Tax Incentives Program
Owners of National Register properties may be eligible for special historic preservation tax incentives. The Federal Investment Tax Credit Program authorizes a 20 percent 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 Pat Dahlen at (602) 542-6943.
For information on our state property tax programs, call Eric Vondy at (602) 542-6998.
Incentives for Historic Preservation
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.
Federal Tax Incentives
The Investment Tax Credit Program (ITC)
The ITC program permits owners and some lessees of historic buildings to take a 20 percent 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 procedures, 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:
- a structure individually listed in the National Register of Historic Places, or;
- a structure certified by NPS as contributing to a registered district. A registered district is a designated area listed in the National Register, or listed under a state or local statute certified as substantially meeting the requirements for listing of districts in the National Register.
Application and Certification
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 State Property Tax (SPT) Program for Incoming Producing Properties is a rehabilitation-based program for historic properties. It can be combined with the Investment Tax Credit (ITC) program though this program affects property taxes rather than income tax. Upon entering the program, the County Assessor’s Office will do an assessment of the property as is. Over the next 10 years, improvements are taxed at 1% instead of the normal commercial rate. Without a substantial amount of rehabilitation, this program will have little or no effect upon a building’s property tax. As with the ITC program all work must conform to the Secretary of the Interior’s Standards for the Treatment of Historic Properties and be preapproved by SHPO. Unlike the ITC, properties must already be listed on the National Register of Historic Places in order to be admitted into the program.