North Carolina Historic Preservation State & Federal Tax Credits
North Carolina preservation state tax credits, effective January 1, 1998, have made rehabilitations of historic buildings in North Carolina more attractive than ever before. The law provides a 20% state tax credit and a 20% federal investment tax credit for rehabilitations of income-producing historic properties. Only certified historic structures will qualify for the credits. A “certified historic structure” is defined as a building that is listed in the National Register of Historic Places, either individually or as a contributing building in a National Register historic district. In effect, the combined federal-state credits reduce the cost of a certified rehabilitation of an income-producing historic structure by 40%. Downtown Sanford is fortunate to have three districts located within or near its boundaries – the Downtown Sanford Historic District, the Rosemount-McIver District, and the Hawkins Avenue District. If you own property in one of these districts you may be eligible for the credit; please click on this link for a Map of the National Register Districts.
Some other key points and cautionary reminders about the credits:
- The new credits will apply only to qualified expenditures made on or after January 1, 1998.
- The federal tax credit for income-producing buildings provides for “preliminary certification” that enables an owner to take the credit for a qualifying rehabilitation even before the structure is actually listed in the National Register of Historic Places.
- The rehabilitation of the historic structure must be substantial. For income-producing properties, the rehabilitation expense must exceed the greater of the “adjusted basis” of the building or $5,000 within a 24 month period or a 60 month period for phased projects.
- All rehabilitation work must meet the Secretary of the Interior’s Standards for Rehabilitation. Applications for income-producing structures are subject to a joint review by the N.C. State Historic Preservation Office and the National Park Service, with final authority resting with the National Park Service.
- The credits cannot be claimed against the cost of acquisition, new additions, site work, or personal property. Only costs incurred in work upon or within a historic structure will qualify. Interior work such as HVAC work and kitchen and bathroom remodelings will qualify if the work meets “The Secretary of the Interior’s Standards for Rehabilitation.”
- Property owners of income-producing properties are strongly advised to consult with the State Historic Preservation Office before beginning a rehabilitation to resolve potential design and rehabilitation problems that could result in denial of the credits.