MAINE STATE REHABILITATION TAX CREDIT

On March 31, 2008, Democratic Governor Baldacci signed a bill approved nearly unanimously by the Democratic-controlled legislature that fundamentally changed the state tax credit. Among the changes were a significantly increased credit cap, the creation of a small projects provision for taxpayers who do not claim the federal tax credit but who could claim the state credit, and the inclusion of an added incentive for the creation of affordable housing.

In 2011, Republican Governor Paul LePage signed an extension of the bill passed nearly unanimously by the Republican-controlled legislature.

The Maine Historic Preservation Commission administers the program in consultation with the Department of Administrative and Financial Services, Bureau of Revenue Services. The Commission strongly recommends that prospective applicants carefully review the program rules prior to submitting applications or commencing work.

Maine's State Historic Rehabilitation Tax Credit Program includes the following features:

1.   The "Substantial Rehabilitation Credit". A 25% state credit for any rehabilitation that also qualifies for the 20% federal credit. The rehabilitation must meet all the requirements of the Federal tax incentive program.

2.   The "Small Project Rehabilitation Credit." A 25% state credit for the rehabilitation of certified historic structures with certified qualified rehabilitation expenditures of between $50,000 and $250,000. This credit is available to entities that do not claim the federal rehabilitation credit. Applicants must meet all federal tax code qualifications except the substantial rehabilitation requirement.

3.   The "Affordable Housing Rehabilitation Credit Increase". The State Substantial Rehabilitation Credit and the Small Project Rehabilitation Credit are increased currently to 32% if the rehabilitation project results in the creation of a certain amount of affordable housing. Please contact the Maine State Housing Authority (MSHA) for additional eligibility requirements.

4.   State credits are fully refundable to any Maine taxpayer. One quarter or 25% of the total state credit is claimed for the taxable year in which the property is placed in service, and 25% of the total credit is taken in each of the next three (3) taxable years. There is a "per year" state credit cap of $5 million for each project.

If Maine's Substantial Rehabilitation Credit is applied for, 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. The adjusted basis is the purchase price of a building minus land costs and depreciation, plus any capital improvements.

For Maine's Small Project Rehabilitation Credit, the certified qualified rehabilitation expenditures must be between $50,000 and $250,000 within either a 24-month or, if the project will be completed in phases, a 60-month period.

Property owners are strongly advised to consult with the Maine Historic Preservation Commission before beginning a rehabilitation to resolve potential design and rehabilitation problems that could result in denial of the credits.