Federal Tax Incentive Program
Income tax incentives for the rehabilitation of historic structures are important tools for historic preservation and economic development throughout the United States. A federal income tax credit for the rehabilitation of historic structures first appeared in 1976 and today consists of a 20% credit for the certified rehabilitation of certified historic structures. For more information regarding the Federal Tax Incentive Program, please see the National Park Service website.
State Rehabilitation Tax Credit
Bessey School, Scarborough – Certified January, 2009
In his supplemental budget that was signed into law on March 31, 2008, Governor Baldacci incorporated the provisions of LD 262, An Act to Amend the Credit for Rehabilitation of Historic Properties. This bill fundamentally changes the existing state tax credit. Among the changes are 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. The law went into effect as of July 1, 2008, although the tax credit is allowable for certified qualified rehabilitation expenditures incurred after January 1, 2008.
The Maine Historic Preservation Commission (also referred to as the Maine State Historic Preservation Office) will administer 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 now includes the following features:
- The "Substantial Rehabilitation Credit". A 25% state credit for any rehabilitation that also qualifies for the 20% federal credit. The rehabilitation must meet all of the requirements of the Federal tax incentive program.
- 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 investment requirement.
- The "Affordable Housing Rehabilitation Credit Increase". The State Substantial Rehabilitation Credit and the Small Project Rehabilitation Credit may be increased to 30% 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.
- There is a "per project" state credit cap of $5 million. State credits are fully refundable, 25% of the credits must be claimed in taxable year in which the property is placed in service, and 25% must be taken in each of the next three (3) taxable years. Only rehabilitation expenditures incurred between January 1, 2008 and December 31, 2023 are eligible for the credit.
Some key points and cautionary reminders about the credits:
- Only certified historic structures will qualify for the credits. A "certified historic structure" is defined as a building that is listed in the National Register of Historic Places, either individually or as a contributing building in a National Register historic district, or as a contributing building within a local historic district that has been certified by the Secretary of the Interior.
- A property is listed in the National Register of Historic Places by a nomination, which is a research report prepared according to detailed state and federal guidelines. The final authority on National Register listing is the federal Keeper of the National Register in Washington, D.C. In its role as administrator of the National Register program in Maine, the Maine State Historic Preservation Office is charged with ensuring that nominations forwarded by the State Historic Preservation Officer to the Keeper are complete and correct. The State Historic Preservation Office provides direction to preparers but generally does not write nominations for purposes of the tax credit. Most nominations are prepared by private consultants [this list is in Adobe Acrobat Reader format] hired by property owners, local governments, or private non-profit organizations. The nomination process typically takes a minimum of six months, and may take much longer. For more information regarding the National Register nomination process, please contact Christi Mitchell at the Maine Historic Preservation Commission: Christi.Mitchell@maine.gov or 207-287-1453.
- 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. 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.
- All rehabilitation work must meet the Secretary of the Interior's Standards for Rehabilitation. Applications for Maine's Substantial Rehabilitation Credit are subject to a joint review by the Maine State Historic Preservation Office and the National Park Service, with final authority resting with the National Park Service. Applications for Small Project Rehabilitation Credit are reviewed solely by the State Historic Preservation Office. However, any building that is the subject of the rehabilitation must be listed in the National Register of Historic Places before it will become a "certified historic structure", which means that it must be approved by the Keeper of the National Register. Rules for Maine's historic rehabilitation tax credit program are promulgated by the Maine Historic Preservation Commission.
- The credits cannot be claimed against the cost of acquisition, new additions, site work, or personal property. Only costs incurred in work upon or within a historic structure will qualify. Interior work such as HVAC work and kitchen and bathroom remodelings will qualify if the work meets "The Secretary of the Interior's Standards for Rehabilitation."
- 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.
If you are considering submitting an application, or if you have any questions, please contact:
Rehabilitation Tax Credit Coordinator
Maine Historic Preservation Commission
55 Capitol Street
Augusta, ME 04333
If you have specific tax or fiscal-related questions, please contact:
Maine Revenue Services
Business Taxes Section
51 Commerce Center Drive
Augusta, ME 04333