Historic Tax Credits – Second of a Three-Part Series
By Abby Hood, CPA
Iowa Historic Tax Credits: How does the program work?
As noted in the previous Historic Tax Credits (HTC) blog, historic structures/features have captivated me since I was a child and I’ve been able to bring that passion to my “9-5” through the HTC program. The HTC program allows entities to receive an indirect subsidy to assist in financing the rehabilitation of historic structures through a tax credit for qualified expenditures. The federal tax credits are usually 20% of qualified expenditures and the Iowa tax credits are 25% of qualified expenditures. The process and tax credit amount vary from state to state with majority closely mirroring the federal tax program.
For Iowa, any project with qualified expenditures greater than $750,000 are only accepted during the registration filing window (once or twice a year) and projects with qualified expenditures less than $750,000 are accepted year-round (I’ll address what is considered a qualified expenditure in part three of the HTC series).
Below is a high-level summary of the HTC program process for the state of Iowa:
- Historic Structure (Part I): The structure either needs to be on the National Registry of Historic Places (the Registry) or requested and approved by the National Park Services to be a certified historic structure. To be considered a historic structure, the structure has a historic significance usually met by the age, location, and/or architectural features of the structure. Approval is completed by both the State Historic Preservation Office (SHPO) and the National Park Service (NPS).
- Restoration Narrative (Part II): Provide a narrative of what work needs to be completed to restore the structure, but to also maintain the structure’s historic attributes. The narrative evaluates if the proposed rehabilitation falls within The Secretary of Interior’s Standards for Rehabilitation. Include how the renovation will be completed by providing a narrative, architect designs, expected costs and funding, and photos. Extensive photos of the structure are provided to aid in the narrative and assist in demonstrating the current condition of the structure and what original features are still intact that should be maintained and/or restored. Part II is reviewed and approved by both SHPO and NPS. Renovation can be started at any time with the potential that SHPO and/or NPS may have changes to the design proposed.
- Rehabilitation Proof and Costs (Part III): Once renovation is completed based on the plans approved in Part II, Part III is started which involves providing proof (photos) of the rehabilitation work completed is in line with the plans approved in Part II. There is also a cost certification required for all projects that have over $100,000 in qualified expenditures to assist in verifying rehabilitation costs incurred. The cost certification is completed by a CPA licensed in the state of Iowa. Part III is approved by SHPO, NPS, and Iowa Economic Development Authority (IEDA). IEDA focuses on the cost certification and SHPO and NPS focuses on if the rehabilitation was in line with what was originally approved in Part II.
Next up in the final part of the Historic Tax Credit series are details on what is considered as a Historic Tax Credit qualified rehabilitation expenditure.
Abby Hood, CPA | Manager