Federal Historic Rehabilitation Tax Credits – FAQs

1. Can the federal credit be sold?

No. However, the credit can be transferred to an investor through the creation of a partnership or limited liability company.

2. Is the federal credit subject to recapture?

Yes. The building must remain in service for a period of 5 years after completion by the same ownership group that rehabilitated the property.

3. Is there any risk associated with this credit?

Yes. The risk falls largely into two areas – real estate and tax compliance. Rutgers University studies show that a properly-structured transaction between competent parties carries extremely low risk to an investor.

4. Are state credits structured in the same manner as federal credits?

In some cases, yes and in other cases, no. Some states mirror the federal program. Other states award credits via an application process. Furthermore, some states provide for the credits to be “certificated” and freely transferred between sellers and buyers.

5. Is there a standard pricing scheme for the federal and state credits?

No. A number of factors and variables enter into the cost or pricing of each credit that only competent professionals can address.

6. I’ve not heard of this tax credit. Has it been around long?

The federal program dates back to the 1970s in its earliest form and 1986 in its current form. The state programs vary in terms of legislative history.

7. What is the carryforward period?

There is a carryforward period of 20 years and a carryback period of 1 year.

8. Does the credit have a limitation?

Yes the credit in general can offset up to 75% of regular tax and alternative minimum tax liability in a given year.

9. How and when do we receive the credit?

The credit is received via an allocation reported in Schedule K-1 in the year the project is placed in service.

10. How long has MPC been selling these credits?

Principals of MPC have been involved in historic rehabilitation projects dating back to the early 1980’s.

11. Where can I learn more?

For more information, contact Rick Chukas.

FEDERAL RENEWABLE ENERGY

These credits are typically derived from renewable energy projects which also generate opportunities for favorable public relations.

FEDERAL HISTORIC REHABILITATION

The Federal Historic Rehabilitation Tax Credit is an incentive available for the rehabilitation of certified historic structures.  The program provides a tax credit equal to 20% of eligible rehabilitation expenditures.

FEDERAL AFFORDABLE HOUSING

The federal credit can be monetized by developers, often through syndicators, and utilized by third investors through the use of partnerships or limited liability companies.

FEATURED PROJECTS