will meet the commercial requirement.

  • It must be “Contributing” to the District. Every property in Irvington has a Contributing or Non-Contributing status as determined by the District Inventory.

  • The rehabilitation project must preserve the historic character of the property, both inside and outside and meet the Secretary of the Interior’s Standards for Historic Property Rehabilitation. Note that this is true on the outside of the structure for ANY building modification in the District under Historic Design Review, but only the Federal program regulates changes to the interior. However, this program’s protection of the interior does NOT prevent modifications or adaptive re-use of the building – a good example is the well-known Ladd Carriage House in downtown Portland, which received Historic Tax Credits even though it was re-purposed from an empty barn to a restaurant!

  • The cost of the rehabilitation must be at least $5000 and more than the “Basis” value of your property. The “Basis” is the original purchase cost of the property (improvements only, not the land), plus any subsequent investments, less the accumulated depreciation. For example, if you bought your apartment building in 1990 for $300,000, of which $250,000 was for “improvements, not including land”, and didn’t make any capital expenditures over the years, your “Basis” might be about $250,000 less roughly $192,000 in accumulated depreciation or a net “Basis” of about $58,000. To qualify for the Federal Tax Credit, you’d need to spend at least $58,000 on rehabilitation. This last requirement is a sticking point for many properties. The program works best for owners who have owned the property for many years, such that the accumulated depreciation is substantial. Current real estate prices in Irvington are such that newly purchased commercial buildings would be eligible for this program only if seriously deteriorated and requiring substantial restoration investment.

Based on the District Inventory, 258 properties in the Irvington Historic District are both Contributing and Commercial in nature and, thus, potentially eligible for the Federal Historic Rehabilitation Tax Credit program. There are lots more details of the program relating to fees, application forms, and, especially, to how the tax credits can affect your income tax calculations, so if you think you may qualify based on the list above, you should get the brochure titled “Historic Preservation Tax Incentives” published by the U. S. Department of the Interior (which administers the program).

Additional Information

For more information, check out the SHPO website for application forms, FAQs, the Oregon Special Assessment Statute, and complete application instructions. You can also contact Joy Sears, program coordinator at 503-986-0688 or joy.sears@oregon.gov.

SHPO staff are very helpful in providing guidance and will discuss your plans with you.  The SHPO website has recent sample application for the program, which currently just happens to be for a property here in Irvington.

Also see Oregon and Multnomah County property tax rules and policies - scroll down to the "Property Events" discussion.