What are the Federal Historic Tax Credits?

The Federal Historic Preservation Tax Credit Program is a 20% federal income tax credit on the qualified amount of private investment spent on the certified rehabilitation of a historic building. A certified historic building is one that is eligible or listed individually in the National Register of Historic Places (NRHP) or a building that is designated as a contributor to a NRHP-listed historic district.

The National Park Service (NPS) administers the program at the federal level and makes final decisions about the certifications. The Internal Revenue Service (IRS) establishes the qualified rehabilitation expenses on which the credit may be taken.

The State Historic Preservation Office (SHPO) works at the state level to coordinate with applicants to ensure successful projects and is responsible for reviewing the NRHP eligibility of properties as well as reviewing the rehabilitation plans for compliance with the Secretary of the Interior's Standards for Rehabilitation.

Which Projects Qualify?

In order to claim the tax credit, the building must be eligible for or listed in the National Register of Historic Places, either individually or as a contributing property to a listed district. 

• The property must be income-producing/commercially depreciable for at least five years following rehabilitation. This may include, but is not be limited to, uses such as hotels and hospitality, restaurant or bar, retail, office, short term or long-term residential rental, industrial, or agricultural. Owner-occupied residential properties do not qualify for the federal tax credit.
• The amount spent on Qualified Rehabilitation Expenditures* (QREs) must be either equal or greater than the Adjusted Basis value** of the property.

*Qualified Rehabilitation Expenditures* (QREs) can be soft or hard project development costs, and not necessarily reserved for historic character-defining features of a property.

** Adjusted Basis value is an IRS term to determine the "value" of a historic property using this basic formula:

          A – B – C + D = adjusted basis, where:
          A = purchase price of the property (building and land)
          B = cost of land at the time of purchase
          C = depreciation taken for an income-producing property
          D = cost of any capital improvements made since the purchase

To be certified, the rehabilitation work must be completed according to the Secretary of the Interior's Standards for Rehabilitation (the Secretary's Standards). For further information on how to interpret the Standards, visit the NPS Technical Preservation Services website. Many applicants choose to hire the services of a qualified historical architect or historic preservation consultant to assist them with ensuring project conformance to the Standards.

After rehabilitation, the building must be owned by the same owner and operated as an income-producing property for five years, as the credit is allocated over a 5-year period on federal income tax returns.

Application Process

There are three parts to a tax credit application:

The Part 1 application is used to request NPS certification that a building is a contributor to an NRHP-listed historic district or is an individually NRHP-listed property comprised of more than one building. It can also be used to request a preliminary determination of whether an individual building or district not yet listed in the NRHP is eligible.

A stand-alone building that has previously been individually listed on the National Register does not require a Part 1 application. If the subject property contains more than one building, regardless of the age or National Register status of the buildings, the applicant is required to complete the Part 1 application.

The Part 2 application describes the rehabilitation work that will be undertaken on the building(s). The form breaks down the project elements into categories (e.g. masonry, windows, ceilings, HVAC) and requires the applicant to describe the entire scope of work for the project, not only the QREs . Proposed work will be evaluated by NPS for conformance with the Secretary of the Interiors Standards or Rehabilitation. Submitted materials in support of the Part 2 application includes at minimum a comprehensive set of existing conditions photographs and photo keys, as well as architectural and engineering drawings.

Applicants are strongly encouraged to submit applications prior to the start of work. Applicants who undertake rehabilitation projects without prior approval from the NPS do so at their own risk. Work accomplished prior to Part 2 certification may result in project denial.

The Part 3 application is submitted to NPS to request certification of a completed rehabilitation project for purposes of receiving the historic tax credit. If the project is being completed in phases, the Amendment/Advisory Determination Form is submitted to receive approval of the phase.

Tips for Successful Federal Tax Credit Projects

The most important advice we can give applicants is to communicate with us very early in the planning phases of the project. SHPO's role is to guide your application through the NPS certification process, and we are invested in your success. Meeting early gives us the opportunity to review the project and identify any treatments that would not meet the Secretary’s Standards. By communicating early in the process, SHPO can help identify potential issues and work with you to develop appropriate solutions. Successful applications are those in which the process is collaborative. We are happy to provide guidance at any time in the design process.

