December 13, 2017 Presented by Kimberly & Jack Alvarez - - PowerPoint PPT Presentation
December 13, 2017 Presented by Kimberly & Jack Alvarez Landmark Consulting LLC 83 Grove Avenue, Albany, NY 12208 www.landmarkconsulting.net The Historic Tax Credit Program Landmark Consulting LLC is a small, Albany-based historic
December 13, 2017 Presented by Kimberly & Jack Alvarez Landmark Consulting LLC 83 Grove Avenue, Albany, NY 12208 www.landmarkconsulting.net
Landmark Consulting LLC is a small, Albany-based historic preservation and architectural firm combining more than 50 years of construction, historic preservation and architectural design experience.
Kimberly Konrad Alvarez, Preservation Consultant
National Historic
Federal Highway
Urban Renewal Program’s
Preservation Act of 1966
Set up the partnership
Created the National Register
Created the Section 106
With new Federal focus on historic preservation came the change in the tax code in 1976 which had previously favored demolition of older buildings to the preservation and reuse of them.
Tax Reform Act of 1976
The Revenue Act of 1978
The Tax Treatment Extension Act of 1980
The Economic Recovery Tax Act of 1981
The Tax Reform Act of 1986
Reagan Administration’s 1986 “pro-growth tax code” described by President Reagan as “not only a matter of respect for our nation’s beauty and history, but good economic sense.” The goal of the financial incentive was to encourage historic preservation efforts – to encourage private expenditures in areas deemed in the public good, because it was believed that the marketplace otherwise would not sufficiently invest to achieve the public good.
As opposed to speculative investment and economic growth, has been quantifiably proven to increase investment.
The Federal Historic Preservation Tax Incentives program has leveraged over $130 billion in private investment to preserve more than 42,293 historic properties since 1976 by encouraging private sector investment in the rehabilitation and re-use of historic buildings.
It has created 2.4 million jobs.
Developed 550,000 housing units with 30% being affordable for low and/or moderate income families.
Has generated $145 billion in gross domestic product
For the $25.2 billion in Federal Tax Credits “returned” to investors, $29.8 billion in new tax revenues were returned to the Federal Treasury.
34 States across the country offer
incredible leveraging power of the Federal Tax Credit, through creation of State Historic Tax Credit programs.
Requires that property be located in a
qualifying Federal census tract having a median family income at or below the State median.
Qualifying rehab expenditures must
exceed $5,000.
Simply piggy-backs on the Federal
process – using the same application and review process.
Unused state tax credits are refundable.
The current tax reform plan is using the argument that reduced income tax rates will result in “economic growth” as a result of increased investment. The reason that historic tax credits were
because it was decided that investment in historic buildings was deemed in the public good, and up to that time the marketplace (private sector) was not sufficiently investing in those assets on its own.
Federal Historic Tax Credit consists of 20% of qualifying rehab costs.
Property must be certified – meaning it must be listed on the National Register of Historic Places.
Rehab must be on an income-producing property.
Tax credit is available to the person(s) or entity that hold the title to the property.
The rehabilitation work must be substantial – exceeding the adjusted basis of property or $5,000, whichever is greater.
Project must go through the 3-part application process and requires review & approval from SHPO and NPS.
Approval of work is based on compliance with the Secretary of the Interior’s Standards for Rehabilitation.
Tax credit is claimed once property is placed into services.
New York State also has a matching Commercial Properties Rehabilitation Tax Credit of 20%.
Important to recognize the added layer of
process & associated timeframe
Possible need for additional professionals
(consultant, architect, engineer, CPA or tax attorney)
First step is determining whether
property can be or is already eligible as a listed property on the National Register.
If not already listed, full National Register
Nomination will need to be prepared prior to Part 1 application.
Form requires property and
applicant/owner information
Summary paragraph of physical
appearance/condition
Summary paragraph stating significance. Reference to National Register
Nomination or Historic District
Current representative interior and
exterior photos keyed to drawings or site plan.
Review period can range from 2 weeks to
2 months total.
Form requires preliminary anticipated info on project such as start and completion dates, estimated rehab costs, floor area, before and after rehab uses, etc.
