Historic Tax Credits

Federal Historic Preservation Tax Credit

The Federal Historic Preservation Tax Incentives program encourages private sector investment in the rehabilitation and re-use of historic buildings. It creates jobs and is one of the nation's most successful and cost-effective community revitalization programs. It has leveraged over $84 billion in private investment to preserve 42,293 historic properties since 1976. The National Park Service and the Internal Revenue Service administer the program in partnership here in Maine with the Maine Historic Preservation Commission, our State Historic Preservation Office.

20% Tax Credit

A 20% income tax credit is available for the rehabilitation of historic, income-producing buildings that are determined by the Secretary of the Interior, through the National Park Service, to be “certified historic structures.” The Maine Historic Preservation Commission and the National Park Service review the rehabilitation work to ensure that it complies with the Secretary’s Standards for Rehabilitation. The Internal Revenue Service defines qualified rehabilitation expenses on which the credit may be taken. Owner-occupied residential properties do not qualify for the federal rehabilitation tax credit. Learn more about this credit before you apply.

Each year, the National Park Service's Technical Preservation Services approves approximately 1200 projects, leveraging nearly $6 billion annually in private investment in the rehabilitation of historic buildings across the country. Learn more about this credit: Historic Preservation Tax Incentives.

Federal Tax Credit Basics

  • The amount of credit available under this program equals 20% of the qualifying expenses of your rehabilitation.
  • The tax credit is only available to properties that will be used for a business or other income–producing purpose, and a "substantial" amount must be spent rehabilitating the historic building.
  • Your building needs to be certified as a historic  structure by the National Park Service.
  • Rehabilitation work has to meet the Secretary of the Interior’s Standards for Rehabilitation, as determined by the National Park Service.

Before applying, consult your accountant or tax advisor to make sure that this federal tax credit is beneficial to you. Certain income and other restrictions may have a bearing on whether an owner is able to use the credit. IRS administers the Department of the Treasury’s involvement with the Federal Historic Preservation Tax Incentives Program. The IRS has provided written guidance on these complex federal regulations which is available as easy-to-read guidance in IRS Info.

Partnership Program

The tax incentives program is administered by the National Park Service (NPS) and the Internal Revenue Service (IRS) in partnership with the State Historic Preservation Office. Each plays a specific role:

Maine Historic Preservation Commission

  • Serve as first point of contact for property owners.
  • Provide application forms, regulations, information on appropriate treatments, and technical assistance.
  • Maintain records of buildings and districts listed in the National Register of Historic Places, as well as state and local certified historic districts.
  • Assist anyone wishing to list a building or a district in the National Register of Historic Places.
  • Advise applicants on rehabilitation projects and make site visits.
  • Make certification recommendations to the National Park Service.

 National Park Service

  • Reviews applications for conformance with the Secretary of the Interior’s Standards for Rehabilitation.
  • Issues certification decisions in writing.
  • Transmits copies of all decisions to the IRS.
  • Publishes program regulations, the Secretary of the Interior’s Standards for Rehabilitation, the Historic Preservation Certificat ion Application, and information on rehabilitation treatments.

Internal Revenue Service

  • Publishes regulations on qualified rehabilitation expenses, time periods for incurring expenses, and all other financial matters concerning the 20% tax credit.
  • Answers inquiries on financial aspects of the program, and publishes an audit guide to assist owners.
  • Audits taxpayers to ensure that only parties eligible for the 20% tax credits use them.

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 33% 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.