Applicants are not required to hire consultants to complete an application, but experienced preservation consultants can be helpful in navigating the process, especially for large, complex projects. SHPO does keep a list of qualified consultants but cannot provide endorsement of any individual or firm for preservation services.

Here is the process for a successful tax credit application:

1. Call SHPO with preliminary ideas for a project. Get feedback and incorporate it into plans. A site visit with SHPO is a great way to convey the current state of a building and the intentions of a rehabilitation project.
2. Submit the Part 1 application to SHPO, if applicable. SHPO review can take up to 30 days and forwards to NPS if no applicant edits are requested. When NPS has reviewed the Part 1, they will send a notification letter of their decision via email. This usually takes about 30 days.
3. Upon approval of the Part 1 application, SHPO and NPS offer a free preliminary consultation meeting to discuss the proposed work before submitting the Part 2. This meeting is highly recommended to begin early communication and avoid delays resulting from adjustments to the project.
4. Submit the Part 2 application for review. Part 2 application reviews often include requests for additional information or conditions for approval, so expect that there may be adjustments to the scope of work. 
5. SHPO review can take up to 30 days and forwards to NPS if no applicant edits are requested. When NPS has reviewed the Part 2, they will send a notification letter of their decision via email. This usually takes about 30 days.
6. Should any changes need to be made during construction, an amendment must be submitted and approved by NPS. If a change is made that is not approved through an amendment, the applicant is at risk of having the project denied.  
7. When work is completed, coordinate a site visit with SHPO to verify the completed work, and then submit a Part 3 application.
8. SHPO review can take up to 30 days and forwards to NPS if no applicant edits are requested. When NPS has reviewed the Part 3, they will send a notification letter of their decision via email. This usually takes about 30 days.
9. If NPS denies a project certification, the applicant may appeal the decision.

Electronic Submission Requirements

As of August 15th, 2023, all three parts of the Historic Tax Credit application must be submitted online. If a project was initiated prior to August of 2023 through a hard copy (paper) submission, all subsequent submissions must be electronic. Projects started on paper will not continue on paper. The National Park Service has developed file- and photo-naming conventions and instructions on organizing files for electronic submission. These are the requirements for submitting applications and supporting materials electronically:

• Applicants must use the most recent version of the NPS application forms.
• All materials must be submitted as PDFs.
• Application forms must include one of the following types of signatures: Adobe digital ID or an original signature that has been scanned as a .jpeg (or another image) file. Typed signatures will not be accepted.
• Application parts must be saved as individual files. Cover sheets, narratives, site plans/photo keys, photographs, existing conditions drawings, and proposed work drawings should not be combined.
• Application files must be saved using the NPS-required naming conventions.
• Photographs must follow NPS guidelines for formatting, captions, and photo keys.
• Photographs should be submitted to SHPO in one PDF file and not as individual jpegs.
• Drawing files must be flattened when saved as a PDF. Existing and proposed floor plans and elevations must not be combined into one PDF file.

Incorrectly formatted files will be returned, and failing to follow these requirements may result in delays to your project.

Application Forms

The three parts of the application form, including instructions and amendment forms are available for download as fillable PDFs. The files include:

• Historic Preservation Certification Application Instructions
• Part 1  - Evaluation of Significance
• Part 2  - Description of Rehabilitation
• Part 3  - Request for Certification of Completed Work
• Amendment/Advisory Determination Form - Use this form to provide additional information, amend a Parts 1,2, or 3 application, or request determination as to whether a completed phase meets the Secretary’s Standards.

All fees for the review of applications are paid to NPS through Pay.gov.

Application files must be provided to SHPO on a USB flash drive. Emailed files, hard copies and CDs of the application will not be accepted. A cover letter should accompany the USB flash drive to identify the project, contents of the drive, points of contact, and any other information relevant to SHPO review. Applications can be mailed, shipped or hand delivered during business hours, to:

State Historic Preservation Office
Attention: SHPO Architect
1110 West Washington Avenue, Suite 100
Phoenix AZ 85007

If the above information did not answer your questions, please contact:

Susan Lawson,
SHPO Architect
State Historic Preservation Office
slawson@azstateparks.gov

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