Policymakers in Congress and in Virginia have put in place tax incentives that are designed to encourage private investment into the development, rehabilitation, and renewed use of historic buildings and historic properties.

You or your company may be eligible to utilize these tax credits. In this article, you will find an overview of the most important things that Virginia developers need to know about qualifying for state and federal tax incentives for historic restoration.

Federal Tax Incentives for Historic Restoration

Many developers working on historic projects have utilized the federal tax credit. Since the creation of the tax credit program in 1976, the United States Department of Interior reports that the Federal historic preservation tax incentives have resulted in nearly $100 million in direct private investment into historic structures.

The federal government offers a 20 percent tax credit on qualifying rehabilitative expenses. For expenses to be eligible for the federal historic tax credit, work must be performed on a structure that is listed on the National Register of Historic Places. Beyond that, they need to be an officially certified historic structure as contributing to a ‘listed’ district may also qualify for these federal tax incentives.

Virginia Tax Incentives for Historic Restoration

In addition to federal tax incentives, the state of Virginia has also put a historic restoration credit for eligible rehabilitation expenses. As described by the Virginia Department of Historic Resources, the state’s Historic Rehabilitation Tax Credit (HRTC) was enacted in 1997. In the first 20 years of the program, more than $1.2 billion in tax credits were utilized by private parties within the Commonwealth. Virginia’s HRTC program allows companies and investors to reimburse up to 25 percent of their eligible rehabilitation costs as a state tax write off. In order to qualify for the Virginia historic restoration tax credit, rehabilitative work must meet one of the following three criteria:

• The property must be listed in the Virginia Landmarks Register;
• The property must be certified as eligible for listing; or
• The property must be classified as a contributing structure.

Navigating Development Tax Credits Can Be Challenging

Developers and investors should explore all applicable federal, state, and local tax incentives. Companies never want to leave money on the table. In some cases, developers may be able to take both state and federal tax credits for work associated with a single project. With a comprehensive understanding of the available historic restoration tax credits and financial incentives, companies can make better decisions.

For a number of different reasons, securing a tax credit for a historic development project can be challenging. It is not always clear whether or not a rehabilitation project is eligible for a historic tax credit. If you have questions or need additional information about these type of tax incentives, it is strongly recommended that you consult with an experienced Virginia tax law attorney for assistance.

If you want more information on this area of tax law, see our tax overview.