The Commercial Historic Preservation Tax Credit

The Commercial Historic Preservation Tax Credit

 

About the Program

The Commercial Historic Preservation Tax Credit (based on House Bill 14-1311) is a tax credit for owners of designated commercial properties that commence a certified rehabilitation of their property. This program is jointly administered by OEDIT and History Colorado through a two-step process. The program is now accepting applications for both large and small rehabilitations. Owners with eligible projects are encouraged to apply. We encourage you to review the Fact Sheet. Our Program Guide is currently under review and will be posted soon. If you have urgent questions, please feel free to contact the program manager at: wael.khalifa@state.co.us

Current Program Status

https://oedit.secure.force.com/oedit/PtHptcProgramExt

 

Program Funding

Commercial Historic Preservation Tax Credits are categorized based on the estimated expenditures, and there is no limit to the number of projects that can be reserved and issued, but there is a limit on the dollar amount of credits that can be reserved and issued in any given calendar year to $1M. Reservations will be limited based on the following table:

Expenditure Category


2016


2017


2018


2019


Estimated rehab expenditures of $2,000,000 or less


$2,500,000


$5,000,000


$5,000,000


$5,000,000


Estimated rehab expenditures over $2,000,000


$2,500,000


$5,000,000


$5,000,000


$5,000,000


OEDIT has the discretion to move unused credits between categories and into subsequent years.

 

Requirements and Eligibility

This tax credit is available to the owner of a certified historic structure who performs a certified and substantial rehabilitation on their property in accordance to the standards for rehabilitation of the US Secretary of Interior. The owner must perform a rehabilitation for which the qualified rehabilitation expenditures must exceed twenty-five percent of the owner’s original purchase price less the value attributed to land {25%(original purchase price – value of land)}, and meet one of the following criteria:

  • Holds title to a qualified structure
  • Holds prospective title to a qualified structure in the form of a purchase agreement
  • Holds prospective title to a qualified structure in the form of an option to purchase
  • Holds a leasehold interest in a qualified commercial structure for a term of not less than 39 years

 

Reservation and Issuance of Tax Credits

  • In order to apply for the credit, an applicant must first set up an account with OEDIT (Create Account).
  • After the account is created, the applicant needs to log in and go to the “Apply” screen and click on “Historic Preservation Tax Credit Qualification.”  This will take the applicant through the qualification questionnaire. Successful questionnaires will prompt access to the full application.
  • The owner submits a full application and rehabilitation plan to OEDIT for a reservation of tax credits. Successful applications will earn a tax credit reservation for the owner depending on availability of credits.
  • There are two fees associated with this tax credit. The first is an application fee, which is expected to be $500 when the estimated credits is over $250,000 (if the estimated credit is less than or equal to $250,000, no application fee will be charged). The application fee is charged when the application and rehab plans are submitted. The second fee is the issuance fee, which is charged when the credit is finally issued. This fee is expected to be 3% of the amount of the tax credit issued. Both of these fees must be paid directly to OEDIT, they cannot be deducted from the tax credit.
  • Owner must submit ongoing proof of construction.
    • 12 month report: projects with reserved tax credits that have not begun construction must begin 12 months from the date of reservation
    • 18 month report: projects must expend at least 20% of estimates total rehabilitation expenditures 18 months from the date of reservation
  • Upon completion of construction, the owner must apply for issuance of tax credit and submit documentation for final review.
  • OEDIT and History Colorado review the final documentation and upon approval, issue the tax credit certificate.
  • Since there are limits on the total credits the program can reserve each year, applications will be processed on a first come, first served basis. If multiple applications/rehab plans are received on the same day, a lottery process will determine the order in which they will be reviewed and reserved.

 

Calculating the Credit

The tax credit is calculated as a percentage of the actual qualifying rehabilitation expenditures. The percentage applied depends on two things: the actual amount of rehab expenditures and whether the structure is located in a recognized disaster area or not.

The following rates apply:

Regular Area Disaster Area
First $2 million of Actual Rehabilitation Expenditures 25% 30%
Any Rehabilitation Expenditures over $2 million 20% 25%

 

These percentages are added together, so a property not in a disaster area with $3 million in actual rehab expenditures would be eligible for a tax credit of $700,000 ($500,000 for the first $2 million, plus $200,000 for the amount over $2 million). The tax credit is based on the amount of actual qualifying expenditures, even though the reservation is based on the estimated expenditures.

Owners can apply for multiple properties, but there is a limit of $1 million per year on any given property.

The initial credit issued cannot be more than the amount of credit reserved. If actual qualifying expenditures exceed the amount reserved, the owner must apply for the difference, and (subject to annual limits and property limits) will be awarded a second tax credit certificate for the excess amount. If the actual rehab expenditures are less than the amount reserved, the tax credit issued will be calculated on the actual amount.

 

Using the Credit

The tax credit is a credit against Colorado income taxes. The credit is issued to the owner of the property when construction is complete and approved. The credit can be carried forward ten years, and any unused portion of the credit can be sold to third parties. If the owner chooses to sell the credit, both the owner and the purchaser of the credit must coordinate their transaction through the OEDIT website. After ten years, any unused and unsold credit will expire and cannot be refunded.

 

Other Programs

Participants in the Historic Preservation Tax Credit are encouraged to also participate in other OEDIT programs. Participating in the Historic Preservation Tax Credit does not limit your participation in most other state programs. Programs of interest:

History Colorado

Historic Preservation Residential Tax Credit

Joe Saldibar (Architectural Services Manager, tax credit specialist) at History Colorado

Colorado Creative Industries

Colorado Main Street Program

Dept of Local Affairs, Community Development Block Grant

Enterprise Zone Vacant Building Rehabilitation Program

For information on the 2014 Residential Historic Preservation Tax Credit, click here. For information on the 1990 Historic Preservation Tax Credit, click here

 

Wael Khalifa Program Analyst wael.khalifa@state.co.us