Owners of National Register properties may be eligible for special historic preservation tax incentives. The Federal Investment Tax Credit Program authorizes a 20% investment tax credit coupled with accelerated depreciation for income-producing properties. The SHPO is responsible for reviewing the eligibility of properties as well as rehabilitation plans to ensure their compliance with the Secretary of the Interior's Standards for Rehabilitation. Additionally, the State of Arizona maintains a property tax reduction program for non-income-producing properties listed on the National Register and a property tax incentive program for income-producing properties. This program is administered by the SHPO in conjunction with the county assessors. For information on the federal investment tax program, call Robert Frankeberger at (602) 542-6943. For information on the state property tax program, call Eric Vondy at (602) 542-6998.
As tangible links to its past, a community's historic buildings reflect the unique character of its neighborhoods, businesses, and gathering places. Various federal and state laws have been enacted to support the preservation of these places through tax reductions, grants, and other financial incentives. Arizona's historic property owners can benefit from these programs if their properties meet certain criteria. Preservation incentive programs are summarized below.
The ITC program permits owners and some lessees of historic buildings to take a 20% income tax credit on the cost of rehabilitating such buildings for industrial, commercial, or rental purposes. This program also permits depreciation of such improvements over 27.5 years for a rental residential property and 31.5 years for commercial property. The rehabilitated building must be a certified historic structure that is subject to depreciation, and the rehabilitation must be certified as meeting The Secretary of the Interior's Standards for Rehabilitation, established by the National Park Service (NPS).
The ITC program is governed by Section 43 of the Internal Revenue Code (26 U.S.C. 47) and Section 170 (h) of the Internal Revenue Code of 1986 (26 U.S.C. 170(h)). The Internal Revenue Service is responsible for all proceedures, legal determinations, and rules and regulations governing the tax consequences of the ITC program.
Only projects involving certified historic structures are eligible for tax credits. According to program rules, a certified historic structure is:
NPS requires that owners complete a form, the Historic Preservation Certification Application (Form 10-168) for all certification requests. The form is divided into three parts; Part 1 for evaluating the historic significance of a building; Part 2 for describing rehabilitation work; and Part 3 for requesting certification of completed work.
Applications are submitted to and reviewed by the SHPO before submission to NPS, which makes the final certification decision after considering the recommendations of the SHPO. For proposed rehabilitation work as described in Part 2 of the application form, NPS will issue preliminary approval if it meets The Secretary of the Interior's Standards. The preliminary approval becomes final when the work is completed and NPS can verify that the Standards have been met. NPS charges a fee for reviewing certification requests which is based on the cost of rehabilitation.
The SPT commercial component aids owners who rehabilitate underutilized historic commercial or industrial properties. This program also offers participants a substantial reduction in their annual state property taxes, but in a manner different from the residential component. The intent of this program is to provide an owner the opportunity to make a building presentable to tenants and allow such tenants a period to establish business without the burden of increased rent due to property tax increases. To receive the tax reduction, the property owner enters into a 10 year agreement during which the property is rehabilitated and maintained according to The Secretary of the Interior's Standards for Rehabilitation. During this period period, the temporary tax classification set by the county assessor does not necessarily change the current base assessment, but those modifications intended to restore or rehabilitate the property are almost entirely tax free (assessed at 1% of full cash value rather than 25%).
Owner Requirements: The property owner must rehabilitate and maintain the property to preserve the historical integrity of its features, materials, appearance, workmanship, and environment. All construction work must conform to The Secretary of the Interior's Standards for Rehabilitation, and SHPO must approve plans for such work prior to implementation. In addition, the property owner may be required to annually submit an expenditure record, and a form (furnished by the SHPO) verifying that the property has been maintained according to program guidelines.
Applications can be obtained from your county assessor's office or the SHPO. Completed applications must be mailed to the county assessor's office along with two 5" x 7" color photos of the property's exterior. Applicants will receive notice within six weeks of application submittal. For residential properties, the tax reduction does not take effect until the year following the approval of the application. For commercial properties, the tax reclassification takes effect immediately.