Use of the Tax Credit Incentive Program is not limited only to developers and large commercial buildings. This New Orleans house, now a bed and breakfast, is a recent example of the program at work. The Tax Credit incentive Program has been used quite successfully in New Orleans to rehabilitate housing for low income residents.(Uptown Historic District, Orleans Parish) Developers often use the Tax Credit Incentive program to help finance large rehabilitation projects like the Jefferson Hotel in Caddo Parish. The Tax Act staff is available to assist with projects throughout the state. This building in Opelousas was successfully rehabilitated using the State Commercial Tax Credit Program. It is now an excellent addition to the downtown. View the interior before and after photos of this State Tax Credit project in Opelousas. This residence on Royal Street in New Orleans was successfully rehabilitated using the Residential Tax Credit Program.
  1. What exactly is a tax credit?
  2. How do I find out if my building is located in an eligible district?
  3. How do you compute the adjusted basis?
  4. What are some expenses that qualify for the rehabilitation tax credit?
  5. What are some examples of expenses that do not qualify for the rehabilitation tax credit?
  6. I own an old building, but it isn’t in a National Register Historic District.
  7. I have already started the rehabilitation of my property. Is it too late to apply for tax credits?
  8. My rehabilitation is complete. Is it too late to apply for tax credits?
  9. I received approval for my exterior work from the local historic district commission. Does that mean I qualify for the tax credit program?
  10. Only the work I do to the exterior has to be approved, right?
  11. I have tax related questions. Who can help me?
  12. I am not sure how to fill out the application. Are there instructions?
  13. I heard about Restoration Tax Abatement. Is it the same as the tax credit

 

  1. What exactly is a tax credit?
    A tax credit is not money up front nor is it a grant. The tax credit is awarded upon completion of the project and is a direct, dollar for dollar, reduction in the amount of money a taxpayer must pay in taxes for a given year. It’s much better than a deduction, which only reduces a taxpayer’s income and may or may not put him in a lower tax bracket.


  2. How do I find out if my building is located in an eligible district?
    To determine if your building is listed on the National Register of Historic places or located within the boundaries of a National Register Historic District, search the Louisiana National Register Database.

    Cultural Districts and contact information 

    Main Street Districts and contact information

    Downtown Development Districts and contact information

    To determine if your building is within the boundaries of a local historic district, contact your city or parish government.

  3. How do you compute the adjusted basis?
    Adjusted basis of a building is the cost of the property (excluding land) plus or minus adjustments to basis. The Tax Assessor's office would be able to provide a building to land value ratio. Increases to basis include capital improvements, legal fees incurred in perfecting title, zoning costs, etc. Decreases to basis include deductions previously allowed or allowable for depreciation. See Treasury Regulation 1.48-12(b)(2)(iii).

    For the substantial rehabilitation test, the date to determine the adjusted basis of the building is the first day of the 24-month measuring period or the first day of the taxpayer's holding period of the building, whichever is later. Generally the holding period is deemed to begin the day after acquisition.

  4. What are some expenses that qualify for the rehabilitation tax credit?
    Any expenditure for a structural component of a building will qualify for the rehabilitation tax credit. Treasury Regulation 1.48-1(e)(2) defines structural components to include walls, partitions, floors, ceilings, permanent coverings such as paneling or tiling, windows and doors, components of central air conditioning or heating systems, plumbing and plumbing fixtures, electrical wiring and lighting fixtures, chimneys, stairs, escalators, elevators, sprinkling systems, fire escapes, and other components related to the operation or maintenance of the building. In addition to the above named "hard costs", there are "soft costs" which also qualify. These include construction period interest and taxes, architect fees, engineering fees, construction management costs, reasonable developer fees, and any other fees paid that would normally be charged to a capital account.


  5. What are some examples of expenses that do not qualify for the rehabilitation tax credit?
    • Acquisition costs
    • Appliances
    • Cabinets
    • Carpeting (if tacked in place and not glued)
    • Decks (not part of original building)
    • Demolition costs (removal of a building on property site)
    • Enlargement costs (increase in total volume)
    • Fencing
    • Feasibility studies
    • Financing fees
    • Furniture
    • Landscaping
    • Leasing Expenses
    • Moving (building) costs (if part of acquisition)
    • Outdoor lighting remote from building
    • Parking lot
    • Paving
    • Planters
    • Porches and Porticos (not part of original building)
    • Retaining walls Sidewalks


  6. I own an old building, but it isn't in a National Register Historic District. Can I still qualify for Federal tax credits?

    If a building isn't already listed in the National Register of Historic Places, either individually or as a contributing element to a National Register District, the owner may contact the Division of Historic Preservation’s National Register Coordinator to determine whether or not the building is eligible for the National Register of Historic Places. If listed on the National Register, the building would then be eligible for the 20% Federal Rehabilitation Tax Credit. For more information on the National Register Program, click here.

  7. I have already started the rehabilitation of my property. Is it too late to apply for tax credits?
    As long as the building has not been placed in service you may still apply. Keep in mind, however, that when you begin a project prior to Part 2 approval you are proceeding at your own risk.


  8. My rehabilitation is complete. Is it too late to apply?
    Yes. A Part 1 application must be submitted prior to the completion of the rehabilitation project.

    However, if the building is individually listed in the National Register and you are applying for the Federal Rehabilitation Tax Credit, you may apply even after the rehabilitation has been completed.

  9. I received approval for my exterior work from the local historic district commission. Does that mean I qualify for the tax credit program?
    No. Approval by a local commission does not guarantee approval by the Division of Historic Preservation or National Park Service for the rehabilitation tax credit. The owner must submit the required applications to the Division of Historic Preservation and receive the necessary approval from the Division of Historic Preservation or National Park Service in order to qualify for the rehabilitation tax credit programs.


  10. Only the work I do to the exterior has to be approved, right?
    No. The Division of Historic Preservation and the National Park Service review all work to a building, interior and exterior. Proposed work must meet the Secretary of the Interior’s Standards for Rehabilitation. For more information on these Standards, click here.


  11. I have tax related questions. Who can help me?
    The Tax Incentives Program Staff are Architectural Historians, not tax experts. Therefore, we recommend you contact an accountant or tax attorney. Additionally, you may find the answers to your questions in the IRS Connection Frequently Asked Questions.


  12. I am not sure how to fill out the application. Are there instructions?
    There are detailed instructions for filling out tax credit applications on each program's page.

  13. I heard about Restoration Tax Abatement. Is it the same as the tax credit?
    The Restoration Tax Abatement (RTA) Program is a separate program administered by the Louisiana Department of Economic Development. The RTA is an economic development incentive created for use by municipalities and local governments to encourage the expansion, restoration, improvement and development of existing commercial structures and owner-occupied residences in Downtown Development Districts, Economic Development Districts or Historic Districts. The program grants a five year deferred assessment of ad valorem property taxes normally assessed on improvements. 
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