Tax Incentives for Reusing Old Buildings

Step Back Demo –Simulate greenfield –Reduces uncertainties Time Cost City Assembles developable parcel Conventional thinking when Brownfield initiative commenced Industrial Uses

But That existing structure(s) can be your most valuable resource!!!!

Why think of Reuse? Carrots Tax Incentives Market Niche More Sustainable –LEED pts –Embodied Energy –Walkable Neighborhood Community/ Neighborhood HP Effort Sticks NEPA HP Act 1966 (sec 106)

New Construction Windows HVAC Materials Looks “Best able to take advantage of modern technology” People expect modern amenities But Gut rehab (preserve shell) can have best of both worlds

Historic Preservation Tax Incentives Federal –20% Credit –10 % Credit –Donations Façade easements State/Local Commerical Residential Funky, unique space – Mkt value Embodied energy Walkable communities (public Health)

State & Local Added Tax Credit –MO, LA – 25% (LA also SF), OH (compet) –IN, NY, MA – 20% Real Estate Tax –e.g. Illinois 8 yr freeze 4 yr phase in =12 yr reduction IN similar

Federal Tax Incentives –20% Credit –10 % Credit –Donations Façade easements

Tax Credit One for one replacement on taxes owed Can be sold/syndicated & turned into cash –Replaces equity –Significant impact on ROI – return on investment

Rehabilitation Project Non-Historic - No Credits

Rehabilitation Project Historic - Tax Credits & Donation

Tax Credit - Non Historic Definition - Federal income tax credit equal to 10% of cost of the rehabilitation of non-historic buildings constructed before Building must be nonresidential (commercial or industrial) to qualify for credit. Like historic, rehabilitation must be “substantial”, with qualifying expenditures greater than the building’s basis. Unlike historic, no certification of rehabilitation work is necessary.

Rehabilitation Tax Credit -Historic Definition - Federal income tax credit equal to 20% of cost of rehabilitation of historic buildings. Qualification 1 - Building must be used in a business or held for the production of income. Qualification 2 - Building must be a “certified historic structure”, i.e. listed individually on the National Register of Historic Places or located in a “registered historic district” and certified by the Secretary of the Interior as being of historical significance to the district.

Rehabilitation Tax Credit - Historic To receive the credit, rehabilitation must be “substantial”, with qualifying expenditures greater than the building’s basis. Expenditures must be capital in nature and depreciable as real property to qualify. Rehabilitation must be performed in compliance with the Secretary of the Interior’s Standards for Rehab and approved by the local SHPO and Ntnl Pk Svce. Credit may be subtracted directly from federal income taxes by the owner in year of completion.

Eligibility for the Historic Preservation Rehabilitation Investment Tax Credit Building must be eligible for the National Register of Historic Places (and be listed within 30 months following project completion) Occupancy must be income producing Project cost must constitute a “substantial rehabilitation” All work must meet the Secretary of the Interior’s Standards for Rehabilitation of Historic Properties.

Eligibility for the National Register Formal process EVENT PERSON DESIGN / CONSTRUCTION INFORMATION POTENTIAL CONSIDERATIONS moved properties, commemorative properties, recent significance

Income Producing Occupancy Commercial Office Agricultural Manufacturing Rental Residential (excluded in 10% program for uncertified rehab)

Substantial Rehabilitation Qualified costs must equal or exceed the adjusted cash basis of the building before rehabilitation. Measurement period for “substantial rehabilitation” is 24 months or 60 months for multiple phased project

Substantial Rehabilitation

Qualified Costs Purchase price is not a qualified cost Qualified costs include construction materials, labor and fees and soft costs such as architectural, historical, and engineering consultant fees. Disqualified costs include site work, landscaping, equipment, furnishings, etc. $

Secretary of the Interior’s Standards for Rehabilitation of Historic Properties 1. A property will be used as it was historically or be given a new use that requires minimal change to its distinctive materials, features, spaces, and spatial relationships. 2. The historic character of a property will be retained and preserved. The removal of distinctive materials or alteration of features, spaces, and spatial relationships that characterize a property will be avoided. 3. Each property will be recognized as a physical record of its time, place, and use. Changes that create a false sense of historical development, such as adding conjectural features or elements from other historic properties, will not be undertaken. 4. Changes to a property that have acquired historic significance in their own right will be retained and preserved. 5. Distinctive materials, features, finishes, and construction techniques or examples of craftsmanship that characterize a property will be preserved. 6. Deteriorated historic features will be repaired rather than replaced. Where the severity of deterioration requires replacement of a distinctive feature, the new feature will match the old in design, color, texture, and, where possible, materials. Replacement of missing features will be substantiated by documentary and physical evidence. 7. Chemical or physical treatments, if appropriate, will be undertaken using the gentlest means possible. Treatments that cause damage to historic materials will not be used. 8. Archeological resources will be protected and preserved in place. If such resources must be disturbed, mitigation measures will be undertaken. 9. New additions, exterior alterations, or related new construction will not destroy historic materials, features, and spatial relationships that characterize the property. The new work shall be differentiated from the old and will be compatible with the historic materials, features, size, scale and proportion, and massing to protect the integrity of the property and its environment. 10. New additions and adjacent or related new construction will be undertaken in a such a manner that, if removed in the future, the essential form and integrity of the historic property and its environment would be unimpaired.