Full description of existing conditions/appearance of interior and exterior features and spaces
Full description of work that is proposed – methods and materials.
Each feature is numbered, dated, & cross referenced to photos and architectural drawings.
Full photo-documentation is required of “before” conditions
Full set of noted architectural plans & elevations are required.
Review period generally takes 1 to 3 months.,
but can take longer if there are questions on the scope and repair methods.
Rehabilitation is defined as the act
compatible use for a property through repair, alterations, and additions while preserving those portions or features which convey its historical, cultural, or architectural values.
Upon completion of the
rehabilitation work, the Part 3 application is submitted requesting Certification of Completed Work.
Form asks for final project
data such as start and completion dates, date placed in service, estimated rehab costs and total actual rehab costs, number of housing units before and after (if applicable), and applicants and any other
including tax identification number(s).
Full photo-documentation is
required of “after” conditions. 158 Knox Street – “after”
158 Knox Street – “before”
Exterior & Interior Walls Partitions Floors Ceilings Permanent coverings, such as wood paneling, glued down carpeting or tiles Windows and doors Components related to heating or central air conditioning systems Plumbing and plumbing fixtures Sprinkler systems Electrical wiring and lighting fixtures Chimneys Roofs Stairs Escalators, elevators, fire escapes Other components related to the operation or maintenance of the building PLUS soft costs (architectural/engineering, consulting & other prof. fees.)
Property Acquisition costs Site Work such as landscaping, fencing, outdoor lighting, paving, parking lots
Moving, new construction of demolition costs for removal a building on
property.
Appliances Cabinetry Interior furnishings as well as window treatments Tacked or area rugs Computer equipment, A/V equipment or technology equipment
Recently the NPS has indicated that solar panels, wind turbines and geothermal equipment if essential to the operation or maintenance of the historic building will qualify for the tax credit.
Application fees are assessed by the National Park Service for the reviews and request for certification of rehabilitation except for projects under $80,000. Under this Fee Schedule, ½ of the total fee will be billed upon receipt of the Part 2 Application. The remaining half will be billed upon receipt of the Part 3 Application. The State fee range between $500 for projects under $100,000 and with a maximum of $5,000 for projects over $10million. Project Cost Total Application Fee $5,000 - $79,999 No Fee $80,000- $3,849,999 $845 + 0.15% of rehab cost over $80,000 $3,850,000 or more $6,500
Tax credit is available to the person(s) or entity who holds title to the property –
typically an LLC.
The tax credit cannot be claimed until the property is substantially rehablitated
and placed into service.
Tax Credit different from tax deduction in that it is a dollar for dollar reduction in
the federal (and state) tax liability.
Tax credits that are unused may be carried back 3 years or carried forward for 15
For depreciation of the building, straight-line depreciation must be used.
Property’s depreciable base is reduced by the amount of the rehab tax credit, making it 80% of the basis value.
Owners of structures being rehabbed may
the property before it is placed in service giving investor a proportional share of the credit.
A project might be in a situation where after being certified as a qualified rehabilitation, the credit may be recaptured. The following are examples of “recapture events”:
Building is sold within five years of being placed in service, Building ceases to be "business or commercial use“ – it must be an income
producing property.
A partner disposes greater than one–third of its interest, The National Park Service (NPS) removes the building from the National Register,
Non-certified alterations are made during first five years or building is demolished, The building is destroyed by a casualty (fire, hurricane, tornado, earthquake, etc.).
There are also a number of events that are somewhat similar to the recapture events listed above that do not trigger recapture. These events include:
A simple transfer between spouses or a spousal transfer due to a divorce, Transfer due to death, Transfer due to certain tax free corporate reorganizations, Or there is a change in the form of the business entity, but only if the property
retains the same trade or business status.
