Financial Incentives in Historic Districts

Historic Rehabilitation Tax Credits

Historic Rehabilitation Tax Credits
 State credit = 25% of
qualifying expenses
 Federal credit = 20%
of qualifying expenses

 Information in this
presentation will
concentrate on the
State program.
Historic Rehabilitation Tax Credits

Federal Credit applies

only to “income-
producing” properties.
State credit also
applies to “owner-
occupied” buildings
such as residences.
Historic Rehabilitation Tax Credits
 To qualify, a building
must be individually
listed (or eligible for
listing) on State
Landmarks Register or
be a “contributing”
building to a historic
district on the State
Landmarks Register
Historic Rehabilitation Tax Credits
Staunton has 6 National
and State Register
Historic Districts
 Beverley
 Gospel Hill
 Newtown
 Stuart Addition
 The Wharf
 Western State
Historic Rehabilitation Tax Credits
 Since 2000, Staunton has seen
approximately $50 million total investment
in historic tax credit projects ($12.5M in
state credits).
 Mostly large projects with combined
federal/state credits.
 Few residential projects (despite easier
regulations in the state program).
Historic Rehabilitation Tax Credits
 Rehabilitation - the action or process of making possible a
continuing or compatible contemporary use of a historic place or an
individual component, through repair, alterations, and/ or additions,
while protecting its heritage value.
Vs.
 Restoration - the action or process of accurately revealing,
recovering or representing the state of a historic place or of an
individual component, as it appeared at a particular period in its
history, while protecting its heritage value.
Historic Rehabilitation Tax Credits
 Qualifying expenses:
Rehabilitation work
properly charged to capital
account but not including
additions and most site
work. Qualifying expenses
consist of rehabilitation
related hard costs
(including new building
systems) and soft costs
such as professional fees
and construction period
interest.
Historic Rehabilitation Tax Credits
 Minimum investment:
At least 25% of the
assessed value for
owner-occupied
buildings and at least
50% of the assessed
value for all other
eligible structures or
$5,000 whichever is
greater
Historic Rehabilitation Tax Credits

Expenses can be
claimed in the year the
rehabilitation is
completed and carried
forward for 10 years.
Historic Rehabilitation Tax Credits
Work must conform to
the Secretary of
Interior’s Standards for
Rehabilitation
Retain “character-
defining features.”
Window replacement,
masonry repairs,
additions, interior
alterations.
Historic Rehabilitation Tax Credits
Secretary of Interior’s Standards for Rehabilitation

 1. A property shall be used for its historic purpose or be placed in a new use that requires minimal change to the defining characteristics
of the building and its site and environment.
 2. The historic character of a property shall be retained and preserved. The removal of historic materials or alteration of features and
spaces that characterize a property shall be avoided.
 3. Each property shall be recognized as a physical record of its time, place, and use. Changes that create a false sense of historical
development, such as adding conjectural features or architectural elements from other buildings, shall not be undertaken.
 4. Most properties change over time; those changes that have acquired historic significance in their own right shall be retained and
preserved.
 5. Distinctive features, finishes, and construction techniques or examples of craftsmanship that characterize a property shall be
preserved.
 6. Deteriorated historic features shall be repaired rather than replaced. Where the severity of deterioration requires replacement of a
distinctive feature, the new feature shall match the old in design, color, texture, and other visual qualities and, where possible, materials.
Replacement of missing features shall be substantiated by documentary, physical, or pictorial evidence.
 7. Chemical or physical treatments, such as sandblasting, that cause damage to historic materials shall not be used. The surface
cleaning of structures, if appropriate, shall be undertaken using the gentlest means possible.
 8. Significant archeological resources affected by a project shall be protected and preserved. If such resources must be disturbed,
mitigation measures shall be undertaken.
 9. New additions, exterior alterations, or related new construction shall not destroy historic materials that characterize the property. The
new work shall be differentiated from the old and shall be compatible with the massing, size, scale, and architectural features to protect
the historic integrity of the property and its environment.
 10. New additions and adjacent or related new construction shall be undertaken 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.
Historic Rehabilitation Tax Credits
Three-part application reviewed by VDHR:
Part 1 – used to determine if building is
“contributing”
Part 2 – existing conditions photographs,
description of proposed work and impact on
historic features
Part 3 – shows completed work
30 day review period (60 for state/federal)
Pass/fail – no partial credit!
Historic Rehabilitation Tax Credits
Sample Project:
 Assessed value = $200,000
 Qualifying expenses = $60,000
( more than 25% of assessed value)
 Amount of state credit = $15,000
(25% of qualifying expenses)
Historic Rehabilitation Tax Credits

 For more information

visit the Virginia
Department of Historic
Resources website:

http://www.dhr.virginia.
gov/tax_credits/tax_cr
edit.htm