News, Analysis and Commentary On Affordable Housing, Community Development and Renewable Energy Tax Credits May 2011, Volume II, Issue V Published by Novogradac & Company LLP Q&A Working with the National Park Service – How to Qualify a Building for the Historic Tax Credit By Tom Boccia, CPA, Novogradac & Company LLP Q A uestion: In order for my project to realize historic tax credits (HTCs), what is the National Park Service (NPS) process to qualify my building? nswer: To qualify for historic tax credits, the building must be considered to be a certified historic structure (CHS). A CHS, as defined under the Internal Revenue Code (IRC), is “any building and its structural components which: is listed in the National Register of Historic Places, or is located in a registered historic district and is certified by the Secretary of the Interior to the Secretary of the Treasury (IRS) as being of historic significance to the district.” As noted, the building itself can be listed on the National Register or the building can be located within a historic district. First, an NPS Form 10-168, Historic Preservation Certification Part 1 – Evaluation of Significance (Part 1) must be filed with the NPS by a building owner whose property is not listed on the National Register (owners of building listed on the National Register do not need to request this determination). The NPS determines whether a building contributes to the historic significance of a district based on whether its “…location, design, setting, materials, workmanship, condition of structure, building age, feeling and association adds to the district’s sense of time and place and historical development.” See NPS 36 CFR 67 for more details. Part I is generally filed with the respective State Historic Preservation Office (SHPO) prior to commencing any of the rehabilitation work. Next, in order to qualify for the HTCs, the building must not only be a CHS but the rehabilitation must also be a certified rehabilitation. A certified rehabilitation is defined in the IRC as “any rehabilitation of a CHS which the Secretary of the Interior has certified to the Secretary of the Treasury (IRS) as being consistent to the character of such property or the district in which such property is located.” This step is accomplished by filing Historic Preservation Certification Part 2 – Description of Rehabilitation (Part 2). Part 2 documents the actual work to be performed on the building to determine whether the proposed work as outlined in the architectural plans, specifications and other detailed information about the rehabilitation will be consistent with the historic significance of the building or district so that the building work will qualify as a certified rehabilitation. Part 2 also must contain documentation that documents the building’s appearance, site and environment prior to the commencement of any of the rehabilitation. At this point, the NPS then makes one of three possible determinations regarding the Part 2 submission: the proposed rehabilitation is deemed to meet the historic standards of the NPS (pending certification of completed work); conditional approval is made subject to certain revisions in the proposed rehabilitation work; or the application is rejected because the proposed rehabilitation does not meet the historic standards of the NPS (although owner may resubmit after making corrections). Finally, upon completion of the rehabilitation work, the owner must submit a completed Historic Preservation Certification Part 3 – Request for Certification of Completed Work (Part 3). In this step, the NPS certifies that the work was completed in accordance with the Secretary of the Interior’s Standards for Historic Rehabilitation. At this time, NPS is provided with two important pieces of information. continued on page 2 NOVOGRADAC JOURNAL OF TAX CREDITS continued from page 1 The first provides the starting date of the rehabilitation and the date the work was completed and placed in service. The second includes the following: total costs attributable to the CHS (both qualifying and non-qualifying costs) and costs attributed to new construction (including site work, parking lots, etc.). The final NPS Certification (an approved Part 3) must be received no more than 30 months after the filing date of the tax return on which the credit is claimed. Novogradac Journal of Tax Credits Editorial Board PUBLISHER Michael J. Novogradac, CPA MANAGING EDITOR Alex Ruiz EDITOR Jane Bowar Zastrow TECHNICAL EDITORS This process for claiming the HTCs can be complex and cumbersome. Understanding the processes and working closely with historic advisors on the steps involved and the timing of when the applications are submitted, among others, is critical in order to be certain the HTCs that have been claimed will not be disallowed. This article first appeared in the May 2011 issue of the Novogradac Journal of Tax Credits. © Novogradac & Company LLP 2011 - All Rights Reserved Notice pursuant to IRS regulations: Any U.S. federal tax advice contained in this article is not intended to be used, and cannot be used, by any taxpayer for the purpose of avoiding penalties under the Internal Revenue Code; nor is any such advice intended to be used to support the promotion or marketing of a transaction. Any advice expressed in this article is limited to the federal tax issues addressed in it. Additional issues may exist outside the limited scope of any advice provided – any such advice does not consider or provide a conclusion with respect to any additional issues. Taxpayers contemplating undertaking a transaction should seek advice based on their particular circumstances. This editorial material is for informational purposes only and should not be construed otherwise. Advice and interpretation regarding property compliance or any other material covered in this article can only be obtained from your tax advisor. For further information visit www.novoco. com. Robert S. Thesman, CPA James R. Kroger, CPA Owen P. Gray, CPA Thomas Boccia, CPA Daniel J. Smith, CPA ASSIGNMENT EDITOR Jennifer Dockery STAFF WRITER Jennifer Hill CONTRIBUTING WRITERS Tom Boccia Brandi Day Brad Elphick Jason Evans Tony Grappone A. Ann Hered Thane R. Hodson Neil D. Kimmelfield Chris Kolerok Peter Lawrence John Leith-Tetrault Forrest David Milder Amanda M. Peterson John Sciarretti Amanda Talbot John Tess Stephen Tracy PRODUCTION Jesse Barredo James Matuszak Novogradac Journal of Tax Credits Information Address all correspondence and editorial submissions to: Alex Ruiz/ 415.356.8088 www.novoco.com Address inquiries regarding advertising opportunities to: Emil Bagalso / 415.356.8037 Editorial material in this publication is for informational purposes only and should not be construed otherwise. Advice and interpretation regarding the low-income housing tax credit or any other material covered in this publication can only be obtained from your tax advisor.  May 2011 2 © Novogradac & Company LLP 2011 All rights reserved. ISSN 2152-646X Reproduction of this publication in whole or in part in any form without written permission from the publisher is prohibited by law.