The Knox Street Apartments project renovated 18 long-troubled rowhouses in the Park South section of Albany. The project was led by WinnDevelopment, a Boston company, and was intended to kicked off the city’s plan for the rejuvenation of the area south of Washington Park. The resulting work won a Historic Preservation Award from the state Office of Parks, Recreation and Historic Preservation as it was
Commercial Rehab Tax Credit.. The $12.5 million project was funded in part through the city’s Community Development Agency, low-income tax credits from the Division of Housing and Community Renewal, and Federal and State historic tax credits. While the approach for historic rehab was not continued along New Scotland Avenue, as had been intended, this project as a result of the newly created historic district did result in additional property
This long neglected commercial anchor building on Main Street in the Village of Saranac Lake, was purchased with the intent to rehab in 2013. The developer intended to use the Historic Tax Credits from the beginning and was in discussions with us even prior to negotiating the purchase. In 2013, the North Country REDC awarded $5million to the Hotel as one
the need for more hotel rooms in the region to take better advantage of the tourism economy and growing jobs. Totally nearly $30million in project cost, and the new anchor in its community, with new restaurant, retail shop, full service spa, and banquet facilities it will breathe new life into its North Country community. Despite the long development and construction project, this hotel is scheduled to open later this month.
minimum 5-year period. The non-profit corporation could maintain full control and ownership rights through the LLC, while an investor that has federal and state tax liability would participate in the LLC and in effect purchase the tax credits from the non-profit organization.
under the Federal Community Reinvestment Act, they need to participate in projects in places designated as lower income areas.
partners for non-profits, as they gain local recognition for their participation in an important community revitalization project.
financial brokers from around the country are always looking for projects to invest in that can provide the rehab. tax credit.
Name /Address Year Project Cost Function #/Year 346 State Street 2002 $820,300 Residential 1 113 State Street 2004 $645,041 Commercial/Residential
111 State Street
2004 $645,041 Commercial/Residential 2 492 Madison Avenue 2006 $204,000 Residential 13 Ash Grove Place 2006 $427,358 Residential 109 Grand Street 2006 $389,922 Residential 107 Grand Street 2006 $364,037 Residential 106 Grand Street 2006 $410,432 Residential 104 Grand Street 2006 $404,565 Residential 97 Grand Street 2006 $434,749 Residential 89 Grand Street 2006 $547,462 Residential 88 Grand Street 2006 $346,008 Residential 76 Grand Street 2006 $335,330 Residential 10 504 Madison Ave 2008 $91,000 Residential 6 Madison Place 2008 $400,000 Residential 2 135-158 Knox Street 2009 $7,804,408 Residential Matthew Bender Bldg – 109 State Street 2009 $2,159,956 Commercial Office 121 Grand Street 2009 $416,396 Residential 20 156 Jefferson Street 2010 $156,657 Residential 149 Dove Street 2010 $280,800 Residential 2 310 State Street 2011 $241,500 Residential 86 Morton Ave 2011 $574,088 Residential 2 The William Sayles House – 686 Madison Avenue 2012 $2,000,000 Residential The McGinnis Bldg – 370 Broadway 2012 $2,145,788 Commercial/Residential 46 Elm Street 2012 $47,324 Residential 64 Morton Ave 2012 $411,070 Residential 4 The Plaza at Fifty State – 50 State Street 2013 $2,000,000 Commercial Office The Liberty Lofts – 374 Broadway 2013 $1,069,290 Commercial/Residential 2
2014 $10,000,000 Residential 518 Broadway 2014 $1,749,192 Commercial/Residential 62 Morton Ave 2014 $663,000 Residential 68 Morton Ave 2014 $442,000 Residential 70 Morton Ave 2014 $442,000 Residential 74 Morton Ave 2014 $327,867 Residential 6 60 State Street 2015 $6,500,000 Residential 1 Philip Livingston Middle School – 315 Northern Blvd 2016 $22,975,000 Residential 194 Western Avenue 2016 $250,000 Residential 153 Dove Street 2016 $261,798 Residential Dewitt Clinton Hotel – 142-144 State Street 2016 $40,000,000 Hotel 58 North Pearl Street 2016 $3,858,270 Residential Arcade Bldg – 482 Broadway 2016 $7,500,000 Commercial/Residential The Argus Bldg – 412 Broadway 2016 $3,000,000 Residential 7 $123,741,649 59
Commercial Tax Credit Project in the City of Albany totaling an investment of $123,741,684.
investment amount of $51,072,786 and 4 projects in Schenectady totaling $32,598,999.
Albany that are in progress or were completed in 2017.