INTERPRETING THE SECRETARY OF THE INTERIOR’S STANDARDS bulletins 1. Interior Plan: Changes to Shotgun Interior PlanInterior Plan: Changes to Shotgun Interior Plan 2. Garage Door Openings: New Infill for Historic Garage OpeningsGarage Door Openings: New Infill for Historic Garage Openings 3. New Additions: New Additions to Mid-Size Historic Buildings 1New Additions: New Additions to Mid-Size Historic Buildings 1 4. Exterior Doors: Inappropriate Replacement DoorsExterior Doors: Inappropriate Replacement Doors 5. Exposed Interior Brick: Removing Interior Plaster to Expose BrickExposed Interior Brick: Removing Interior Plaster to Expose Brick 6. Significant Spaces: Preserving Historic Church InteriorsSignificant Spaces: Preserving Historic Church Interiors 7. Interior Finishes: Painting Previously Unpainted WoodworkInterior Finishes: Painting Previously Unpainted Woodwork 8. Interior Alterations: Interior Alterations to Detached Residences to Accommodate New FunctionsInterior Alterations: Interior Alterations to Detached Residences to Accommodate New Functions 9. Porches: Inappropriate Porch AlterationsPorches: Inappropriate Porch Alterations 10. Stair Tower Additions: Exterior Stair/Elevator Tower AdditionsStair Tower Additions: Exterior Stair/Elevator Tower Additions 11. School Buildings: Interior Alterations to School Buildings to Accommodate New UsesSchool Buildings: Interior Alterations to School Buildings to Accommodate New Uses 12. School Buildings: Rehabilitation and Adaptive Reuse of SchoolsSchool Buildings: Rehabilitation and Adaptive Reuse of Schools 13. Storefronts: Repair/Replacement of Missing or Altered StorefrontsStorefronts: Repair/Replacement of Missing or Altered Storefronts 14. Adding New Openings: New Openings in Secondary Elevations or Introducing New Windows in Blank WallsAdding New Openings: New Openings in Secondary Elevations or Introducing New Windows in Blank Walls 15. Industrial Interiors: Treatment of Interiors in Industrial BuildingsIndustrial Interiors: Treatment of Interiors in Industrial Buildings 16. Loading Door Openings: New Infill for Historic Loading Door Openings Loading Door Openings: New Infill for Historic Loading Door Openings 17. Interior Parking: Adding Parking to the Interior of Historic BuildingsInterior Parking: Adding Parking to the Interior of Historic Buildings 18. New Additions: New Additions to Mid Size Historic Buildings 2New Additions: New Additions to Mid Size Historic Buildings Interior Finishes: Deteriorated Plaster FinishesInterior Finishes: Deteriorated Plaster Finishes 20. School Buildings: Converting Historic School Buildings for Residential UseSchool Buildings: Converting Historic School Buildings for Residential Use 21. Adding New Openings: Adding New Openings on Secondary ElevationsAdding New Openings: Adding New Openings on Secondary Elevations 22. Adding New Openings: Adding New Entrances to Historic BuildingsAdding New Openings: Adding New Entrances to Historic Buildings 23. Windows: Selecting New Windows to Replace Non-Historic WindowsWindows: Selecting New Windows to Replace Non-Historic Windows 24. Corridors: Installing New Systems in Historic CorridorsCorridors: Installing New Systems in Historic Corridors 25. Interior Finishes: Altering the Character of Historically Finished InteriorsInterior Finishes: Altering the Character of Historically Finished Interiors 26. Entrances and Doors: Entrance TreatmentsEntrances and Doors: Entrance Treatments 27. Awnings: Adding Awnings to Historic Storefronts and EntrancesAwnings: Adding Awnings to Historic Storefronts and Entrances 28. Corridors in Historic Highrise Apartment Buildings and Hotels 29. Adding Vehicular Entrances amd Garage Doors to Historic Buildings 30. New Entries on Mill Buildings

Preservation Easement Definition - Charitable contribution deduction for the donation of a historic preservation easement. Donation must be made in perpetuity to a local historic preservation organization. Easement donation prohibits unauthorized changes to the exterior or demolition of historic buildings. Amount of the charitable contribution is equal to the appraised difference in the value of the property with and without the easement. Deduction is limited annually to 30% of gross income for individuals and 10% for corporations.

Cash Equivalent Marginal tax rate

1926 Chouteau Ave - St Louis MO Office Buidling LISART Capital LLC $500k federal historic tax credits, $617k Missouri historic tax credits axcredits.com/tax- credit-projects.html

Beaux Arts Building (St. Louis) $5.4 million New Market Tax Credits $2.7 federal historic tax credits $3.4 Missouri historic tax credits

Corn Exchange Building, Buffalo, NY $500,000 for the structure $5 mil project

Homan Square Powerhouse Sears Complex Powerhouse Henry Ford Academy (Charter School)

Beatty’s Mill Factory Bldg 27 live/work spaces

Philadelphia Naval Shipyards $100 million Urban Outfitters

Eugene Goldfarb